Author: Piotr Grudzień, Innovation Consultant at Bax & Company
Škoda Auto entered the EV race in 2010 with a small batch production of the Octavia model. This model can be seen in the Skoda Museum in Mlada Boleslav, Czechia. In 2019, the first serial car was put into production - the Citigoe iV. The first car based on the MEB platform (MEB stands for the German term "modularer e-Antriebs Baukasten") was the Enyaq iV in 2020. This platform was designed exclusively for electric vehicles. The Enyaq iV model quickly gained market share with 57,213 units produced in 2022.
Although the majority of batteries in Škoda EVs won’t reach their end-of-life for many years, some parts, which are essential to recycle, are generated by development and quality assurance processes. Of course, this cannot be overlooked. The volume of these batteries presents a challenge to implement and trial new processes focusing on 2nd life and recycling, allowing related innovations to be seamlessly integrated into the most efficient processes. For this reason, the Czech OEM has been actively exploring various partnerships to postpone recycling by giving their batteries a second life. This circular business case analyses the strategy behind Škoda’s circularity efforts and reveals operational insights.
The operational model
Environmental care and a focus on sustainability don't end once the vehicle leaves the factory. Consideration is given to a car's environmental impact throughout its entire lifecycle, encompassing the development phase, production, usage, and recycling when the product reaches its end. Materials from the car after its useful life can be used to manufacture new products, thereby creating the "Closed Loop Economy" or also "Circular Economy". This brings not only financial savings, but also reduces reliance on raw material resources, and above all, lessens the industry’s impact on the environment. In the case of Li-ion batteries, up to 97% of used materials can be recycled. Until recycling becomes available, there's a smart solution: just because it's feasible to replace a car's Li-ion high voltage battery doesn't mean it's only fit for recycling.
An intriguing avenue that Škoda, in collaboration with partners like the subsidiary Škoda X, is exploring involves storing electrical energy in used accumulators. These can be installed in places where, due to infrastructure limitations, it is not feasible to build a regular large-capacity charging station, or where no sufficient distribution network is available. At the same time, the station can be charged with renewable sources of electricity, such as solar energy from photovoltaic panels. Pilot projects have shown that battery cell capacity in stationary systems decreases by only about 2% per year, extending battery life up to 15 years. This significantly reduces the carbon footprint. After the battery completes its second life, it can be recycled in line with circular economy principles, and its raw materials are reused for the production of new cells.
Currently, these projects are being developed and tested, for example, on high-voltage (HV) batteries used in prototypes for technical development or quality testing. The goal is to be ready when aged batteries with deteriorating SoH (State of Health) from customers begin to emerge in larger quantities, aiming to have the most suitable solution ready. These Li-ion batteries have thus become an important topic for the Aftersales department at Skoda Auto, which manages their recycling and secondary use as a crucial aspect of establishing recycling procedures across Škoda Auto. Used batteries are assessed and sorted internally according to stringent criteria for second life applications.
Business model: 2nd life to reduce costs of recycling
Škoda Auto’s primary circular value proposition is the reliable feedstock of functioning batteries that, while no longer suitable for highly demanding EV applications, are valuable for those with the capacity and expertise to repurpose them. For key customers such as integrators of battery energy storage systems (BESS), it’s important that these batteries come directly from the OEM. Škoda Auto has full knowledge about the battery’s properties (like its SoH – State-of-Health, as well as its history), and can provide assurance regarding the battery’s source.
From Škoda Auto’s perspective, every battery that enters its second life represents a reduction or deferral of recycling costs, aligning with the company's sustainability values. Additionally, the OEM can generate revenue through deals with battery repurposers or customers interested in energy storage products (e.g., charging station providers, energy utilities). If the battery is not in good condition or it completes its second life, the recycling comes into play.
From the perspective of automakers, the new battery regulations set for 2031 may present challenges for repurposing. When the targets for recycled content come into play, car manufacturers and suppliers will have to use recycled materials (16% for cobalt, 6% for lithium, and 6% for nickel). This raises the questions: how much recycled material will be available? European manufacturers must incorporate this consideration into their business and operational models to prepare for various market scenarios. This will likely place an even greater emphasis on reverse logistics.
The public charging use case
Škoda’s big public 2nd life project began in Praha-Chodov district in November 2022. The energy storage system, with a 300 kWh capacity, is comprised of battery modules from Enyaq iV. It serves as a public charging station capable of charging up to twelve electric vehicles at the same time – ten with an output of 22 kW and two on a fast 150 kW station. The partner in this project is Pražská Energetika (PRE), an electricity provider testing battery storage as an alternative way of strengthening the distribution network without the need for a new cable network. There is a growing demand for such applications since the electricity grid is often insufficient in many city areas to handle high power for EV charging. In addition, battery storages and smart electric vehicles can act as stabilising elements of the grid, using surplus energy and supplying energy during shortages.
This case study was elaborated as part of the BatteReverse project by Bax & Company with input from Škoda Auto. The article is part of the Circular Business Cases series, which analyses existing business models for Li-ion batteries.
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