This study aims to analyze the implications of the recent European Union Regulation 2023/1542 on the circular economy and stakeholder strategies within the electric vehicle lithium-ion battery (EV-LIB) sector. It aims to explain the policy intentions, recommend practical strategies for stakeholders and examine how the new regulation exerts pressure on stakeholders to transition from older directives to more sustainable practices and operational standards, while also highlighting policy gaps. Design/methodology/approach The research employs a dual-method approach, combining text analysis of EU legislation with semi-structured interviews of industry stakeholders. This methodology allows for a comprehensive understanding of the regulatory impacts by integrating legislative intent with practical, on-the-ground insights from key players in the EV-LIB sector. Findings Our findings show that the three aggregated dimensions of operational sustainability, R&D and new technologies and collaborative dynamics are the key dynamics underlying the intended outcomes. The findings also highlight the policy’s historical development, the stakeholder categories, the implications for each and practical recommendations in responding to the policy requirements. Additionally, the findings identify policy gaps, such as weak incentives and broad economic operator classifications, with examples from international markets. The regulation creates proactive stakeholders driving innovation and collaboration and reactive ones adapting to changes, where static implicit implications may affect their viability by imposing unequal burdens. Originality/value To the best of the authors’ knowledge, this paper is the first to analyze the new EU Regulation 2023/1542, offering novel insights into the strategic responses required by stakeholders to adapt to the regulatory pressures. By focusing on the latest regulatory framework and its practical implications, the study bridges the gap between policy and practice, providing valuable guidance for industry players navigating the evolving regulatory environment. Highlights (1) EU’s policy shift from Directive to Regulation (EU) 2023/1542 has extended implications on the Electric Vehicles battery sector. (2) Duel qualitative methods of text analysis and semi-structured interviews validated three aggregate dimensions and policy gaps. (3) R&D with advancing technology, Operational sustainability and safety and Collaboration dynamics are dominating the scene. (4) Emergence of Proactive vs Reactive stakeholder dynamics. (5) The broad classification of “economic operators” and insufficiently detailed incentives, hinting at potential competitive imbalances and underexplored roles of end-users in achieving circular economy goals are appearing policy’ gaps.