KUPPENHIEM, Germany—Mercedes-Benz is constructing a state-of-the-art factory here to recycle electric vehicle batteries. The facility will establish a close-loop system for raw materials.

The first stage of the plant—mechanical dismantling of EV batteries—will ramp up later this year, followed by a hydrometallurgy pilot plant. Eventually, the battery recycling factory will cover every step, from dismantling at the module level to shredding, drying and processing of materials.