Market and product

As regulations on forced labor, digital battery passports, and supply chain localization become increasingly stringent, the global electric vehicle (EV) battery industry is turning to artificial intelligence (AI) to verify the origin of battery materials—from the mine to the finished vehicle.

Supply chain visibility extends far beyond Tier 1 suppliers

In the past, supply chain management largely focused on ensuring that Tier 1 suppliers delivered products on time, at the agreed cost, and with the required quality. Today, however, supply chain visibility has expanded to encompass the entire value chain—from battery cell manufacturers and cathode and anode material suppliers to lithium compounds, precursor chemicals, and even upstream mining operations.

This shift is driven by three converging pressures: tightening regulations, increasing supply chain disruption risks, and rising quality expectations. As a result, many manufacturers are diversifying their sourcing strategies and favoring suppliers that can provide transparent documentation and traceable material origins rather than competing solely on price.

New regulations are raising the bar for traceability

One of the strongest regulatory drivers comes from the United States. Under the updated enforcement strategy for the Uyghur Forced Labor Prevention Act (UFLPA), lithium has been added to the list of high-priority sectors subject to enhanced scrutiny. The decision reflects concerns over lithium production in China's Xinjiang region and allegations of forced labor associated with mining activities there.

Enforcement has intensified significantly. During fiscal year 2025, U.S. Customs and Border Protection (CBP) detained more than 7,300 shipments for UFLPA review—an increase of over 50% compared with the previous year. Only about 6.5% of those shipments were ultimately released. Since the law took effect, more than 18,000 shipments valued at approximately US$3.8 billion have been subject to review.

Europe is also introducing a major traceability requirement through the Digital Battery Passport under the EU Battery Regulation. Beginning on February 18, 2027, all electric vehicle batteries and industrial batteries with a capacity exceeding 2 kWh placed on the EU market must carry a digital passport accessible via a QR code. The passport will contain comprehensive information on material composition, carbon footprint, durability, and recycling history.

The initiative is expected to serve as a model for expanding digital product passports to other industries, including textiles, electronics, and construction materials.

Effective traceability requires connected data

According to industry experts, a robust traceability system must integrate three categories of information.

The first is the financial trail, including purchase contracts, invoices, and payment records.

The second is the logistics trail, covering shipping documents, customs declarations, and delivery records.

The third is the manufacturing trail, documenting production processes, material inputs, and packaging operations.

The key link connecting these three streams is the batch number. By maintaining consistent batch identification from raw materials through battery manufacturing, companies can demonstrate a complete and verifiable chain of custody.

Such traceability serves not only regulatory compliance but also quality management. If a battery defect is discovered in the field, manufacturers can quickly identify the affected material batch, production line, or supplier instead of issuing broad product recalls.

The challenge, however, is that much of this work is still performed manually. Supply chain data are scattered across multiple IT systems, document formats, and languages, making comprehensive verification both time-consuming and error-prone.

AI is helping companies see deeper into supply chains

According to McKinsey's Supply Chain Risk Pulse survey, 95% of companies have visibility into their Tier 1 suppliers, yet only 42% can monitor Tier 2 suppliers and beyond. Ironically, many of the most disruptive supply chain risks originate precisely at these deeper tiers.

This is where agentic AI is expected to make a significant difference.

AI systems can automatically extract supplier names, batch numbers, purchase order references, and origin information from contracts, invoices, shipping documents, and manufacturing records—even when these documents are unstructured or written in different languages.

The technology can then cross-check information across multiple sources to identify inconsistencies before they become compliance issues during customs inspections or audits.

In addition, AI can continuously update supplier networks in real time, providing companies with a dynamic view of sourcing relationships and emerging risks throughout the supply chain.

Research firm Gartner forecasts that global spending on AI-enabled supply chain management software will surge from less than US$2 billion in 2025 to approximately US$53 billion by 2030. The firm also identifies agentic AI as one of the most influential technologies shaping supply chain management over the coming years.

Real-world adoption is already underway

AI-powered battery traceability is rapidly moving beyond pilot projects.

In the United Kingdom, battery recycling company Altilium has introduced Regentrace, an AI platform designed to manage the traceability of recycled battery materials. The system combines industrial production data with AI-driven decision-making and digital traceability throughout the recycling process.

Meanwhile, Gartner's Global Supply Chain Top 25 report for 2026 highlights that leading manufacturers, including Schneider Electric, are increasingly deploying generative AI and agentic AI to enhance supply chain visibility, support decision-making, and improve coordination across global operations.

Human expertise remains essential

Although AI can process massive volumes of supply chain data and automatically reconcile millions of records, experts emphasize that it cannot replace human judgment.
Procurement, compliance, and quality assurance teams must still investigate exceptional cases, assess risks, and ensure that traceability evidence can withstand scrutiny from regulators and customers.

Over the longer term, the ability to demonstrate a credible chain of custody—from the mine to the finished battery pack—is becoming more than a compliance requirement. It is emerging as a strategic competitive advantage. Companies that establish trustworthy traceability systems will be better positioned to withstand supply chain disruptions, respond quickly to quality issues, and meet increasingly demanding regulatory and customer expectations worldwide.

Source:

1. Battery Technology (BatteryTechOnline), 7/2026 
2. Renewable Energy Magazine; Procurement Pro, 2026 
3. Batteries (MDPI, open access); Circularise; Rev-Log — về EU Battery Regulation & Digital Battery Passport, 2025–2026 
4. U.S. Department of Labor; Lexology (Troutman Pepper Locke); Kharon; CMTrade Law — về cập nhật thực thi UFLPA, 8/2025–2/2026 
5. Gartner Newsroom (các báo cáo về agentic AI, xu hướng công nghệ chuỗi cung ứng và Global Supply Chain Top 25); Inside Logistics; Supply Chain Digital, 2/2026–6/2026