Until now, the company has been using third-party recyclers. Their need was lower at the time. But as the older models reach seven years old, the need to recycle has risen and they're now taking that responsibility in-house.
The recycling facility will be part of Tesla's Nevada-based Gigafactory. They will recover lithium, cobalt, aluminum, copper, and steel from the batteries, refining them back for use in new products. Aside from the reduced cost of materials this system provides, it will also mean less travel pollution from having to ship the batteries overseas for the third party recyclers.
Tesla's Formal Statement
"The closed-loop battery recycling process at Gigafactory 1 presents a compelling solution to move energy supply away from the fossil-fuel based practice of take, make and burn, to a more circular model of recycling end-of-life batteries for reuse over and over again."
Recycling is always a good thing to do. It's not clear what this means for consumers who need a new battery, though. We can possibly expect a small reduction in price, at least.