Battery health pivotal in valuating used EVs
For a typical internal combustion engine vehicle, the deterioration of its components can be thought of as “lots of paper cuts” that occur over the car’s lifetime, says Recurrent CEO Scott Case.
But for an electric vehicle, its component degradation is typically, “noting, nothing, nothing and then ‘WHAM!’ whenever the battery fails,” Case said.
“If that’s within warranty, no problem,” he said. “That actually could be a great situation for a used-car buyer. If you can get your hands on a car that might have 100,000 miles on it and a brand-new battery in it, because it just got replaced within warranty or somebody else paid to do it, well that's worth a lot of money. It's a hidden gem.”
However, Case said, “if you're buying a car that only has two years left on the warranty and there's this question mark (about the battery life), you better figure that out.
“It's worth a lot to avoid a situation where you'll basically have a brick in three years, versus a car that could go for another 10, no problem,” he said.
That’s where Case and his team at Recurrent — an EV battery and range analytics company – come into play.
If you think about the “guts” of an ICE vehicle, there are any number of parts and components impacting its value as a used car. But for an electric, one competent drives most of that valuation: the battery health.
“Especially with an older car, where the price point of a older Leaf or an older Bolt might be $15,000 and it could cost close to $15,000 to replace one component if it fails,” Case said, referring to the battery
But properly evaluating the health of an EV's battery hasn't always been so cut and dry.
“The dealers who were doing the earliest handling of used EVs, they all kind of developed some rules of thumb. There’re some crazy stories that are out there about how dealers would take a ballpark (estimate of the battery’s health) basically,” Case said.
There were alternative techniques and technologies created by early EV drivers, he said, but those could be complicated and hard to decipher.
“What we realized when we came along is that all of that's too complicated and too time-consuming and so we need to come up with some standard way of measuring these cars and comparing them against each other in a world where there are no standards between the high-voltage batteries from one car to another and even sometimes within one car's make and model,” Case said.
Furthermore, with continued innovation in battery materials, electrical engineering layouts and how the energy itself is consumed by the vehicle, that complicates the task of gauging battery health, he said.
“It's all over the place, and we thought the industry is going to need a simple answer that cuts through all the junk that's out there and makes it so a dealer, no matter what their nameplate, their affiliation is, can get a quick sense with a limited amount of time and cost” what the health of a vehicle battery is and how it stacks up against to comparable vehicles, Case said.
“That's what we provided, that's what we still provide, that's what we're doing for dealers and we're doing it now for wholesale,” Case said.
Wholesale market partnerships
As Auto Remarketing reported in September, Recurrent has been working with two of the most notable names in the wholesale space: ADESA and Black Book.
ADESA launched a condition report feature to showcase battery performance of electric vehicles. Powered by Recurrent, the EV Range Score is available on the majority of used electric vehicles that transact on the U.S. market, providing buyers with more transparency and confidence when purchasing EVs.
Black Book announced the integration of its VIN-specific data into a valuation tool built on Recurrent’s new Range Score.
Range Score is designed to make it easier to understand expected range in a used EV by comparing a unit’s current expected range to what was normal when new, which often differs from its EPA-rated range.
During the interview with Auto Remarketing, Case discussed the partnership with Black Book, which is still in early stages.
Essentially, a visitor to the Recurrent website can punch in the VIN and generate a valuation on the vehicle, be it retail or wholesale. It provides the full Black Book valuation, including such metrics as base value, mileage adjustment, retail adjustment, history adjustment and so forth, Case said.
In addition to those metrics, Recurrent will then provide a battery adjustment based on the specific vehicle.
The vehicle receives a range score between 0-100. If, for example, the car gets a score of 90, Case said, that means its battery is getting 90% of the range it got as a new vehicle.
The battery adjustment would tell the user whether a score of 90 on that 2017 Tesla Model S, for instance, is average, good or bad compared to other 2017 Model S units evaluated by Recurrent.
And with the ADESA partnership, most all of the used cars coming through the auction chain now have a Recurrent report with a range score, Case said.
“I think that's just going to show up in more and more and more different wholesale buying situations,” he said. “And even like when dealers are appraising the car, when somebody brings it in for a trade-in or it's a private-party sale off the street, if they're working with us, they can use our same system to understand the battery health of that and then that plays into the price they should pay.”
Biggest impacts to battery health
So, what factors have the greatest effect on the health of an EV’s battery? Case said it varies from model to model, but said these are some of the “big ones”:
- Vehicle is exposed to extreme heat on a sustained basis
- Regular use of DC fast charging the majority of the time, instead of using Level 1 or 2 charging
- The practice of draining the battery to near-zero, then charging it all the way back up completely.
- Keeping the vehicle plugged in and completely charged all the time, without driving it much.
Asked about regional impacts to battery health, Case said that would be a "blunt way" of doing valuations.
“If I had nothing else to go on, i would probably prefer to buy a car that had grown up in Northern Vermont versus one that had grown up in Phoenix, Arizona,” he said.
“But there's a lot of nuance there,” Case said. “The car in Phoenix might have been garaged most of the time in a climate-controlled setting and never parked in the sun and gently charged its whole life, versus the one in Vermont could have been just jammed in in the freezing cold in to fast charging. So, it's not that clear-cut. It's very, very vehicle-specific.”
Looking ahead
Case anticipates there will likely be 300,000 to 400,000 used EV sales in 2023, which is still a small fraction of the overall used market’s near-40 million overall sales.
“But we have a lot to go in terms of coverage on all of the cars that are showing up for sale. i think i see us working with more and more dealers and working with additional wholesale auctions, working with commercial fleets to track all those batteries on a really granular basis, so that when cars show up for sale, we kind of have them dead to rights,” Case said.
“So, it's a lot of that data access and collection for us, and then just increasing our distribution of the places that we're interacting with a potential buyer, whether that's a dealer buying from wholesale or a retail customer buying from a dealer.”
In a report separate from this interview, Case outlined a few expectations for 2023.
As for the trends he believes dealers should pay attention to, Case pointed to Inflation Reduction Act of 2022, which is now in effect and includes the first-ever tax credits for used electric vehicles.
“Since the used EV tax credit requires that a vehicle be sold by a dealer to qualify for the $4000 credit, there’s a new advantage over private party sales. Traditionally, just 55% of used car sales go through dealers,” Case said in the report. “That (percentage) could be as high as 70% moving forward for used electric vehicles. This grows the market long-term for dealers.”