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The future of ATFs in an electrified world

Hans Eric Melin, Founder and Managing Director of Circular Energy Storage, a consultancy focused on the life cycle of lithium-ion batteries, discusses where ATFs stand when it comes to processing EV batteries.

Electric vehicle batteries are something of a divider among ATFs. Challenging to handle, difficult to price but potentially the most profitable component ever seen in a scrapped vehicle.

A battery pack from a Tesla Model S is made up by over 7,000 battery cells. Each cell contains recoverable materials currently worth 16 pence. Altogether with cables and structure, the pack has a material value of around £1,500. However, before this can be realised, the battery needs to be disassembled and prepared for recovery and eventually processed in a hydrometallurgical process with the ability to separate and turn the mixed materials into new chemical products. Usually, there is also at least one leg of transportation between each of these steps. With an efficient recycling process in a highly optimised reverse supply chain, we may look at a net value of £800-£1,000 which should be shared between as many as four or even five different players which all want to have as large a piece of the pie as possible. 

Compare this with the current price for Telsa modules which usually can be sold for £700-£800 each, making the entire pack worth more than £10,000. The difference is of course that the modules will not be recycled but reused as they normally are in very good condition.

Batteries from electric cars are reused in a number of applications. One of the most popular for modules from Tesla is the conversion of classic cars. Batteries are also frequently used in different kind of energy storage systems, from small residential systems to large containerised solutions for grid support. In China, more than 4 GWh of used EV batteries are used for backup power to telecom towers. While many batteries for energy storage systems still cost more than $200 per kWh batteries from Nissan Leaf, BMW i3 and various Tesla models often can be sourced for less than $100 per kWh.

For many ATFs, batteries from EVs have become a great business with a steady increase in both demand and supply. However to achieve this, and to sustain profits over time, it requires both an efficient operation and investments in training, equipment and facilities for storage of batteries. But most of all it requires close contact with the market.

From January to May in 2020 the sales of electric cars in the UK increased with more than 130 per cent compared to last year. That was during an unprecedented lockdown which indicates that this will only increase further. A sharp rise in sales also means a rise in the number of vehicles that will come off the road.

In the US where Tesla’s first mass volume car, the Model 3, was launched in 2017 there are already more Model 3 coming off the road than Model S, which has been on the market since 2012. This means that the flavour of the day might change quickly and batteries which previously have been in high demand might suddenly lose its attraction when preferences shift in favour of new, more interesting alternatives.

Another trend we see clearly today is how the car makers increasingly take back control of the batteries. From having treated the batteries mainly as liabilities, more and more OEMs realise they can monetise the battery, which still is the single most expensive component in the car, several times by changing the battery in the car not because the old was bad but because a new was better. By doing so they can get hold of batteries for use in energy storage systems.

The recent discussions about so-called “million miles” batteries, a stretch which would take a normal UK driver more than 100 years to drive, indicates that the most important asset in the future for a carmaker is the battery. Add to this, business models such as shared mobility and technological innovations like autonomous driving and we might come to a point where the cars become interchangeable structures that will reach their end-of-life far earlier than the battery.

What does this mean for ATFs? 

Well, in the worst case it means that the recoverable values of the components in electric cars might be significantly lower because batteries are suddenly not included. It means that batteries from less successful models might have zero attractiveness because the supply from more popular models is enough to meet the demand. On top of that comes an increasing supply of ICE cars from a market with a decreasing demand for spare parts.

What’s important now for ATFs is to look far beyond the wrecks that are off-loaded on the yard today and to figure out which role to play in the next ten or even twenty years. And one of the key parameters to follow is the strategic direction the carmakers themselves will choose. The big change electrification brings to the market is not only about new components, it’s about a completely new generation and distribution of value. ATFs need to figure out how they can secure their share.

If you would like to contact Hans Eric Melin, please call +44 775 692 7479 or send an email to hanseric@circularenergystorage.com or visit www.circularenergystorage.com

Caption: Hans Eric Melin inspecting an old EV battery in a second life system

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