Reuse Before Recycle: Why Vietnam Needs a Different Approach for Its LFP Batteries
Vietnam's EPR rules for batteries are now in effect, and battery storage now has regulated prices under Circular 17 and Circular 62. But most batteries in Vietnam use LFP chemistry, which has very low recycling value. For LFP batteries, the greater value is in reuse, and this should shape Vietnam's policy.
Ananth Chikkatur — CEO, XanhTerra
Rules Are in Place, but the Industry Is Not Ready
Vietnam now has two important policies for a battery circular economy. First, Extended Producer Responsibility, known as EPR, has applied to batteries since 1 January 2024. Second, battery storage now has regulated prices, through Circular 17/2025/TT-BCT for storage that EVN deploys and Circular 62/2025/TT-BCT for standalone storage projects. However, having these rules is not the same as having a working recycling industry. Most batteries used in Vietnam, in electric vehicles and in almost all grid storage, use lithium iron phosphate, known as LFP. LFP has very low recycling value, which is different from the battery types that recycling systems in other countries were designed for. To build a real circular economy, Vietnam should follow a clear order. It should reuse batteries first, recycle them second, and make battery testing cheap enough that both can happen.
EPR for batteries comes from the 2020 Law on Environmental Protection and Decree 08/2022/ND-CP. It was updated by Decree 05/2025/ND-CP, which took effect on 6 January 2025, and these rules have since been consolidated into Decree 110/2026/ND-CP, which took effect on 25 May 2026. For storage, Vietnam now has two regulated price tracks. Circular 17/2025/TT-BCT covers storage that EVN builds and operates. Circular 62/2025/TT-BCT covers standalone storage projects and sets a capacity-based payment. In addition, Decree 243/2026/ND-CP allows storage combined with rooftop solar for self-consumption. These rules are a good foundation.
However, the rules do not yet create the industry they assume. Vietnam actually has two different problems that share one name. The first is lead-acid recycling. It is well established but informal. It already earns money from recovered material, but much of it takes place in craft villages with poor environmental and safety standards. Here the task is to formalize activity that already exists. The second is lithium-ion recycling. It is almost entirely new. The economics are negative today, and there is very little domestic capacity. Here the task is to create the industry from the beginning. Using one recycling coefficient for both battery types treats these two very different problems as if they were the same.
The LFP Differentiation
Most advanced recycling systems, in China, Korea, and the European Union, were designed for NMC batteries, which contain nickel and cobalt. Nickel and cobalt have high value, so recovering them pays for the recycling process. A recycler can afford to buy used NMC batteries because the recovered metals are worth enough.
LFP batteries do not contain nickel or cobalt. They contain iron and phosphate, which are inexpensive. Only the lithium has meaningful value, and recovering lithium from LFP is technically difficult and often not profitable at current lithium prices. As a result, in many markets, used LFP batteries are sold for very little or thrown away as hazardous waste. The recycling value of an LFP battery is close to zero, and sometimes negative.
This is very important for Vietnam. Electric vehicles use LFP, and almost all grid storage in Vietnam uses LFP. A recycling industry that depends on metal value will not work well in Vietnam, because the metals in Vietnam's batteries are not worth enough to recover.
NMC Batteries
Contain nickel and cobalt — high-value metals that pay for the recycling process. Recyclers can profitably buy used NMC batteries. Systems in China, Korea, and the EU were designed around this chemistry.
LFP Batteries
Contain iron and phosphate — inexpensive and abundant. Only lithium has meaningful value, but recovery is technically difficult. Recycling value is close to zero, and sometimes negative.
Vietnam's Reality
EVs and almost all grid storage in Vietnam use LFP. A policy copied from NMC-based recycling systems will misjudge the problem. The economics that work elsewhere simply do not apply here.
The LFP Opportunity: Reuse First
The same features that make LFP difficult to recycle make it well suited for a second use. An EV battery is usually removed from a car at about 70 to 80 percent of its original capacity, because a car needs full driving range and high power. However, a battery removed from a car is not finished. LFP batteries have a long total cycle life, often two to three times that of NMC, and their capacity declines slowly. So a used LFP battery still has a large amount of useful life left.
Stationary energy storage is a good place to use this remaining life. Uses such as peak shaving, smoothing solar output, and backup power operate at lower power levels and do not need the high power that a car requires. A battery that has lost some power capability, but still holds energy well, can meet these needs.
LFP Is Thermally Stable and Safe
LFP does not release oxygen during thermal runaway in the way that nickel-rich batteries can. This is important for a used battery, which is older, less uniform, and often installed at sites with less control. It is especially important in Vietnam's hot climate.
Lower Energy Density Does Not Matter for Stationary Storage
LFP's main weakness in vehicles — lower energy density — does not matter for stationary storage, because weight and space are not major concerns for storage installations. The limitation disappears in the second-life context.
Reuse and Recycling Do Not Compete for LFP
Because the recycling value of a used LFP battery is close to zero, choosing to reuse it costs almost nothing in lost recycling income. For NMC batteries, reuse and recycling compete. For LFP batteries, they do not. The lithium stays inside the battery and can be recovered later, at true end of life, when recovery methods may have improved.
What Is Missing Is Standards
If reuse has the most value, why does Vietnam not yet have a second-life market? There are two reasons. Only one of them is about timing.
Timing — and It Is Temporary
Vietnam's EV fleet is still young, so there are not yet many used batteries available. This is the reason the mandatory recycling rate for EV and hybrid batteries has been set at 0 percent under Decree 110/2026/ND-CP (Article 5(2), Appendix I; effective 25 May 2026), rising by up to 10 percent every three years, starting in 2029. The supply of used batteries follows the growth of the fleet by about ten years. This is a market to prepare rules for now, and to expect to grow in the 2030s.
Standards — and It Is the More Important Reason
Circular 17 and Circular 62 were written for new batteries. Vietnam has no system to test, certify, warranty, or assign liability for reused batteries. Without such a system, a bank cannot value a used-battery project and cannot lend against it. The barrier to second-life investment is not the price level in the tariff. The barrier is the absence of standards that allow a used battery to be given a reliable value that a bank can accept. This work is mainly the responsibility of the Ministry of Science and Technology (MOST). It is not a task for another pricing circular.
The choice of deployment channel also matters. Under Circular 62, a standalone storage project earns a capacity-based payment, but it receives no premium for its location and must find its own site and its own buyer. Under Circular 17, EVN deploys storage directly, with a regulated tariff and a defined site. For second-life batteries in particular, the EVN-directed track under Circular 17 may be the more practical channel in the early years. EVN can decide where the batteries are placed, can standardize how they are purchased and tested, and can manage the performance uncertainty of used batteries within its own operations. A merchant developer under Circular 62 has none of these advantages, and would carry the full risk of an unproven used-battery asset.
How to Reliably Test Used Batteries at Low Cost
To resell a used battery, three things must be known: its state of health, its remaining useful life for a given use, and how consistent its cells are. A full laboratory capacity test can measure these, but it takes several hours per battery and requires special equipment. At the scale that a second-life market needs, this is too slow and too expensive. This high testing cost is the main obstacle.
Machine learning can replace the expensive laboratory test with an estimate based on data that the battery has already produced. Battery aging leaves clear patterns in the data that the battery management system already records. These patterns include incremental-capacity and differential-voltage curves, written as dQ/dV and dV/dQ, which show whether the battery has lost lithium or lost active material. They also include the increase in internal resistance, measured from how the voltage responds to changes in current.
This early data is very useful. In one well-known study (Severson et al., Nature Energy 2019), a model predicted a battery's cycle life to within about 9 percent using only the first 100 cycles, before any capacity loss was visible. Importantly, that study used LFP cells, which is the main battery type in Vietnam.
Low Cost at Scale
Once the model is trained, the estimate is very cheap to produce. Testing becomes reading the battery's recorded history and applying a short standard measurement. This allows hundreds of batteries to be tested per day, instead of only a few.
Confidence Reporting for Banks
To be useful for a bank, the estimate must report how confident it is — not only a single number. It must be checked regularly against real capacity tests on a sample of batteries, and it must receive trustworthy, standardized data from a shared battery record.
The Need for a Battery Passport
A model trained on one battery type, or one pattern of use, does not work well on batteries of unknown history. Reliable testing therefore depends on a shared data record for each battery — which is a reason to build a battery passport data system, not a reason to avoid one.
Learning From Other Countries
When used batteries do eventually arrive, and recycling grows, Vietnam should avoid a mistake that many advanced countries have made. Korea, the United States, and Europe subsidized battery shredding and refining capacity before enough used batteries were available. When the used batteries arrived later than expected, and metal prices fell, much of this capacity was left unused and unprofitable.
Vietnam's fleet is even younger, so its main source of recycling material in the near term is not used batteries — it is scrap from domestic battery manufacturing. The VinES-Gotion LFP plant in Hà Tĩnh is the first real source of such scrap. The better approach is to place recycling next to manufacturing, so that manufacturing scrap is recycled directly, rather than building separate recycling plants that must wait years for used batteries to appear.
In summary, Vietnam can take the demand-creating rules from the EU, the tracking and take-back system from China, and the caution about timing and prices from Korea and the United States. It should follow China's order — establishing tracking and take-back first, and adding stricter requirements later. Given Vietnam's size, it should also avoid building large refining capacity too early. A more realistic near-term role is to safely collect used batteries and carry out early-stage processing, and then send the material to regional refiners.
What This Means for Vietnam
These three ministries have complementary roles, and the policy system should follow a reuse-first order of priority across all of them.
From Rules to a Working Industry
Vietnam's main challenge in the battery circular economy is not technology, and it is not tariff levels. The challenge is to design policy so that a market dominated by LFP batteries, with few used batteries available so far, recovers value in the correct order — reuse before recycling — and can measure the condition of a used battery reliably and at low cost, so that both reuse and recycling can take place. If Vietnam gets this order right, its EPR rules will become a real industry.
Reuse First
Used LFP batteries leaving EVs at 70–80% capacity still have significant useful life for stationary storage. Reuse captures the real value before it is lost; recycling captures almost nothing from LFP at current prices.
Standards Enable the Market
Testing, certification, and liability standards — primarily MOST's responsibility — are the missing link. Without them, banks cannot value a used-battery project, and investment cannot flow into second-life storage.
Machine Learning Reduces Testing Cost
ML-based state-of-health estimation — validated on LFP cells in peer-reviewed research — can turn an hours-long laboratory test into a minutes-long estimate, making the second-life LFP market financially workable at scale.
About the Author
Ananth Chikkatur is the CEO of XanhTerra, an energy consulting and advisory firm operating across Southeast Asia. He holds a doctoral degree from MIT, conducted post-doctoral research at the Harvard Kennedy School, and has more than 20 years of energy-sector experience across Vietnam, Southeast Asia, and South Asia. XanhTerra specializes in AI-assisted modeling, cost-of-flexibility analysis, and regulatory and policy advisory for VWEM, C&I solar, BESS, and DPPA projects across the region.
This briefing reflects XanhTerra's reading of the 2020 Law on Environmental Protection, Decrees 08/2022/ND-CP, 05/2025/ND-CP, 110/2026/ND-CP, and 243/2026/ND-CP, and Circulars 17/2025/TT-BCT and 62/2025/TT-BCT, together with the international sources listed below. It is provided for information only and is not legal or investment advice.
Notes & Sources
Vietnam EPR. Battery recycling obligation from 1 January 2024 (Law on Environmental Protection 2020; Decree 08/2022/ND-CP); Decree 05/2025/ND-CP effective 6 January 2025; consolidated into Decree 110/2026/ND-CP, effective 25 May 2026. F&L Asia · Tilleke & Gibbins · MAE
Storage price tracks. Circular 17/2025/TT-BCT (storage deployed by EVN) and Circular 62/2025/TT-BCT (standalone storage), and how each is paid, as discussed in XanhTerra's commentary on Circular 29/2026. XanhBlog: Circular 29/2026 · Lexology (Circular 62)
Storage and rooftop solar. Decree 243/2026/ND-CP (26 June 2026), legal basis for storage with self-consumed rooftop solar. VietnamPlus
LFP economics and reuse. Low recycling value of LFP; used LFP often sold for very little or treated as hazardous waste; suitability of LFP for stationary reuse. Neu Materials
Feedstock timing. Recycling capacity built before used batteries were available; excess shredding capacity and exported material. Discovery Alert · Fastmarkets
International models. EU Regulation 2023/1542 (in force 18 August 2023; battery passport from 2027); China MIIT Interim Measures (effective 1 April 2026); South Korea resource-security framing and recycler downturn. Archimede · SESEC · KEIA
Battery testing with machine learning. Severson and others, Data-driven prediction of battery cycle life before capacity degradation, Nature Energy 4(5), pages 383 to 391, 2019. About 9.1 percent error using the first 100 cycles, on LFP and graphite cells. Nature Energy