Newsletter December ‘25

Rather than a full phase-out, the proposal targets a 90% reduction in car CO₂ emissions by 2035 (relative to 2021 levels), allowing a limited share of non-electric vehicles to remain in the market. Automakers would offset residual emissions through measures such as green steel sourcing and e-fuels, a shift viewed by some as the EU’s most significant climate policy retreat in years. While German manufacturers welcomed the added flexibility, EV-focused companies warned the move could undermine long-term investment certainty across the electric vehicle battery supply chain and widen Europe’s competitiveness gap with China. The proposal now awaits approval from EU governments and Parliament, reflecting mounting pressure to balance decarbonisation with industrial resilience under the evolving EU batteries regulation framework.  

China – ‘No Fire, No Explosion’ Battery Rule
China strengthened its regulatory oversight of the lithium-ion battery supply chain by making EV battery safety requirements nationally mandatory for the first time. The new “no fire, no explosion” standard, effective from July 2026, elevates thermal safety criteria to compulsory national status and applies across new-energy vehicle platforms. Regulators framed the update as a major advance in vehicle safety governance, forcing manufacturers to improve battery design, thermal management systems, and quality control across the battery materials supply chain. The revised technical standards also tighten energy-efficiency benchmarks and expand rules on battery recycling and circular use, reinforcing Beijing’s dual focus on safety, sustainability, and long-term battery supply chain resilience.  

United States – EV Incentives Withdrawn
In the United States, the rollback of federal EV incentives continued to reverberate across the EV supply chain. Following the expiration of consumer EV tax credits at the end of September, electric vehicle sales fell sharply in November, highlighting the sector’s sensitivity to policy support. The new federal budget law not only ended the long-standing $7,500 purchase credit but also froze fuel-economy penalty increases, easing regulatory pressure on automakers to electrify. In response, manufacturers began scaling back EV investment plans: Ford Motor announced the cancellation of several next-generation electric models and recorded a major write-down on its EV programme, pivoting toward hybrids and near-term profitability. These developments underscore growing uncertainty across the US battery supply chain, as companies reassess electrification timelines amid shifting policy signals and market demand.  

Battery Passport & Traceability 

Battery Passport Momentum
With the EU battery passport regulation approaching implementation in 2027, December saw accelerated progress across the industry. Market analysis published this month projects the global battery passport market to expand rapidly over the next decade, reflecting rising demand for digital product passport solutions that support regulatory compliance and supply chain transparency. Leading cell manufacturers, including CATL, LG Energy Solution, and Panasonic, have moved from pilot phases into active deployment of blockchain-enabled battery passport systems, aligning with EU regulatory requirements. These digital records link each battery to verified data on materials provenance, carbon footprint, and recycled content, enabling traceability along the battery supply chain and supporting streamlined compliance reporting. By the end of 2025, the battery passport had clearly transitioned from a conceptual policy tool into a practical mechanism underpinning sustainable and transparent battery markets.  

Traceability Initiatives & Standards
Traceability and responsible sourcing advanced in parallel with passport development. Chinese battery manufacturers increasingly view the EU battery passport as a de facto global market access requirement, accelerating internal investments in supply chain traceability software and material tracking systems. Major producers have established dedicated teams to monitor raw material sourcing and lifecycle emissions in preparation for EU compliance. Globally, standard-setting bodies and industry consortia made progress toward harmonised supply chain traceability and transparency frameworks. The Global Battery Alliance expanded pilot reporting templates covering the majority of global EV battery output, while new standards such as SAE’s EV battery traceability specification gained traction as blueprints for recording critical mineral provenance. Together, these initiatives are laying the foundation for end-to-end material traceability compliance, enabling batteries to carry auditable “digital twins” from extraction through second-life and recycling. 

Circularity & Innovation 

Recycling Initiatives & Circular Investments
December saw continued momentum toward a circular battery materials supply chain, driven by both industry and government investment. In Europe, BMW Group and its recycling joint venture Encory opened a new Battery Cell Recycling Competence Center in Bavaria, showcasing a closed-loop system that recovers lithium, nickel, cobalt, and other critical materials through direct mechanical recycling. Recovered materials are fed directly back into pilot battery cell production, demonstrating a scalable model for battery supply chain circularity. At the policy level, the European Commission announced €3 billion in funding to accelerate domestic sourcing of critical raw materials, including recycling infrastructure, strategic stockpiles, and joint purchasing initiatives. Similar recycling and reuse requirements were embedded in China’s updated EV standards, underscoring a global push to reduce reliance on primary mining and strengthen responsible battery supply chains.  

Second-Life & Battery Innovation
As the first wave of retired EV batteries begins to emerge, second-life deployment gained traction as a key bridge between use and recycling. Reusing batteries in stationary energy storage is increasingly viewed as a critical component of a resilient battery storage supply chain, extending asset lifespans while delaying material recovery. Pilot projects worldwide are repurposing used EV packs into grid-scale storage systems, extracting additional value before end-of-life processing. Alongside circular innovation, late-2025 also marked progress in next-generation battery technologies. Solid-state battery development accelerated in Asia, with multiple manufacturers unveiling high-energy-density prototypes and launching pilot production lines. Chinese authorities released draft standards for solid-state EV batteries, providing regulatory clarity to guide commercialisation. Together, these advances signal a shift toward a more sustainable, transparent, and technologically advanced battery ecosystem — one designed for longevity, recyclability, and compliance with future digital product passport requirements. 

Sources Consulted 

Reuters (2025/12/03), Reuters (2025/12/10), Reuters (2025/12/16), Argus Media (2025/11), VnExpress (2025/12/28), GlobeNewswire (2025/12/17), IDTechEx (2025/12), BMW Group Press Release (2025/12/15)