Battery recycling takes the driver's seat

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Electric-vehicle demand is accelerating rapidly and so is the need for EV batteries. As these batteries reach end-of-life, significant growth opportunities in the recycling space are emerging.

www.mckinsey.com/, Apr. 13, 2023 – 

As electric mobility increases globally, so does the need for electric-vehicle (EV) batteries. This demand has led to considerable growth in battery production, with over five terawatt hours (TWh) per year of gigafactory capacity expected globally by 2030. There is also considerable growth in EV battery volumes as they approach end-of-life, with over 100 million vehicle batteries expected to be retired in the next decade.1 Moving from fossil-fuel based to electric mobility is a clear positive for the environment and for many consumers' pocketbooks, but overhauling our transportation system requires new supply chains to be designed and scaled. With this challenge comes an opportunity–to scale a supply chain that is more stable, more resilient, more efficient, and more sustainable than that of the fossil-fuel and internal combustion engine (ICE) vehicle industry. Battery recycling is the key to pursuing that opportunity (see sidebar, "Batteries' second lives: An additional revenue stream").

In China, Europe, and the United States, which are all undergoing a large EV transition, most of the battery material suitable for recycling still comes from consumer electronics cells, such as those in laptops and other household items, and cell manufacturing scrap generated from faulty batteries that don't pass quality control. With cell manufacturing scrap being as high as 30 percent when a new battery factory launches, a significant source of volume for recycling evolves in markets where EV battery manufacturing is kicking into high gear. In markets where EV adoption has been pervasive for some time, such as China, end-of-life EV batteries represent a greater volume. Yet, globally, production scrap will likely remain the primary source of battery materials for recycling until 2030, when end-of-life EV battery volumes will have grown to the point of overtaking (Exhibit 1).

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