China's Ministry of Industry and Information Technology (MIIT) has abruptly halted the long-standing policy governing the "cascade utilization" of end-of-life electric vehicle (EV) batteries, a move that marks a significant regulatory pivot in the recycling industry.

The decision, formalized in a July 30 announcement, abolishes provisions related to cascade utilization—the practice of repurposing retired EV batteries for less demanding applications like energy storage. Under the new rules, the MIIT has revoked the approved status of 100 companies previously listed as compliant cascade utilization operators, including major players such as BYD (Shanghai), Huayou Resources, SVOLT Energy, Gotion High-tech, Rept Battero, and GEM. The list of approved recycling companies, which focus on material recovery through smelting and dismantling, remains unaffected.

This policy "hard brake" is intended to eliminate regulatory loopholes that allowed substandard products to enter the market, shifting the industry from a culture of conceptual arbitrage to one centered on technical rigor and safety.

Unified Regulatory Framework

As China's EV fleet ages, the volume of decommissioned batteries has surged. However, inconsistent quality and residual capacity among retired batteries often lead to severe safety risks, including thermal runaway from overcharging, short circuits, or crushing, when repackaged without strict quality control. To address these risks, the MIIT has revised its approach. The previous 2024 industry standards defined "comprehensive utilization" broadly to include both cascade and material recycling. However, a December 2025 interim measure on battery recycling sharply redefined the term, excluding cascade utilization and focusing solely on material recovery through dismantling, crushing, and smelting.

To align with this new definition, the MIIT's latest announcement removes all cascade utilization clauses from the 2024 standards and deletes the entire list of approved cascade operators. Meanwhile, the list of compliant recycling companies remains valid. A senior official from the MIIT's Department of Energy Conservation and Comprehensive Utilization stated that the policy no longer treats "cascade utilization" as a special product category. Instead, all batteries produced from retired batteries will be regulated under the same framework as new battery production.

Safety as the Red Line

The decision to scrap the cascade utilization policy stems from growing safety hazards and market chaos. The MIIT official noted that the "cascade" label was often misunderstood, creating a perception that "second-hand" batteries could have lower performance and safety standards. This allowed some companies to market poorly tested, simply refurbished batteries as "cascade" products, even illegally selling them for use in high-risk applications like electric bicycles. "This led to serious quality chaos and safety risks," the official added.

The policy now establishes a clear, non-negotiable principle: the only criterion for a retired battery to re-enter the market is whether it fully meets the quality and safety standards of a specific application, just like a new battery. This is reinforced by two fundamental legal obligations. First, under the Product Quality Law, producers must ensure their products are free from unreasonable safety risks and comply with national standards. Second, the Circular Economy Promotion Law requires that such products be clearly labeled as "reused" to protect consumer rights. The MIIT has also drawn a clear red line, explicitly banning the use of these batteries in electric bicycles, hoverboards, scooters, energy storage systems over 100 kWh, power banks, and toys.

These practices, the official argued, have created a "bad money drives out good" effect, where legitimate companies investing heavily in rigorous testing and lifecycle management are undercut by unregulated "small workshops" producing substandard goods at a fraction of the cost. "The term 'cascade utilization' was a shield for low-quality products," the official said. "Now, that shield is gone. Products made from retired batteries must meet the same standards and bear the same producer responsibilities as new ones. This levels the playing field and reverses the 'bad money drives out good' phenomenon."

End of the "Second-Hand Discount" Privilege

This regulatory correction is set to trigger a deep structural shake-up in the battery recycling industry. In the short term, companies that relied on the "cascade utilization" business model face significant adjustments. However, in the long run, the move clears the path for healthier industry development.

First, the regulatory approach has shifted from "concept-based differentiation" to "standard-based unification." No longer will products made from retired batteries enjoy a "second-hand discount" privilege. The MIIT official stated that the new policy will steer the industry from "competing on price" to "competing on quality," accelerating the concentration of resources among technically capable leading enterprises.

Second, the policy mandates a comprehensive, top-down cleanup. The announcement requires a three-tiered effort—at the national standard, local policy, and industry self-regulation levels—to root out all references to the now-defunct "cascade utilization" concept. Standardization bodies are tasked with revising or abolishing relevant national and industry standards, while local authorities must accelerate the review of their own policies. Industry associations are also ordered to cease all promotional activities related to cascade utilization.

Importantly, this is not a total ban on reusing retired batteries. The 2024 standards were a non-mandatory, guiding document, not an administrative approval requirement. The MIIT official emphasized that while the 100 companies were removed from the compliance list, "this does not affect their legal and compliant production and business activities. As long as they fully comply with the Product Quality Law, the Circular Economy Promotion Law, and other mandatory standards, these companies can continue to produce qualified products from retired batteries and compete fairly in the market."

Zhang Xiang, Secretary-General of the International Intelligent Vehicle Transport Technology Association, believes that compliant material recycling (dismantling and smelting) companies will benefit. "The abolition of the 'cascade utilization' policy removes the shield for non-compliant firms. Compliant recyclers will now get more orders, and the industry will be set right," he said.

The end of the "cascade utilization" era for EV batteries is a microcosm of China's broader shift in the new energy sector from pursuing quantity to prioritizing quality. It sends a clear signal that safety and regulation are non-negotiable red lines. The comprehensive utilization of retired EV batteries is now entering a new phase, one where technology drives value and "good money" finally drives out "bad."