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

Abstract: Introduction: The ongoing transformation towards emission-free means of transportation goes along with the resource-intensive production and integration of electric vehicle batteries. Despite the environmental potential in decarbonizing the transport sector, electric vehicle batteries lose capacity over time and use and are only usable for transportation purposes until reaching 70 to 80 residual capacity. Discarding the electric vehicle batteries despite the high residual capacity represents a waste of resources and does not go in line with European-wide sustainability goals. Consequently, several second life scenarios for end-of-life electric vehicle batteries have been identified and partly proven to be 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 their core business while leaving the remanufacturing process to third parties, namely second life manufacturers. Accordingly, the market for end-of-life electric vehicle batteries is expected to be intermediary-based in which automotive OEMs transfer end-of-life electric vehicle batteries to second life manufacturers. However, automotive OEMs and second life manufacturers face two interorganizational uncertainties when trading end-of-life electric vehicle batteries which can be conceptualised by means of the principal-agent theory: First, ex-ante, the second life manufacturer cannot 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 OEM cannot fully monitor the second life manufacturer’s actions (hidden action), who can act against the automotive 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 the future. There is an ever-increasing need for a cross-sectoral market form that reduces or prevents the inter-organizational uncertainties between the automotive OEM and second life manufacturer and thereby facilitates the exploitation of the environmental and economic potential connected to second life. Research Question: The study aims to answer to what extent an online business-to-business marketplace can reduce or prevent the inter-organizational between the automotive OEM and second life manufacturer. Methodology: A multiple-case study based on three business-to-business marketplaces was conducted, including two semi-structured interviews with the operators. Additionally, two semi-structured interviews with one automotive OEM and one second life manufacturer were carried out, respectively. Lastly, a semi-structured interview with an expert on business-to-business marketplaces underpinned the overall study. Findings: Six general areas of activity are identified and theorized that reduce the agency problems of adverse selection and moral hazard: (i) the implementation and maintenance of market regulations; (ii) the definition of a standard for evaluating and classifying the product quality (iii) the definition of a standard for specifying the traded 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 payment system. The proposed theory is subsequently tested on the market for end-of-life electric vehicle batteries revealing the transferability of the identified areas of activity in reducing the interorganizational uncertainties between the automotive OEM and second life manufacturer. Conclusion: Despite the potential of the identified areas of activity in reducing the inter-organizational uncertainties between the automotive OEM and second life manufacturer, further research is needed to analyse and measure their effectiveness.