As major Western automakers have struggled to make the transition to electric vehicles, they have stubbornly favored nickel-based batteries, even though they are costlier and subject to more supply chain snarls than the iron-based batteries used by market leaders Tesla and China’s Byd. A  primary objection to iron-based batteries has been that they are not economically recyclable, diminishing their value.

But over the last year or so, little noticed in the West, hundreds of Chinese companies have begun to recycle lithium-iron-phosphate batteries. So too are two U.S. companies, in small quantities. Many of the Chinese companies are earning a profit, according to Hans Eric Melin, a U.K.-based specialist on battery recycling, and that puts new pressure on traditional auto and battery makers like General Motors and South Korea’s SK to reconsider their bet on relatively expensive nickel.