Driving Net-Zero Circularity: Business Model Selection and AI-Enhanced Echelon Utilization in Closed-Loop EV Battery Supply Chains

The realization of net-zero manufacturing in electric vehicles (EVs) relies on effective battery reuse and recycling. This paper analyzes how business model selection, direct selling (BS) or battery leasing (BL), together with artificial intelligence (AI)-enhanced sorting, affects pricing, demand, and profitability in closed-loop EV battery supply chains. A Stackelberg game compares three settings: no echelon utilization, traditional echelon utilization, and AI-supported echelon utilization. The analysis shows that under BS, the forward and reverse channels are separated, so the new EV price remains unchanged. Under BL, the channels are integrated, allowing residual battery value to lower consumers’ access costs. We further derive threshold conditions for adopting echelon utilization and AI, which depend on reuse value and AI cost but not on the business model. The comparative profitability of BS and BL is determined by the price sensitivity of recycling volume to the recycling price under BS: BL is more advantageous when this sensitivity is low, while BS yields higher profitability when it is high. These results provide theoretical insights into how business model choice and AI-enhanced echelon utilization jointly shape pricing, value creation, and profit allocation in the EV battery industry.