Business-to-Business Market Making on the Internet: A Case for End-of-Life Electric Vehicle Batteries

University essay from Göteborgs universitet/Graduate School

Abstract: Introduction: The ongoing transformation towards emission-free means of transportation goes alongwith the resource-intensive production and integration of electric vehicle batteries. Despite theenvironmental potential in decarbonizing the transport sector, electric vehicle batteries lose capacityover time and use and are only usable for transportation purposes until reaching 70 to 80 residualcapacity. Discarding the electric vehicle batteries despite the high residual capacity represents a wasteof resources and does not go in line with European-wide sustainability goals. Consequently, severalsecond life scenarios for end-of-life electric vehicle batteries have been identified and partly proven tobe technologically feasible. European laws oblige automotive original equipment manufacturers(OEMs) to ensure that end-of-life electric vehicle batteries are taken back and recycled adequately.Despite the importance of automotive OEMs in the battery value chain, they want to focus on theircore business while leaving the remanufacturing process to third parties, namely second lifemanufacturers. Accordingly, the market for end-of-life electric vehicle batteries is expected to beintermediary-based in which automotive OEMs transfer end-of-life electric vehicle batteries to secondlife manufacturers. However, automotive OEMs and second life manufacturers face two interorganizationaluncertainties when trading end-of-life electric vehicle batteries which can beconceptualised by means of the principal-agent theory: First, ex-ante, the second life manufacturercannot asses the electric vehicle battery’s quality without facing high costs (hidden characteristics)which can prevent the transaction to occur (adverse selection). Second, ex-post, the automotive OEMcannot fully monitor the second life manufacturer’s actions (hidden action), who can act against theautomotive OEM’s interest (moral hazard). Due to the growing demand for electric powered vehicles,large amounts of end-of-life electric vehicle batteries will become available for second use in thefuture. There is an ever-increasing need for a cross-sectoral market form that reduces or prevents theinter-organizational uncertainties between the automotive OEM and second life manufacturer andthereby facilitates the exploitation of the environmental and economic potential connected to secondlife. Research Question: The study aims to answer to what extent an online business-to-businessmarketplace can reduce or prevent the inter-organizational between the automotive OEM and secondlife manufacturer. Methodology: A multiple-case study based on three business-to-businessmarketplaces was conducted, including two semi-structured interviews with the operators.Additionally, two semi-structured interviews with one automotive OEM and one second lifemanufacturer were carried out, respectively. Lastly, a semi-structured interview with an expert onbusiness-to-business marketplaces underpinned the overall study. Findings: Six general areas ofactivity are identified and theorized that reduce the agency problems of adverse selection and moralhazard: (i) the implementation and maintenance of market regulations; (ii) the definition of a standardfor evaluating and classifying the product quality (iii) the definition of a standard for specifying thetraded product(s); (iv) the definition of a standard for specifying each type of market participant; (v)the provision of a comprehensive customer support; and (vi) the provision of a secure paymentsystem. The proposed theory is subsequently tested on the market for end-of-life electric vehiclebatteries revealing the transferability of the identified areas of activity in reducing the interorganizationaluncertainties between the automotive OEM and second life manufacturer. Conclusion:Despite the potential of the identified areas of activity in reducing the inter-organizationaluncertainties between the automotive OEM and second life manufacturer, further research is needed toanalyse and measure their effectiveness.

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