Why OEM control, battery value and shifting export markets are putting recyclers under pressure
The automotive recycling sector is being squeezed from both ends: OEMs are moving to control EV battery materials, while shifting global resale markets are weakening traditional end-of-life flows. Christian Drenth argues recyclers must define their commercial role now, before OEM-led circular models decide it for them.
The automotive recycling sector is being squeezed by two structural shifts: OEMs moving to control battery and critical raw material recovery, and changes in global resale markets that are weakening traditional end-of-life flows. Christian Drenth, Founder of DreCo Insights, argues that recyclers must now decide where they sit commercially before the value chain decides for them.
The automotive industry is reorganising across the entire lifecycle of a vehicle. The recycling sector sits at the centre of that reorganisation. The rest of the industry is about to discover just how central.
Two conversations brought that into focus for me.
The first was with Marc, who works in end-of-life vehicle recycling. That has not been my territory. I actually spent 25 years on the supply side, i.e., components, commercial strategy, and OEM and Tier 1 relationships. But what Marc described forced me to rethink where value will sit at the back end of the chain.
The second was with the CEO of a major European truck manufacturer. He described how Chinese competition is affecting residual values in his African business, which is to say, the economics underneath every vehicle he sells today, and every vehicle that will eventually reach a dismantler.
To me, it seems that the value profile of a vehicle is being rewritten at both ends at once, and the recycling sector sits at the hinge of that change.
Here is how it fits together.
The OEM is the new competitor
The first shift for the recycling sector is that its biggest new competitor is not another recycler. It is the OEM.
Regulation is part of the driver. On 12 December 2025, the EU Council and Parliament reached provisional agreement on a new End-of-Life Vehicles Regulation, replacing the 2000 Directive. It strengthens Extended Producer Responsibility, introduces a cross-border mechanism that follows a vehicle across Member States, and makes manufacturers financially and organisationally responsible for the full lifecycle. Those obligations kick in three years after the regulation enters into force.
But regulation explains the obligation, not the new appetite for recycling. OEMs were perfectly content to let dismantlers and recyclers handle end-of-life for decades. They could have claimed parts back at any point. They did not. So the question is: what changed?
No surprises here, the answer is money.
The value profile of a car at the end of life has flipped. Mechanical and metal content is commoditised and low-margin. Legitimate work for dismantlers is never worth an OEM’s attention.
Battery content is something else entirely. Lithium, cobalt, nickel, and manganese sit inside those packs in concentrations that mining operators would recognise as ore. McKinsey projects the battery recycling opportunity to generate $95 billion in annual value creation by 2040, with a $6 billion profit pool by the same date. The wider automotive circular economy market is forecast to reach $455 billion by 2034, up from $154 billion in 2024.
Then add the supply side. Lithium demand is expected to fall into deficit by 2027. Critical mineral supply chains are concentrated in China to a degree that European OEMs can no longer accept. Recycled material is no longer a sustainability talking point; it is part of the procurement strategy.
Regulation closes the loop on the incentive. The EU Battery Regulation of July 2023 sets minimum recycled-content requirements in new EV batteries: 16 percent for cobalt, 6 percent for lithium, and 6 percent for nickel. The Critical Raw Materials Act requires 25 percent of EU strategic raw material consumption to come from recycling by 2030. That creates demand pull for recycled material, and the OEM is the party best positioned to capture it. But only if they control the end of the chain.
The industry is already moving. Mercedes opened its own battery recycling plant at Kuppenheim, with a 96 percent recovery rate and enough output for 50,000 new battery modules a year. BMW runs a Cell Recycling Competence Center with Encory and has a parallel partnership with Redwood Materials in North America. Volkswagen and Audi have tied up with Redwood, Umicore, and Ganfeng Lithium across three continents. Stellantis has set up a dedicated circular economy business unit targeting $2.16 billion in sales by 2030.
The commercial model is shifting with them. Today, OEMs pay disposal firms to take end-of-life batteries, and ownership transfers out with them. McKinsey describes the move toward a tolling model, in which the OEM pays a service fee to the recycler but keeps ownership of the recovered materials. That single structural change explains the whole repositioning.
The OEM does not need scrap metal. They need lithium and cobalt to stay inside their own supply chain.
The recycling model of the last fifty years has extracted value from metal, fluids, and mechanical parts. That model is under pressure, not primarily from regulation, and not because OEMs have developed a sudden attachment to what they designed.
Because the value inside an end-of-life EV is now a strategic raw material being repositioned onto OEM balance sheets.
When “Made in Germany” stops holding value
For at least the last two decades, there has been a resale chain that has worked. A new vehicle sold in Germany or France. After four or five years, it was resold into Central and Eastern Europe. After another five, it was exported south to Africa, the Middle East, and parts of South Asia. Each stage absorbed depreciation and kept the residual value on the last buyer’s side positive. “Made in Germany” held its weight across all three stages. And at the end of every stage, a dismantler or a recycler eventually saw the vehicle.
A CEO of a major European truck manufacturer recently described to me what is breaking that chain. His customers in Africa have started asking him: why pay €30,000 for a used European truck with 300,000 kilometres on it, when a brand-new Chinese one costs the same?
Increasingly, they don’t.
Chinese heavy-truck exports to Africa are now at an industrial scale. Sinotruk alone exported more than 120,000 trucks in 2023, accounting for 44 percent of China’s total truck exports, with Africa as a core market. FAW Jiefang, Shacman, and others run parallel networks. Established dealer structures are in place across South Africa, Kenya, Ethiopia, Ghana, and Mozambique. The proposition is straightforward: new, cheaper, with a factory warranty.
The same pattern is repeating in passenger cars. BYD, Chery, and Geely are replicating the truck playbook at price points European OEMs cannot match with new vehicles, let alone used ones.
For the recycling sector, that matters for three reasons at once.
Feedstock is thinning. European heavy-truck sales fell 9 percent in the first nine months of 2025, and fleets are ageing. 62 percent of European trucks are now five years or older, up from 55.5 percent in 2019. Because operators are holding longer rather than taking the depreciation hit, used-car residual values after 36 months and 60,000 km fell across every major European market last year. Fewer vehicles are moving through the resale chain at their usual pace. The ones that do move are older on arrival.
The mix is shifting. More EVs, more software, more vehicles whose recyclable value is concentrated in battery packs that OEMs now want for themselves, less of the traditional metal-and-mechanical content that the sector was built around.
And the far end of the chain is being competed against directly. Used European vehicles that would have eventually been dismantled somewhere in Africa are being displaced at the point of sale by new Chinese ones. The volumes, the routes, and the terminal operators are all being rebuilt by a different set of players.
Let’s follow the pressure back up the chain.
If residuals decline, leasing prices rise due to higher depreciation. In Germany, the monthly lease cost of a €45,000 EV more than doubled from €284 in 2021 to €621 in 2024. Fitch has formally flagged residual-value risk on BEV-exposed auto-lease ABS in Europe. If leasing prices rise, new-vehicle demand softens.
If new-vehicle demand softens, OEMs have to cut prices to move volume. OEM EBIT margins in Q3 2025 sat at 3.9 percent, down nearly 60 percent from their 2021 peak. European supplier EBIT margins sat at 3.6 percent, the lowest of any major automotive region. That pressure flows straight back to the Tier 1 and Tier 2 suppliers. My own clients, European component manufacturers, are asked to invest in new technology and take costs out at the same time.
This is where the structural shift in the supply chain meets the structural shift at the end of the chain.
Chinese manufacturers are not just competing in new-vehicle markets. They are building the infrastructure to take their own vehicles back. BYD controls raw materials through to assembly. CATL runs a similar model through its recycling subsidiary Brunp. At more than 240 collection depots, around 270,000 tons of waste batteries are being processed each year, with recovery rates above 99 percent for nickel, cobalt, and manganese. Gotion is building Africa’s first EV gigafactory in Kenitra, Morocco, due to open in 2026. BYD now has 20 dealerships in South Africa, scaling to 30 to 35, plus a bus partnership with BasiGo in Kenya. Inside China, they already run buy-back and closed-loop recovery for their own fleets. There is no public evidence of formal buy-back programmes for Chinese vehicles in Africa yet. But the financial and industrial architecture is already in place.
If that model extends to export markets, the end-of-life value chain for Chinese-origin vehicles will bypass European dismantlers entirely. The OEM sells. The OEM recovers. The recycler handles what is left.
So what now?
The instinct of companies facing these pressures has always been to adapt operationally. Install the new equipment. Train for high-voltage. Build volume where the next generation of vehicles is headed. Necessary, but not sufficient.
The harder question is commercial. Who will own the materials when the dismantler hands them over? Who is going to hold the relationship with the vehicle’s last owner? Will the residual value in a battery pack be captured by the one who recovers it, or the one who built it?
None of those questions are operational. They are structural. And the operators asking them early, not the ones running the cleanest yard, will be the ones whose business still exists in ten years.
My own clients, European automotive component manufacturers, are asking the same question from a different angle. How can they create value for their customers and a margin for future investments when their customers are only concerned about cost?
Same question. Different side of the car.
I do not have a clear answer. Nobody does yet.
However, my recommendation is to ask the question on your own terms, while the answer is still yours to shape.
The chain has come full circle. The squeeze is on both ends.
The companies that move first will choose their position. The ones who wait will be assigned one.
Further Reading on Auto Recycling World
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The auto recycling industry must not wait to be invited into circularity’s inner circle
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Toyota Tsusho strengthens EV-battery recycling from collection to recycle stages
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The Future is NEUTRAL operates the first “Individual System” in France for recycling EV batteries
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No successful circular economy without material data
Subscribe to the Auto Recycling Newsletter for the latest news and insights in the auto recycling industry
Sources used
Regulation and policy
European Council, “Circular economy: Council and Parliament strike deal on rules for vehicle circularity and management of end-of-life vehicles,” 12 December 2025. consilium.europa.eu
European Parliament, “Circular economy: deal on new EU rules for the automotive sector,” 9 December 2025. europarl.europa.eu
Regulation (EU) 2023/1542 on batteries and waste batteries (EU Battery Regulation), 12 July 2023. eur-lex.europa.eu
Regulation (EU) 2024/1252 on establishing a framework for ensuring a secure and sustainable supply of critical raw materials (Critical Raw Materials Act), in force 23 May 2024. commission.europa.eu
Battery recycling market and value pools
McKinsey & Company, “Battery recycling takes the driver’s seat” — $95 billion annual value creation and $6 billion profit pool by 2040. mckinsey.com
BIS Research, “Automotive Circular Economy Market, Analysis and Forecast, 2024–2034” — $153.63 billion (2024) to $455.33 billion (2034). bisresearch.com
IEA, “Global Critical Minerals Outlook 2025” — lithium supply/demand outlook; deficits expected in the late 2020s. iea.org
OEM recycling initiatives
Mercedes-Benz Group, “Mercedes-Benz opens own recycling factory to close the battery loop” (Kuppenheim, 96% recovery, 50,000 battery modules per year). group.mercedes-benz.com
BMW Group, “BMW Group and Encory launch innovative direct recycling to recover battery raw materials” (Cell Recycling Competence Center, Salching). press.bmwgroup.com
BMW of North America, partnership with Redwood Materials for EV battery recycling. press.bmwgroup.com
Volkswagen Group / PowerCo and Umicore, IONWAY cathode-materials joint venture. volkswagen-group.com
Redwood Materials and Volkswagen Group of America / Audi, end-of-life battery recycling partnership. redwoodmaterials.com
Stellantis, Dare Forward 2030 — Circular Economy Business Unit targeting €2 billion in revenues by 2030. stellantis.com
Commercial model — tolling
McKinsey & Company, “Battery recycling takes the driver’s seat” — shift toward a tolling model in which recyclers charge a fee while OEMs retain ownership of recovered materials. mckinsey.com
Chinese truck exports to Africa
China Daily, “Sinotruk sees record-high exports in 2023.” chinadaily.com.cn
Sinotruk Annual Report 2023, heavy-truck export volumes and African market share.
European vehicle market data
ACEA, “New commercial vehicle registrations: vans −8.2%, trucks −9.8%, buses +3.6% in Q1–Q3 2025.” acea.auto
ACEA, “Vehicles on European roads 2025” and ING Research analysis of EU truck fleet age: 62% of trucks aged five years or more in 2024, up from 55.5% in 2019. acea.auto / think.ing.com
Autovista Group / Indicata, European residual value indices — decline in used-car residuals after 36 months and 60,000 km across major European markets. autovistagroup.com
EV leasing and residual values
Fitch Ratings, “BEV exposure in European auto lease ABS raises residual value risk” (coverage via Motor Finance Online). motorfinanceonline.com
Mexico Business News, “Europe’s EV Leasing Prices Double Amid Falling Resale Values” — Germany monthly lease for a €45,000 EV rose from €284 in 2021 to €621 in 2024. mexicobusiness.news
Automotive margins
Bain & Company, “Automotive Profitability: How OEM and Supplier Margins Are Faring” — Q3 2025: OEM EBIT margin 3.9% (down nearly 60% from 2021 peak); European supplier EBIT margin 3.6%. bain.com
Chinese closed-loop and overseas infrastructure
CATL, Battery Recycling overview — Brunp subsidiary: 240+ collection depots, ~270,000 tonnes of waste batteries per year, >99% recovery for Ni, Co, and Mn. catl.com
Gotion High-Tech / Gotion Power Morocco, Kenitra gigafactory (Africa’s first battery gigafactory), production scheduled Q3 2026. northafricapost.com / just-auto.com
China Daily and BYD South Africa, dealership expansion (20 rising to 30–35). global.chinadaily.com.cn / byd.international
BasiGo and electrive.com, BYD–BasiGo electric bus partnership in Kenya. basi-go.com / electrive.com
