Abstract for: Informal Trade in the Electric Vehicle Battery Circular Supply Network

Electric vehicle battery (EVB) recycling tends to become a strategic pathway of critical mineral supply in the presence of intensified trade tensions on raw material. A central debate concerns whether to expand domestic recycling capacity or to prioritise battery repurposing. However, prior research does not recognise that a growing share of batteries is repurposed informally through third-party informal collectors, while recycling firms are facing waste feedstock scarcity. Drawing on empirical evidence, we used the lens of supply network configuration and system dynamics to examine the circularity transition of China’s EVB supply chain and how informal trade activities determine its effectiveness. The findings reveal that expanding recycling capacities without addressing supply constraints may risk underutilised assets and weaken the bargaining power of recyclers, especially in the context of volatile virgin metal prices. Capacity expansion in formal recycling unintentionally diverts feedstocks toward lower-regulated and margin-flexible informal repurposing channels. This path distortion is driven by heterogeneous pricing mechanisms and asymmetric institutional transaction costs across alternative pathways, which shapes informal collectors’ behaviour. However, informal collectors developed pre-processing capabilities that are critical to the functioning of circular logistics. Rather than displacing it, integrating its expertise may offer valuable insights for building more resilient circular supply chains.