On August 17th, the EU Battery and Waste Battery Regulation (hereinafter referred to as the "New Battery Law"), which has been publicly announced for 20 days, will officially come into effect.

◈  Core requirements: Whoever produces, recycles, and whoever imports, recycles.

◈  New regulatory requirements

The new battery law applies to all categories of batteries, which are divided into five categories based on their designed use: portable battery, LMT battery (light means of transport battery), SLI battery (starting, lighting and ignition battery), industrial battery, and electric vehicle battery. In addition, battery cells/modules that have not been assembled but are actually put into market use are also included in the regulatory scope of this bill.

The new battery law imposes mandatory requirements on all types of batteries (except for those used in military, aerospace, and nuclear energy) that are placed on the EU market. These requirements cover sustainability and safety, labeling, information, due diligence, battery passports, waste battery management, and more. At the same time, the new Battery Law specifies in detail the responsibilities and obligations of manufacturers, importers, and distributors of batteries and products containing batteries, and establishes compliance assessment procedures and market supervision requirements.

The main contents of the new battery law include:

Extension of Producer Responsibility: The new battery law requires battery manufacturers to bear the full lifecycle responsibility of batteries beyond the production stage, including the recycling and disposal of discarded batteries. Producers need to bear the cost of collecting, processing, and recycling waste batteries, and provide relevant information to users and processing operators.

Introducing digital battery passports: In response to the provision of battery QR codes and digital passports, the new Battery Law introduces requirements for battery labels and information disclosure, as well as requirements for battery digital passports and QR codes. The information to be disclosed includes product capacity, performance, use, chemical composition, recyclable content, and other information. Starting from July 1, 2024, at least battery manufacturer information, battery model, raw materials (including renewable parts), total carbon footprint, carbon footprint of different battery lifecycles, third-party certification reports, and links that can display carbon footprint are required. Starting from 2026, all newly purchased electric vehicle batteries, light transportation vehicle batteries, and large industrial batteries with a single battery exceeding 2KWh must have a battery passport to enter the EU market.

Strengthen battery recycling management:The new Battery Law stipulates the recycling standards and operational requirements for different types of discarded batteries. The recycling target is set to achieve a certain recycling rate and material recycling target within a specific time frame, in order to reduce resource waste. The new battery regulations are clear,

1. Before December 31, 2025, recycling should achieve at least the following recycling efficiency goals: (a) 75% of lead-acid batteries should be recycled based on average weight; (b) Calculated by average weight, the recovery rate of lithium batteries reaches 65%; (c) Calculated by average weight, the recovery rate of nickel cadmium batteries reaches 80%; (d) According to the average weight of other waste batteries, the recovery rate reaches 50%.

2. Before December 31, 2030, recycling should achieve at least the following recycling efficiency goals: (a) 80% of lead-acid batteries should be recycled based on average weight; (b) Calculated by average weight, the recovery rate of lithium batteries reaches 70%.

Set the proportion of recycled material usage: Pay attention to the supply risks of raw materials and ensure the safety of some raw material supplies by setting recycling targets.

In terms of material recycling targets, the new battery law is clear,

1. Before December 31, 2027, all recycling should achieve at least the following material recovery goals: (a) 90% cobalt; (b) Copper is 90%; (c) Lead content is 90%; (d) Lithium is 50%; (e) The nickel content is 90%.

2. Before December 31, 2031, all recycling should achieve at least the following material recovery goals: (a) a cobalt content of 95%; (b) Copper is 95%; (c) The lead content is 95%; (d) Lithium is 80%; (e) The nickel content is 95%.

Limit the content of harmful substances: Limit the content of harmful substances such as mercury, cadmium, and lead in batteries to reduce their impact on the environment and health. For example, the new Battery Law specifies that regardless of whether it is used in electrical appliances, light transportation vehicles, or other vehicles, the mercury content (expressed as mercury metal) in batteries by weight shall not exceed 0.0005%. The cadmium content of portable batteries by weight shall not exceed 0.002% (expressed as metallic cadmium). Starting from August 18, 2024, the lead content of portable batteries (whether or not installed in equipment) shall not exceed 0.01% (expressed as metallic lead), but this restriction does not apply to portable zinc air button batteries until August 18, 2028.

Mandatory requirement for operators to conduct due diligence: Manufacturers are required to conduct due diligence when purchasing raw materials to ensure that the materials used do not cause harm to the environment, human health, and rights. Excluding small and medium-sized enterprises with a net turnover of less than 40 million euros in the fiscal year.

Clear implementation goals and schedule: The new battery law sets goals and deadlines for different stages to ensure that the battery industry gradually develops towards a more sustainable and environmentally friendly direction. The requirements for carbon footprint under the new Battery Law apply to electric vehicle batteries, light transportation vehicles (LMT), and rechargeable industrial batteries, with different schedules based on battery categories. Starting from February 18, 2024, battery regulations will be enforced; Starting from February 18, 2025, the carbon footprint of electric vehicle batteries will be mandatory; Starting from February 18, 2026, the carbon footprint of rechargeable industrial batteries will be mandatory; Starting from February 18, 2027, battery passports for rechargeable industrial batteries and electric vehicle batteries exceeding 2kWh will be mandatory.

It is worth noting that the new battery law also mentions that starting from 2027, all portable batteries should adopt a detachable battery design,Consumers do not need to use special tools (such as solvents, heating) or undergo training to open the device, remove or replace the battery on their own. And all LMT batteries should be able to be easily disassembled and replaced by professionals.

In terms of information disclosure, the New Battery Law introduces a "battery passport", which requires disclosure of information including: battery manufacturer, carbon footprint, supply chain due diligence, battery materials and components, compliance certification, cycle performance, resource efficiency, durability, etc.

◈  The impact of new regulations

According to data released by South Korean market research firm SNE Research, China's share in the global power battery market has exceeded 60%. In the first half of 2023, the global newly registered power battery installation volume was 304.3GWh, a year-on-year increase of 50.1%. Among them, Chinese companies still occupy six seats, namely CATL, BYD, China Innovation Aviation, Yiwei Lithium Energy, Guoxuan High tech, and Xinwangda, with a total market share of 62.6%.

According to the latest data released by the China Automotive Power Battery Industry Innovation Alliance, China's power battery exports continue to grow. From January to July, China's power battery enterprises exported 67.1GWh of batteries and 7.3GWh of energy storage batteries.

From the perspective of the European market alone, SNE Research data shows that China's installed proportion of power batteries in Europe has continued to increase in the past four years, reaching 11.8%, 16.8%, 22.6%, and 34% from 2019 to 2022, respectively.

It can be seen that the European market has become one of the main target markets for Chinese battery exports. So, how will the implementation of the new battery regulations affect Chinese companies?

According to Huatai Securities analysis, the New Battery Law may have three impacts on China's industrial chain:

Firstly, the relevant requirements for carbon emissions may force export enterprises to undergo zero carbon transformation,Innovations will be made in production technology towards high efficiency, low energy consumption, environmental protection, and low-carbon;

Secondly, it is expected to force the improvement of the domestic recycling system,in the long run, it will drive the green transformation of the domestic industrial chain and promote the sustainable development of the industry. Enterprises that have cooperated with overseas manufacturers to layout recycling due to stricter or favorable recycling requirements;

Thirdly, battery passports aim to ensure transparency in the supply chain, and export enterprises will face challenges such as passport database construction, passport management system maintenance, and international unified standard construction.

◈  How to respond?

As a major country in the world of new energy vehicles, China had already formulated relevant policies and regulations before the introduction of the EU Battery Law. On February 26, 2018, the Chinese government website announced the issuance of the "Interim Measures for the Management of Recycling and Utilization of Power Batteries for New Energy Vehicles" (referred to as the "Chinese Battery Management Measures"), which is different from the management measures of the EU Battery Law.

According to Huatai Securities analysis, the New Battery Law may have three impacts on China's industrial chain:

Firstly, the relevant requirements for carbon emissions may force export enterprises to undergo zero carbon transformation, leading to innovation in production technology towards high efficiency, low energy consumption, environmental protection, and low-carbon;

Secondly, it is expected to force the improvement of the domestic recycling system, which will in the long run drive the green transformation of the domestic industrial chain and promote the sustainable development of the industry. Enterprises that have cooperated with overseas manufacturers to layout recycling due to stricter or favorable recycling requirements;

Thirdly, battery passports aim to ensure transparency in the supply chain, and export enterprises will face challenges such as passport database construction, passport management system maintenance, and international unified standard construction.

◈  Upgrade of competition in the overseas battery market

Nowadays, the competition in the overseas market for batteries is becoming increasingly fierce. Chinese lithium battery manufacturers have successively gone overseas to expand their business, but at the same time, relevant overseas industrial policies have gradually become clearer, including the US Inflation Reduction Act (IRA) and the upcoming EU New Battery Act.

Industry insiders have previously stated that this also means that overseas markets are upgrading from a single dimensional product competition to a multi-dimensional system competition.

It is worth mentioning that the global industrial chain is committed to promoting battery passports. More than 120 companies have formed an alliance and plan to jointly launch a blockchain based battery passport. The alliance members include BMW, Stellantis, Honda, Ford, Nissan, Mazda, General Motors, etc.

In addition, during this year's National People's Congress and Chinese People's Political Consultative Conference, Zeng Yuqun, a member of the National Committee of the Chinese People's Political Consultative Conference and Chairman of CATL, suggested conducting research on power battery passports and supporting policies to strengthen the full lifecycle management of battery products.

According to Zeng Yuqun, the battery passport is a digital twin of physical batteries, which can achieve transparent digital management of the entire supply chain of power batteries. Consumers and regulatory agencies can easily and directly access relevant information about battery products through battery passports. Meanwhile, as a powerful tool for government regulation and social supervision, battery passports can become an important policy tool for promoting low-carbon, circular, and sustainable development of the battery industry.

Source: Lithium Battery Pai

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