How data makes your electric vehicle more valuable
In the EV age, data-driven battery health assessment is key to residual value
Unanswered questions about EV battery health
In reading up on electric vehicle industry news earlier this week, a couple recent articles from the New York Times caught my eye. The first is about the effectiveness of federal incentives for EV purchases. The article includes an anecdote about a family that considers, then reconsiders buying a used EV. Per the article (emphasis mine):
With few used electric vehicles to choose from and no easy way to gauge the health of a car’s battery, they bought a used hybrid Chevy Volt to match the one they already have.
So while scarcity of used inventory was an issue, clearly scarcity of information about the battery was too. If this type of concern is widespread, economics would tell us that unanswered questions about battery health are depressing EV resale values.
Indeed in conversations with customers and contacts across the industry, we hear that EV resale value is a major concern for OEMs. It turns out that lease financing is a major profit driver for these companies. They lease out a new vehicle for a few years, then sell it on the resale market once the lease expires. This business model depends heavily on accurately predicting the resale value (more commonly referred to in the industry as “residual value” or “residuals”) once the vehicle comes off lease.
For combustion-powered vehicles, the OEMs and their finance arms have millions of residual value data points collected over decades that enable them to price leases profitably once resale proceeds are taken into account. For electric vehicles, by contrast, the same questions that steered the family in the Times article away from a used EV are depressing used EV values more broadly, and ultimately EV lease profits (article: “All Electric Cars Except Teslas Have A Depreciation Problem”). Anecdotally we’re hearing from OEMs that residual values for early EV lease programs are coming in several thousand dollars lower per-vehicle than they had anticipated. That sum is more than enough to make or break profitability on a vehicle.
Ultimately, this is not surprising as the battery pack is the single most valuable component in the vehicle, and the one upon which future performance, reliability, and lifetime most depends. It follows that if you can’t accurately assess the health of the battery, you can’t accurately assess the value of the vehicle. So what’s an OEM to do?
OEMs are sitting on the answer
The second article that piqued my interest is about how the Biden administration’s EV plan will impact those auto OEMs with EVs already on the market, versus those who have not yet introduced EVs. Independent of policy implications, the article quotes an academic in making another important distinction:
Companies that are already building electric cars in significant numbers have an advantage, Mr. Wells of Cardiff Business School said, because they have collected years of data on how owners use those vehicles.
To a large extent, this data is a detailed log of how the vehicle battery has been used and how it has performed over its life. So here, in two articles from the same newspaper published a couple days apart, we have an interesting juxtaposition. One poses a question about battery health, and the other suggests that OEMs may already hold the keys to an answer. If they already know the full life history of the battery, why not use it to reassure the resale market and drive up residual value?
Closing the information gap with EBI
To solve this problem, auto OEMs need to develop both deep expertise in battery performance and aging over time, as well as the tools and infrastructure to produce data-driven assessments of battery health at scale. Doing so will provide the confidence to the market to boost EV residual value, and thus profitability. Again this is anecdotal, but the industry is broadly seeing that EV batteries only degrade by a few percent over three years, the typical length of a lease. So it really is an issue of information and confidence, as opposed to a larger problem with the underlying battery technology.
Real-time, data-driven health assessments of EV battery packs is one of the benefits that OEMs can accrue from adopting a new category of software developed for the full battery lifecycle and ecosystem of applications: Enterprise Battery Intelligence (EBI). EBI provides the capability to combine all available data about a battery pack’s makeup (which cells from which suppliers, quality control measurements from manufacturing) and performance history to produce a “Carfax-like” battery health report at any point in time.
As the electric vehicle industry matures, we will see the OEMs developing this full-lifecycle capability around batteries as a core competency, and they will need the data infrastructure that EBI provides in order to do so. As the creator and leader of the EBI category, we at Voltaiq are excited to help drive EV profitability for the OEMs, and consumer confidence that even a used electric vehicle can be a true “no compromise” option for personal mobility.
