The battery market has a paradox: availability doesn't guarantee sellability.
Thousands of battery modules sit in warehouses across Europe and North America. Some move within days, others don't move at all. The difference isn't just supply and demand. It's trust, data transparency, and understanding what buyers actually need to deploy batteries with confidence.
The industry talks about oversupply, but the reality is more nuanced. Tier-one cells from CATL and BYD are in high demand. Standardized modules like MEB find buyers fast. Meanwhile, zombie capacity floods the market, and younger, non-standard formats struggle to find a home.
In this conversation:
Samuel Lattarulo, Sales Manager, Circunomics
Nikola Vekić, Co-founder McKinsey Battery Insights, McKinsey & Company
We break down the real mechanics of the battery aftermarket: what makes inventory move, how chemistry affects deployability, why data transparency builds trust, and how regional regulation is reshaping second-life economics. From LFP versus NMC to the role of Battery Passports, this is the signal behind the noise.
Battery Oversupply: What Moves vs What Stalls
Key topics covered:
- Understanding battery oversupply: where it's real and where it's myth
- What makes some battery lots easier to sell than others
- The role of data, certification, and third-party validation in building buyer confidence
- How price fluctuations and tariffs are reshaping regional markets
- Practical recommendations for sellers and buyers navigating the circular battery economy
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HOST: Welcome to the Circunomics Talks podcast. EV battery inventory can be available without being easy to sell. That's what we're talking about today.
We're breaking down why some EV battery lots find a buyer quickly while others don't. Joining me are Samuel Lattarulo from Circunomics and Nikola Vekić from McKinsey & Company. Welcome.
Let's dive right in and start with market context. Nikola, we started with the idea that availability doesn't automatically mean something is easy to sell. We also keep hearing about battery oversupply. How should we understand that? What does it mean in the EV market?
NIKOLA: Thank you for the question, and thanks for the invitation. Very happy to be here.
Oversupply is twofold. You need to look at the front end of the market, where we have primary sales entering the market. In some sections, you can still talk about oversupply. At McKinsey, we track all the cell plants in the world—all gigafactories that are producing.
We added a new term recently from the supply team: zombie capacity. Capacity that is in the market, mainly in China, with severe difficulties finding an offtaker. These are typically tier two, tier three cells that are average and flooding the market. They don't necessarily end up in Western EVs.
When you look at which cells end up in EVs—tier one cells produced by CATL, BYD, Gotion, and the likes—you quickly see that you're not talking about oversupply any longer. These are in very high demand and command a much higher margin than tier two or tier three cells.
That's the front end. You also have a back end—the aftermarket—where Circunomics has mastered matchmaking offtakers for those cells and modules. Here, the differentiation is clear: the longer the vehicle is on the market and the more standardized the product, the more demand you typically see.
If you have a module that is standardized across multiple platforms—say, an MEB module—it typically doesn't sit long in your inventory. There is always demand for these modules. Others that are much younger, not long in the market, or have a difficult form factor like a pouch are much harder to sell. You need a segmented view when looking at supply-demand balance.
HOST: Samuel, what makes some battery inventory easier to sell from your perspective?
SAMUEL: Thank you for the question. Thank you, Nikola, for this discussion. I really appreciate it.
MEB is a great example. We see strong demand in the BESS market in Europe. The great thing about MEB is that in the BESS market, there are fewer integration hurdles than in automotive.
MEB has high quality standards that exceed BESS requirements, so integration, demand, and supply move faster.
HOST: Speaking about particular chemistries and use cases, Nikola, is there something that makes a difference when it comes to availability or deployability of batteries in the market?
NIKOLA: 100%.
You can summarize the chemistry landscape into two big families: NMCs—nickel manganese cobalt batteries, also containing lithium—and LFP—lithium iron phosphate batteries.
One tends to be much more valuable in terms of metal content than the other. LFP cells are cheaper. They should perform longer and typically have higher cycle life stability. However, that depends on cell quality.
The devil is in the detail. You can't just assume an LFP battery will hold longer than an NMC battery. It's much more a function of cell quality than cell chemistry.
Metal content also governs recycling value and what happens with that battery at end of life. You can have a situation where LFP recycling is not profitable at this point, but the battery is good enough for second life. You'll have a second-life operation first before that battery eventually moves into recycling because it has to be recycled and someone has to pay for it.
NMC, on the other hand—if you have a combination of high metal content, poor cell quality, and advanced age—you can have a situation where the value for second life is lower than what you would make if you recycle that battery.
It's a constant evaluation at these end-of-life stages of what to do with the cell next. That differs between LFP and NMC, but as a rule of thumb: reusing in a car as a repair option will always be the most valuable option because it means not having to buy a new battery.
If that doesn't work—if the cell health doesn't allow for it or there's no demand—you can send that cell or module to a second-life operation, which typically generates more value than recycling. But that's a function of metal prices.
HOST: Samuel, what do buyers need to know before they can decide whether a battery will work for their application?
SAMUEL: Like Nikola mentioned, LFP and NMC are the common chemistries you can use. LFP would be, in most cases, the better technical fit for BESS applications. But NMC is right now more available on the market as overstock or second life.
It's more about availability right now than technical fit. Most of our customers are using NMC for now. In the future, they'll use LFP because it's a better fit. But for now, availability drives the supply, not the technical specification.
NIKOLA: Irrespective of the chemistry, you're looking at a market. In this market, you need the typical things every market has: trust.
In the case of a battery, to generate that trust, you need data transparency. In the simplest way, consumers want to know how much guaranteed life this battery still gives them when they install it in second life or use it as a repair module in their car.
You can only answer that through data transparency—by understanding the health of this pack, module, or cell to the fullest. That's exactly what the provider needs to give. That's exactly what the marketplace needs to enforce in order to start generating trust.
As soon as this trust is there, you will see more volumes flowing through that market.
HOST: When it comes to sellers, Samuel, how can they present information in a way that helps buyers decide faster?
SAMUEL: Beyond SOH, data is everything. Nikola mentioned it as well—the battery itself is a black box without data.
Especially in second-life markets, you need to know what was before: how it was used, how it was cycled, how it evolved before you can integrate it into your production or application.
Even if customers purchase complete battery packs, they cannot integrate them without a connection to a CAN protocol. That's only one example.
Also, you cannot transport a battery without UN38.3 certification. A lot of data is really important and a must-have, not a nice-to-have.
HOST: Nikola, testing, certification, third-party validation—what typically accelerates a transaction?
NIKOLA: Anything that generates more trust.
Data transparency is a must. SOH at the end of the day is not a health indication. It is an indication of what the capacity level of that battery is. That's it.
You can have batteries with an SOH of 95+ that will fail earlier than a battery with an SOH of 80. It's all about the quality of that battery.
To assess the quality, you need to look into much deeper data. You need to understand how internal resistance developed over time across different cells. How is the temperature profile in that module or pack under operation to understand which cell is probably going to fail earliest?
The second step to generate even more trust is third-party certification. Someone independent has to vouch that this is true data—that it is exactly what we've measured. That's another step that generates the right trust to confirm transactions.
The third point I see as crucial is you need to empower buyer rights. There needs to be some sort of guarantee when it comes to performance. How exactly that could look is still something to think about.
HOST: Fluctuating and changing battery pricing also affects things in the industry. A few comments on that—how does this affect it?
SAMUEL: That's a good question. I'm the first one to get this frustration from customers as soon as we get into price fluctuation and changes.
It's really hard for customers because many of them are planning beforehand with a margin, with the cost and budget of the complete project. Then suddenly the price changes, and you have a complete project at risk. They cannot plan. They have a lower margin. They have to change everything.
Many customers change their strategies. One way is to look into cheaper modules, maybe with lower quality. The other way is that many are looking more into first life to get a more stable supply chain—a mixed strategy, I would say.
But at the end, this pricing fluctuation always causes frustration. If you are in this market with overstock and second life, you have to plan for it. You have to be prepared for this market structure and pricing structure.
If you know your budget, then you can decide fast.
NIKOLA: It's very different if you look at the automotive aftermarket versus batteries moving to second life—how price impacts them.
The impact comes from primary sales. Sale prices move. That's what's causing the pressure on second life at the moment, given very low primary battery prices. It's setting the ceiling for a second-life battery.
Reusing batteries in a car as a repair option is completely different because the only alternative is to replace the pack entirely with new cells. Otherwise, that doesn't work. You need to find a module or cell that has a very similar age and performance profile like the rest of your pack.
You're moving into a completely different product group that is very independent of primary battery prices. Typically, those products can go much higher in terms of US dollars per kilowatt hour versus what you see in a primary battery index.
This is a very typical phenomenon and very extreme for hybrid vehicles, where we've seen prices of $600–700 per kilowatt hour for specific models.
HOST: Let's zoom in regionally. What are the biggest differences between different regions—for example, North America and Europe right now?
NIKOLA: It's a good segue because it starts again with battery prices. That's what's setting the market for second life.
How does it do that? By forming the ceiling I just mentioned. The maximum price you will ever get for a second-life battery is the price of a new battery. As simple as that.
In some markets, that price can be much higher than in others. That can have various reasons: local supply-demand imbalance, which we don't necessarily have today. The much bigger factor is regulation.
You can have tariffs on the border that can artificially increase the landed cost of batteries. That is right now much more extreme in North America versus Europe.
As such, you see second-life batteries booming much more aggressively in North America at the moment versus Europe because it's simply the cheaper option versus sourcing Chinese batteries that get a 20%+ tariff on top.
It changes the business case. That can have a significant tailwind for a market like second life, as we've seen in the past 12 to 24 months in North America. In Europe, we also see activities, but not to the same extent.
HOST: Given that we have a very popular hot topic—the Battery Passport—coming into force at the beginning of next year, Samuel, from Circunomics' perspective, where can better data infrastructure make the biggest practical difference?
SAMUEL: The Battery Passport itself is a great idea. You have standardized data overall, and that's a great point everyone can work with because you know what you get.
You will have different products based on the provider of your Battery Passport. The appearance is different, but the data behind it is always standardized and the same. Everyone can prepare and search for the right requirements they're looking for. That helps a lot.
Battery Passport will be an accelerator for deal creation because you have the data available that people are searching for. That's really great.
NIKOLA: I agree with Samuel. It's a fantastic idea. It's always good and helpful to provide a certain set of mandatory data transparency, particularly for the market we're operating in—the battery aftermarket and recycling—but also the front end, the consumer perspective. Understanding what you're buying, what the potential sustainability implications are.
I do think it has improvement potential in some areas. The feedback I see from the market is that it's great to know what's in the battery. From a recycler's perspective, it would be much better if they don't need to learn themselves how to disassemble that pack. There should be a user manual attached that they can leverage to safely disassemble the battery and recycle the materials within or find ways to reuse the components.
That's number one.
The other part—and this is something we already touched upon—it gives a good high-level data lens, which is a good start, but it is not replacing testing that is necessary to validate products.
That still has to happen. In an ideal world, we skip this step. We save all those costs. That transparency is already a given.
That is something where you would need to see a bit more fine-tuning in the passport itself until we reach that level.
HOST: Maybe a couple of words from each of you on recommendations or a look ahead, given the trends and the market. Samuel, you can start.
SAMUEL: As a wrap-up, Nikola used one word that's really important: trust. This is really needed in the market. Trust is a good point for everyone—sellers and buyers. On both sides, trust is always needed. Otherwise, there will be no deal.
For sellers, I would say you need to have your data in hand already. The more you have, the better it is, and the faster it moves.
For buyers, I would say you need to fix your budget already beforehand, and you have to move fast. The market is opportunistic, and if you don't decide fast, the supply could be gone. That's really important because I've seen many examples in practice.
And if you want to move faster, I would say come to Circunomics.
NIKOLA: I would structure it in three areas.
On the seller's end, as a rule of thumb, the more transparency you give, the quicker you will be able to sell the lot you're sitting on. That will also increase your throughput. Even without someone mandating you to give certain information, the more transparent you are, the easier it will be to make that sale.
In the middle, I see someone like a marketplace orchestrating that. My clear recommendation is to have a very clear workflow in place with stage gates where you have minimum data requirements, certifying the data before it gets uploaded. Someone who's an expert verifying that to a certain extent, then facilitating that transaction.
Maybe even adding a modeling layer where you can give recommendations on where should this go, what's the ideal case—the matchmaking part. Much of the trouble of the market is the current fragmentation. Platforms like Circunomics exist because someone is sitting on a couple of batteries and doesn't know that there is someone in Scandinavia who needs them.
The art is giving people the understanding of what the value is. Adding that modeling layer is quite important without crossing any liability issues and giving any price guarantee that you cannot do. Over time, with more data, the accuracy of these models will also increase.
On the buyer's end, the pitfalls I typically see are that buyers see the business case from a lens of upfront investment. That's dangerous because typically these systems need more care. That care translates to cost.
When you look at the business case overall, look at it from a lifelong perspective—the full TCO. What do I have to invest? How much do I save versus how much extra do I need to pay for safety requirements, for exchanges? Do I have guaranteed access to additional modules that I will need over the lifetime, given probably higher failure rates during the lifetime of a second-life system?
Those are aspects I would look into a bit more.
HOST: Thank you both for summarizing and breaking down this topic.
If I try to make a key takeaway, it sounds relatively simple: Supply doesn't automatically create opportunity. Batteries move when buyers are confident that they can use them. And that's based on the right fit, information, and everything we spoke about today.
Thank you very much, Nikola and Samuel, for joining me. And thanks, everyone, for listening to Circunomics Talks podcast.
NIKOLA & SAMUEL: Thank you for having me.
