Optimal strategy for secondary use of spent electric vehicle batteries: sell, lease, or both

Abstract

Second-life batteries are those taken away from electric vehicles when they do not have sufficient energy and power density to propel electric vehicles. However, second-life batteries are still powerful enough for motionless applications, thus becoming a low-cost and environmental-friendly source of energy storage before being treated as recycled materials, but few studies have addressed this issue of that how to attract more secondary users to utilize these retired batteries. Thereby, this study examines a secondary-use battery market, where a recycling battery supply chain, including a battery sorter and a gradient remanufacturer, serves heterogeneous secondary users. Three marketing strategy options, i.e., selling, leasing, and hybrid strategies, are considered in the game-theoretical models. The equilibrium outcomes reveal that the more diversified option strategy outperforms a single-option strategy offered by the gradient remanufacturer, particularly when the lease option further splits into two sub-categories—fixed and per-time lease. Additionally, the manufacturing cost of a new battery and the quality level of spent batteries are critical factors impacting the recycling battery supply chain performance. We also find that the remanufacturing cost and subsidies can partially serve as a proxy to coordinate between the supply chain’s members, which enhances the recycling supply chain efficiency.