The B2B platform for full-electric and plug-in hybrid electric vehicles: Industry News

When talking about weak spots of electric vehicles, batteries are always amongst the first to be named. With mass-marketed EVs soon rolling off production lines, some practical considerations on EVs in everyday life stumble again over the battery issue: from a warranty and residual value point of view this time.

Who will assure the warranty for EV batteries?

Emission reduction obligations, political will and national incentives push electric vehicles on the roads and have already or are about to provide basic infrastructure to facilitate their circulation. With mass marketed EVs becoming a reality, practical aspects need considerations.

Ideally, EVs will recharge during nighttime, consuming cheap off-peak electricity, store it in the batteries and either use it on travel or feed it back into the grid in peak consumption times, therefore leveling out the production charge for the power grid. This, however, translates into additional strain on the battery which then will depreciate not on the basis of the mileage absolved but on constant charging and recharging. Considering that the latter benefits the power company and has nothing to do with the primary performance of the electric car, car manufacturers start to fear that they might be trapped with costly warranties for batteries that have been prematurely depleted due to unplanned use patterns.

How much is the EV worth without the battery?

The residual value of cars - the money it is worth after 2, 5, 10 years in use - plays an important role for monthly payment schedules, leasing rates, the calculation of ownership costs, resells etc. For new car models these calculations are always difficult, for new technologies even more so as a base of reference is lacking. CAP, a British research firm providing information on residual values of new and used cars, have launched a review of the electric car sector in order to determine the residual value of EVs based on the available data to date.

So far, CAP sees the major concern in the battery replacement costs which is all the more difficult to determine as for the moment approaches to handling ownership and warranty are as manifold as the players in the field. The Japanese car manufacturer Nissan, for example, first considered selling the full electric Leaf for a very attractive price and leasing the battery separately, but in the end opts now for selling them in one set. The EV infrastructure provider Better Place, on the other hand, has built its business model around “sweeping” depleted batteries for subscribed EV holders who pay Better Place for mileage plans like cell phone users pay for minutes.

The body and most components of an electric vehicle might very well achieve the same durability as conventional car models. The battery - the heart of the EV - however, is expected to degrade down to 80 percent of the original storage capacity within the first 8 years on the road. These degraded batteries are not worthless per se, they can still be of use for other purposes but they are not able to power an EV anymore.

One possibility would be for car makers to sell the EV but only lease the battery to the EV buyer until the end of the battery's usefulness to the EV, then recover the battery and sell it for secondary use in other appliances. In this case, however, the warranty would need to lie with the car maker and be separate from the overall warranty for the rest of the EV, which could result in higher costs for both sides, the carmaker and the buyer.

One battery - three functions?

Tom Gage, CEO of AC Propulsion, has identified three value streams for batteries, which fit the above mentioned options:

• powering the EV: transportation
• feeding back stored electricity: grid services
• powering other appliances: secondary battery market

The secondary battery market could equally comprise again usage in transportation. Axeon, Europe’s largest independent supplier of lithium-ion battery systems, suggests that batteries with degraded capacity could still be deployed in shorter-range vehicles in urban, inner-city delivery fleets for example.

The difficulty in this equation of course lies in the ownership of the battery as the three functions benefit different stakeholders respectively. This means, we can maximise the use and value generation over the battery's life time but we will need new battery ownership structures in order to balance out costs, responsibility (warranty) and benefits.

After the technological challenge, now the organisational challenge remains to be solved.