Closing the loop: Are EU rules supporting a circular automotive industry?

Abstract:

Introduced in 2019, the European Green Deal constitutes one of the most emblematic policy initiatives of the previous European Commission, establishing an ambitious roadmap for reducing greenhouse gas emissions and supporting climate neutrality. Within this broad policy framework, this article focuses specifically on the instruments intended to promote the development of a circular economy in the electric vehicle (EV) industry.
Our analysis adopts a conception of a strong circular economy. This perspective contrasts with more moderate approaches that remain largely compatible with the prevailing growth model and concentrate primarily on marginal efficiency improvements and end-of-life recycling. Such approaches tend to leave dominant patterns of production and consumption largely unchanged, thereby limiting their systemic impact and potentially generating rebound effects.
In contrast, a strong circular economy aims to decouple resource use from economic activity through more profound structural transformations. Achieving this objective requires the redesign of products, the reconfiguration of production processes, and the development of new business models. Central strategies include extending product lifespans, increasing product utilization rates, and creating value through closed material loops. These loops encompass the reuse of production waste, the incorporation of recycled materials into manufacturing processes, and circular activities such as repair, remanufacturing, and refurbishment.
Against this background, the objective of this article is to examine how the European regulatory and financial framework seeks to foster the development of a circular economy and to assess the extent to which these policy instruments may contribute to reshaping the automotive industry, an industrial system that developed through 150 years of existence, toward more sustainable patterns of production and consumption.

To address this question, we identify and analyze the principal regulatory instruments adopted, or currently under negotiation, since 2019 that relate to the repairability, remanufacturing, and recyclability of electric vehicles and their batteries. Particular attention is also devoted to the regulatory mechanisms governing vehicle end-of-life management and extended producer responsibility, which constitute key pillars of the European circular economy strategy.
Our preliminary findings reveal a mixed picture, characteristic of many areas of European regulation. On the one hand, significant progress has been made in establishing a regulatory framework that recognizes the importance of circularity. Several legislative initiatives now address the repairability of products, including vehicles. Moreover, the collection and recycling of batteries at the end of their life have become central components of the emerging regulatory architecture.
In this context, extended producer responsibility has been strengthened considerably. Producers are now required not only to finance the collection of waste generated by their products but also to organize or contribute to its treatment and recycling, thereby creating incentives for eco-design and improved product durability. In parallel, industrial policy instruments such as the Industrial Accelerator Act aim to support the development of strategic value chains, including batteries. These measures seek to accelerate the expansion of European industrial capacity while fostering decarbonization, notably through initiatives supporting the recovery and reuse of critical raw materials.
On the other hand, our analysis identifies several important discrepancies between the regulatory ambitions articulated in these policy frameworks and their effective implementation. For example, regulations concerning access to repair and maintenance information stipulate that any duly certified and registered repair workshop should be able to obtain the technical information required to repair vehicles. In practice, however, the provisions relating specifically to electric vehicle, and particularly to batteries, remain highly general and insufficiently detailed, thereby limiting their practical effectiveness.
The regulatory framework governing batteries also presents notable structural limitations.
Although recycling battery materials is now mandatory, the law does not require this to happen within the European Union. This means manufacturers can use materials recycled outside Europe—especially in China—while still meeting EU targets. On one hand, this satisfies circular economy requirements. On the other hand, it risks separating recycling practices from Europe’s own industrial and economic system.
Recent developments highlight this issue. Since August 2025, China has allowed imports of “black mass” (concentrated recycled battery materials), strengthening its role as a global leader in low-cost recycling. The EU has tried to limit this by classifying battery waste as hazardous and banning its export outside OECD countries. However, this does not fully stop the flow, because OECD countries outside the EU can still export to China. As a result, much of Europe’s black mass may end up being processed there. In this situation, circularity is achieved in technical terms, but Europe gains little industrial value from it.
This ambivalent situation is partly explained by the fact that the circular economy for electric vehicles remains at an early stage of development. Both public authorities and private actors are engaged in a complex process of institutional and technological learning that will likely require time before reaching a sufficient level of maturity.
Nevertheless, the shortcomings identified in the current regulatory framework cannot be interpreted solely as transitional imperfections. Rather, they reveal a deeper structural tension between the objectives of the green transition and the logic of European industrial policy. The European Commission has repeatedly demonstrated a tendency to set ambitious environmental targets before fully defining the economic and institutional conditions required for their effective implementation. Without a more coherent alignment between environmental regulation and industrial strategy, these ambitions risk remaining only partially achievable.
This structural challenge becomes even more acute in the context of intensifying global competition. In particular, China’s growing technological and industrial leadership in the battery and recycling sectors increasingly shapes the strategic environment in which European circular economy policies must operate.