Startup Series: Recurrent
Scott Case is the CEO and Co-Founder at Recurrent, which provides EV battery reports for used EVs, helping consumers and dealers understand the residual health of the battery in a prospective purchase. Think of them as a Carfax report for EVs.
New EV sales have boomed since the launch of the Tesla Model 3 in 2018. A year later, roughly 1% of new sales in the US were EVs. And in 2022, that number had increased to over 5%. The used EV market therefore logically will follow a similar trajectory, with a 3-4 year delay.
In this discussion, Scott points out that a car can only be sold new one time but can be sold used many times over. Most of us have no experience buying a used EV because there just hasn’t been enough inventory. As that changes, so too will our used car buying experience. And when it comes to which factors to pay attention to, the battery's health rises to the top of the list.
Scott and Cody have a great conversation about what impacts an EV battery’s health, how Recurrent gets the data to make health assessments, how Scott sees the used EV market evolving, and even what make/model EV he drives. It’s a jam-packed episode with information that’s sure to be personally relevant to many of us in the coming months and years ahead.
Get connected:
Cody Twitter / LinkedIn
Scott Case / Recurrent
MCJ Podcast / Collective
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Episode recorded on April 21, 2023.
In this episode, we cover:
[3:02] Scott's background and how he got started in the used EV market
[9:25] How Recurrent came to be
[13:51] The early days of figuring out the company's approach and business model
[17:54] An overview of the used EV market
[19:97] How to determine the quality of a used EV battery
[20:24] Recurrent's solution and battery assessment process
[24:49] Battery issues associated with EVs and environmental factors that influence performance
[30:11] Battery quality and price discrimination for used EVs
[32:48] Recent volatility and future market predictions
[35:19] How Recurrent's business model is adjusting and its plans for growth
[40:19] The dealer's role in EV sales
[44:45] Recurrent's progress to date and what's ahead
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Cody Simms (00:00):
Today's guest on the My Climate Journey podcast Startup Series is Scott Case, CEO and Co-founder at Recurrent. Recurrent provides EV battery reports for used EV car buyers, helping consumers and dealers understand the residual health of the battery in a prospective used EV purchase. Think of them as a CARFAX report for EVs.
(00:23):
New EV sales have boomed since the launch of the Tesla Model 3 in 2018. In 2019, roughly 1% of new car sales in the US were EVs. Last year, in 2022, that number had increased to over 5%. The used EV market, therefore logically, will follow a similar trajectory with a three to four year delay. And as Scott points out in our discussion, a car can only be sold new one time, but can be sold used many times over. Most of us have no experience buying a used EV, there just hasn't been any inventory.
(01:03):
As that changes, so too, will our used car buying experience. And when it comes to what factors to pay attention to with the used EV, the health of the battery rises to the top of the list. Scott and I have a great conversation about what impacts an EV battery's health, how gets the data to make health assessments, how he sees the used EV market evolving, and even what sort of EV he drives. It's a jam-packed episode with information that's sure to be personally relevant to many of us in the coming months and years ahead. But before we dive in...
(01:40):
I'm Cody Simms.
Yin Lu (01:41):
I'm Yin Lu.
Jason Jacobs (01:42):
And I'm Jason Jacobs, and welcome to My Climate Journey.
Yin Lu (01:49):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:54):
In this podcast, we traverse disciplines, industries, and opinions to better understand, and make sense of the formidable problem of climate change, and all the ways people like you and I can help. With that, Scott, welcome to the show.
Scott Case (02:09):
Hey, how are you?
Cody Simms (02:11):
I'm doing great, thanks. I got in incredibly late last night, I never travel anymore, ever, ever, ever. And yet I did travel yesterday, and I got in at like 2:30 AM, so I'm a few espressos into my morning, and I'm looking forward to learning about the used EV world.
Scott Case (02:27):
It's going to be riveting. This is going to be the equivalent of your fourth espresso right now.
Cody Simms (02:33):
So, Scott, you've been working in the climate space now. This is I think your second company in the climate space, and you've been in tech for longer than that. Before we get into Recurrent, before we start talking about used EVs, which I think a lot of listeners are going to be interested to learn what you're doing in Recurrent. But just generally, you're going to be interested in what in the world is going to happen with the used EV market. So we're going to have all sorts of fun talking about that stuff, but before we even do that, just who's Scott Case? What's your background? How did you get into this problem in the first place?
Scott Case (03:02):
I'd been in software for years and years prior to getting into climate tech. And my last stop before I got on the good side was in an advertising tech firm called aQuantive. We were acquired by Microsoft, and I was like sitting there going, "Okay, this is interesting problems-"
Cody Simms (03:18):
Wasn't a minor acquisition, that was a big acquisition.
Scott Case (03:20):
I didn't own that company to be clear, if I did, I'd probably would be an investor, not an entrepreneur. But I was sitting around going, "Okay, interesting problems, interesting technology, cool people. Meaningful?" No, we were serving ads, just wasn't that interesting. So, it was after that acquisition that I made up my mind. I was like, "I want to do something meaningful for the rest of my career, in the second half, or whatever." And I thought about either something in energy or something in healthcare, big gnarly problems that I thought I could help with my software background.
(03:50):
I remember I was actually on a trip, I was on a yoga retreat that my wife took me on to India, and I was reading Thomas Friedman's book, Hot, Flat, and Crowded. I remember this, and remember reading the description of the Smart Grid for the first time, and I looked up and there was a solar hot water heater on the building across from where we were in Goa, India. And I was like, "Oh, my God. If India can pull this off, the United States, we need to get on this." That moment was my epiphany moment. And I'm sure a lot of your listeners are sitting there working at Amazon, working at Facebook, or whatever going, "Yeah, it pays pretty good, but I don't know, it feels like I should be doing something meaningful." And I don't know, everybody has one of those moments where it becomes clear, "I got to go on this." So yeah, that was mine. What was yours?
Cody Simms (04:35):
Oh, boy! Interesting. I was also in a developing country. I was in Haiti, and I was there for a tech conference and I remember specifically being in the ocean between events, laying on my back, looking up at these deforested mountains of the ocean I was in Haiti. And thinking, "Wow, this country is obviously in a lot of chaos, and has a lot of challenges, and they don't have any natural resources left to even help them get out of it. And a sea level rise, and increasing temperatures take over. How is a country like this going to even be viable at all given the problems they're already facing today, and what can I do to help?" That was one of my big aha moments as well, interestingly.
Scott Case (05:19):
It's really interesting, too, that both of those came from a moment where you and I were out of our regular daily routine. And I feel like you just look at things differently, especially when you get out of our American culture, and society, and your mind is just open in different ways. And they say when you're dreaming, your brain is using 80% of its capacity versus 10%. I don't know, I come up with great ideas in the shower for companies, and stuff, I guess when I'm outside of my usual routine as well.
Cody Simms (05:48):
Yeah. It's an interesting point too, because I feel those of us who work in climate to some extent... I just mentioned, I just returned from a trip, and I almost never travel anymore. Because I do feel a little bit of that social pressure if I work in climate, I know how terrible jet emissions are for global warming and whatnot. And yeah, you're right when you get out of your day-to-day, it certainly helps. At least for me, it helps reflect on things that I maybe wouldn't be thinking about if I were just in the middle of what I do every day.
Scott Case (06:13):
And else, I don't think it requires being in Haiti or being in India. When you get out of your usual routine, I think that your mind opens a little bit in a different way. So, from that moment of clarity, my epiphany moment, I was just like, "I want to do something with a smart grid. That just seems a good idea." This was 2008.
(06:31):
I ended up getting hooked up with two other guys at that point, that one of them was like, "Yeah, I think we're going to do something around energy, whatever." And I was like, "Great. Sure, that sounds something more meaningful than what I'm doing, and maybe it turns into something." And this was the early days of EnergySavvy, which was the first company I was involved in the climate space.
(06:52):
Our mission for that company was to help people make their houses more energy efficient. So, we were essentially analyzing smart meter data, helping people understand questions about, "What insulation should I have in my attic? Is a heat pump the right thing for me? What's the ROI on that?" And then you'd even get down to, "Gosh, I got new duct air sealing." We could tell from the data that was spinning out people's houses wasn't installed correctly, just from the data. Like, "You should have gotten this result. You didn't, you got this, there's a huge hole somewhere." Those kinds of questions.
Cody Simms (07:22):
Scott, and it feels like that company, you took it to scale and got to a decent outcome for that, but you might have been about five or 10 years early on that one.
Scott Case (07:29):
We were. You know who I love? The company that I love? That is really what I feel EnergySavvy V2 or V3 and that's Sealed. I think that what they're doing is very similar to what we had way back in the day. Only they figured out how to add a financial mechanism to it, so it didn't require the upfront cost. And it's just so smart what they're doing.
Cody Simms (07:49):
Lauren came on the pod, so for all of you pod listeners who haven't heard, go back and listen to the Sealed episode.
Scott Case (07:54):
Awesome. Yeah, she's great. So yeah, ran the company. I was chief operating officer there. This is one of these things, we all picked titles at the beginning. We were not qualified for any of them, but over time you become qualified. I was COO, I ran product and customer success, and everything that wasn't direct sales, or direct engineering was my bailiwick, basically. Like you said, we ended up building it to about 10 million of ARR, and then we were acquired by a company called Tendril. Really interesting exit there, it was an okay exit, it wasn't like a home run.
(08:26):
I think in climate tech, especially Climate Tech v1, that was pretty much a home run. We gave our investor money back, and then some, we landed our customers, and our employees in a great place. And Tendril then, for the insiders, then acquired a bunch of companies. There were like six companies that got rolled up all at the same time. And then they became Uplight, which was a private equity funded thing, which is huge now.
(08:49):
So, neat story there that's like you probably should do some time with Adrian Tuck, or whatever on the Tendril team to get the rest of it. But basically pretty much after we exited, or after we were acquired, I was like, "All right, I'm out. I'm ready for my next thing." Chronology wise, I think that was like 2009. No, I'm sorry, that was not 2009. I made decade off. That was 2019, so 10 years later, that was my first journey.
Cody Simms (09:15):
Time flies, Scott.
Scott Case (09:17):
Because we're about to get into the COVID-19 era, and then time just flat. It's crazy. We're on March 2020, part 36 at this point.
Cody Simms (09:25):
So, then how did Recurrent come to be?
Scott Case (09:27):
After exiting EnergySavvy, I was like, "All right, well, I'm looking around for my next idea." And I'm a pretty pragmatic person, so I'm just like, "How can I keep chipping away at the climate change problem?" And I was so deep for 10 years in energy efficiency, and I lived in Seattle at the time, a single family home, no garage, no driveway, not even off-street parking on my side of the street. So, there was no way I was getting an EV early on, so I just wasn't paying attention.
(09:53):
So, now I popped my head back up in 2019. There's batteries everywhere driving around the road. It's like, "That's different than what it was 10 years ago. So, what are the problems that are left in that space? And what needs to be part of the ecosystem that isn't today?" The first area I looked at was actually an offshoot of EnergySavvy, which our customers in EnergySavvy were utilities. And basically I saw how utilities were going to have to deploy a lot of grid scale storage to incorporate all the renewables that were coming onto the grid. And what I know about utilities is they're cheap, it's super cheap. So they're always going to go, they'll issue an RFP for everything, and they're almost always going to default pick the cheapest one.
(10:31):
I was like, "I know how I could get them cheap storage, and that's decommissioned EV batteries." If you could figure that out, take a waste stream that's really hard to deal with, and then put that into the grid. I definitely, if you're listening at home, do not take used Tesla battery or used Leaf battery, and put it in your home. That's not where those decommission batteries should be. They should be in shipping containers in the middle of the desert next to a solar farm. If one catches fire, it's not a problem, seal it up, move on to the next one.
Cody Simms (10:59):
Actually have a portfolio company at MCJ that specializes in that problem, they're called Moment Energy.
Scott Case (11:04):
I love Moment. I met them early on in their journey through the University of Washington Clean Energy Institute, I've been on the sidelines helping them along, and making some intros, and stuff like that.
Cody Simms (11:15):
You should have a lot of data. I assume that can be useful to each other, presumably.
Scott Case (11:18):
Totally. Yeah. We haven't actually done any work together, but just as a helper on the sideline school. But Moment, they're building the company that I would've gone, and done if it wasn't been for Recurrent. And my conclusion was, at the time, this was 2019, I was like, "I feel there's just not that many decommissioned batteries around." I'm a software guy, so I wanted to do the software version, Moment is doing the whole entire stack. I was like, "That's not me." It's too early for a software only business. But in the process of looking at that company idea, honestly, I was just looking at, "Well, what's the inventory in progress for decommissioned battery?" That's a used car, basically. A used EV.
(11:57):
So, I started looking at how used EVs were getting bought and sold, and I was like, "This is messed up." I was looking at Craigslist posts, I'm like, "You use Leafs?" People were like, "Yeah, this has 10 bars. I get this much range." And I'm like, "10 bars, what does that mean? Is that good? Is that bad?" That was just the Nissan's, BMW i3 is older, Tesla's, it's just all different, and there's no standards for it.
(12:20):
And the other thing, my other moment of like, "Oh, gosh! There's a real problem here." It's recognizing that everybody now has been trained, everyone knows they've had a smartphone long enough, or a series of them, to know that lithium-ion batteries wear out over time. So I actually spent some time at University of Washington in the Clean Energy Institute there. And I would walk into professor's offices, and I'd be like, "All right. Let's say, you walk on a used car lot, and you're going to go buy a used Leaf, and there's two of them sitting next to each other. Same make model year, and same odometer number, let's say, the same color. They both look great. Which one do you buy?"
(12:53):
Material scientists, professors, electrical engineers, chemical engineers. They just leap up to the whiteboard, and they're like, "Okay, let me do this. The first thing I'm going to do is going to pull the battery up, pack out, and I'm going to take all the cells out, and I'm going to hook them up to electric chemical impedance spectography machine." I'm like, "Whoa! None of that works. You can't destroy the thing in order to determine how good the thing is." There's a real problem there, and even you don't have to be a professor of chemical engineering to sort of understand this problem because you've had an iPhone, and it wears down.
(13:21):
It was like, "All right. There's a real problem here." We realize there's a question, and there's a market problem out there. And really the market problem we're solving, that needs to be in place, is the used EV market is dysfunctional, basically. The cars are getting bought and sold with the wrong questions in mind. And what that means is that it's holding the market back, and frankly just injecting this uncertainty in a way that we cannot have to get EVs to scale and get them everywhere. So that's really how Recurrent came to be.
Cody Simms (13:52):
Awesome. You had this epiphany, you had this idea, and then how did the company itself somewhat get going? As I understand it, you were a participant in Pioneer Square Labs, which I know is a leading studio in the Seattle area. Maybe explain the early days of the company of how you came from this idea that, "Hey, there's maybe a problem here," to, "I think I know what the business I might want to build would be."
Scott Case (14:17):
I think the easy part of what we're doing, is that everyone that we talked to in the market recognizes this is a problem, and it needs somebody to solve it. So, that was never the issue. The two harder parts were how are we going to do it in a way that's possible in the used car ecosystem. Which they're not a whole bunch of chemical engineers, and laboratories involved in that. And then the second question is, what's the business model?
(14:39):
So, I had two really key stints that helped me figure out each of those questions. The time at University of Washington was really important to figure out how are we going to do this. I have pages and pages of notes of what you could do, almost all of it is not actionable in the used ecosystem. So we figured out the approach that we thought would work with that. And the second was, time at Pioneer Square Labs to figure out the business model. I love working with that team, I've known a couple of the partners there for a long, long time. Actually, going back to the ad tech days, believe it or not, I walked into Pioneer Square Labs March 10th, 2020 and was like, "Hey, I had this idea. Here's what it is. I know how I would do it. I've checked it with a couple of customers."
Cody Simms (15:23):
Isn't crazy how you remember exactly who you met with in March 2020?
Scott Case (15:27):
Yeah, exactly.
Cody Simms (15:27):
I can also name the three or four last meetings I did at that time.
Scott Case (15:31):
We had two meetings there in person where they were like, "Yeah, we look at a lot of companies and this has a chance." And they throw a lot out. So decided I'm going to go in, and incubate it for a couple of months in that, I remember. I officially became an entrepreneur in residence, but in that first meeting on the 17th of March, they shut down the office and everybody went home. So I was an entrepreneur never in residence basically. The whole thing then was basically from home.
Cody Simms (15:57):
For those lacking the historical context, there was this thing called COVID-19 that happened at that time.
Scott Case (16:02):
This is hilarious. Now, I think of our future viewers 30 years from now, people who were not even born, and be like, "Hey, there was this thing that happened. And, gosh!" Anyway, so we incubated the company from March through June, and it became clear right away. We just did the classic MVP test webpage, it was like the original website was evbatteryhealthcheck.com, or something stupid like that. Where it was the classic thing with a picture of a report, and a big button that says, "Check your battery health." And then you would enter your email, your VIN, and your email, or something like that. And then we just see, "Would anybody do that?" There's a couple of cool, really neat ways that Pioneer Square Labs has developed to market test ideas.
Cody Simms (16:44):
I remember you telling me early on, you all had the number one Google search result for, I think it was Chevy Bolt Battery Health, or something like that.
Scott Case (16:51):
Oh, yeah, still. That came later. At this PSL stage, we would just buy Facebook ads, or LinkedIn ads, really cheap stuff. And all you're looking for is how many people would click on the ad, then go to the site, read three bullets, and look at a picture and be like, "Yeah, I'll enter a vintage email address to find that out." And that's all you're looking at. We couldn't even do shit at the beginning. We couldn't do it.
(17:14):
You got the equivalent of, "Oh, thanks for your interest. We're not available in your area, or whatever." But we needed to do that to figure out, basically, "Can we overcome the decades of auto marketing that has trained people the way you buy used cars?" You look at the odometer number, and we thought that there is going to be a different way that this would change. But a startup can't educate the entire industry, even if intellectually it should be done a different way, a tiny startup cannot do that on their own. So we needed to see, pushing on an open door here or not. And we saw that we were.
Cody Simms (17:47):
It's super interesting to hear your ad tech background presumably also coming in to help you right here, because this is-
Scott Case (17:53):
Yeah, it's all coming together now.
Cody Simms (17:54):
Really, a digital marketing play, at least at the start there. And before we dive into the product solution that you ended up building at Recurrent, and what you offer today. Let's take a side step, and actually just talk about the used EV market. So, you mentioned consumers have been trained for decades to look at an odometer number. When you buy a car, you get a CARFAX report that says, has this car had any accidents or whatnot? Generally, you might take a used car to be looked at by a mechanic, but I think even though it's a best practice, probably very few people actually do that. What's different about buying an EV, that we haven't even thought about yet?
Scott Case (18:31):
First of all, an electric vehicle is still a vehicle. You want to know the same stuff. Has it been in accidents? How many owners has it had? Was it smoked in? Those kinds of things. But an EV has 20 moving parts in its drivetrain compared to 2000 in a combustion engine car. So there just aren't that many things that can go wrong. However, there's one piece to it, that if it goes wrong, it's a huge deal, and that's the high voltage battery. You could have a situation in plenty of cases where a used EV is 10, $15,000 and if the battery dies out of warranty, it costs 10 to $15,000 to replace it. So, you basically just bought a brick. The residual value is much different. It's not like this glide path, it's pretty flat, and then there's a cliff that happens. Maybe, that's the thing, it's like, "Not always going to happen. And so how do I know if it's going to happen in this case?" Anyway, it's worth it to de-risk that problem for a used buyer.
Cody Simms (19:23):
You mentioned that use case of, what if I took a professor to a Nissan Leaf car lot, and had them look at two cars, how would they choose which one to do? What should you be looking at? What matters? How do you know if an EV battery is healthy or not?
Scott Case (19:37):
The way you tell, and what you should be looking for, is some gauge of the battery. Now, what's interesting is first of all, there are no standards unlike 12-volt batteries in cars where you pretty much know what the current voltage should be if it's healthy or not. There are no standards in high voltage batteries that are in EVs. And I think that's fine right now, the technology is changing so quickly every model year, and if you're manufacturers, so it's just this really hard problem to solve. And so the other thing is the manufacturers are not coughing that data up. There are some calls for the EPA to provide a different testing mechanism, and require different stats, but none of that's in place. And so you've got at this point, 12 years worth of used EVs on the road, 3 million cars in the US on the road across all different plugin hybrids, and battery electric cars with basically no disclosure.
(20:24):
So our approach, basically, the short answer to your question, is you should ask for a report from your dealer. That's the self-serving part of this. For anybody who's out there looking to used EV, what we show is we have this score. This is basically a 0 to 100 score, that just compares how much range the max range that individual car gets, compared to what it did when it was new. And if it's 95, it gets 95% of the range at max that it did when it was new. And that's an indication it's not a perfect one, but it's an indication like "Yeah, the battery is in pretty good shape," versus one that we score as an 80, that's more likely to two things. One, is you're going to get less range than a 95 than a new one, and two is it's an indication that the battery is more worn down, and so it's more likely to fail in the future.
Cody Simms (21:11):
And how are you doing that assessment? I know each individual car can show that to the consumer. They may or may not choose to reveal it. Our Apple iPhones have only recently started revealing that to each of us, in the little battery section in settings. Is this incumbent on the prior owner of that vehicle, having granted Recurrent, with access to data around it? Or is it something a dealership can flip on once they take ownership of a car post sale from the consumer back to them? How's it work?
Scott Case (21:44):
Couple different ways. Basically, in a small number of cases at this point we have about 15,000 cars that are enrolled, and connected on our platform that are individually owned. So for everybody listening to this podcast, if you own an EV today, you should come to recurrentauto.com and sign your car up. It's free, and we basically track your battery for you, and give you a monthly wellness report that just says, "Hey, your car's in good shape, or maybe there's something to worry about here, you would want to check it in."
(22:10):
And super simple interface and problem that we're solving there for the owner. When one of those cars shows up for sale, we know as long as the owner says to us, "Hey, you can disclose my data." We have that car debtor rights, we know exactly where that battery is, and can compare it to thousands of other comparables, normalizing for weather, normalizing for state of charge, everything. So, there we have a ton of certainty.
(22:34):
The next level down is if a car wasn't connected, and frankly we only have 15,000 out of 3 million, so it's not a lot right now. But what that 15,000 gives us the ability to do, it's basically, have a sample comparison set. So, if we get a little bit of data for a car when it shows up on a lot. And for us, it looks like the car dealer takes a little picture of the dashboard, enters a couple of pieces of data that we need. Then it's like we were connected to that car for one ephemeral moment, basically. And we can essentially compare it with a reasonable degree of certainty against our broader fleet. And the cool thing is there is a data science flywheel here, so the more cars we get connected of a particular battery pack configuration, the more precise we can be with a car that just so shows up. We get one data point, and we can pretty much dial it in.
(23:20):
That's the simpler answer. Doesn't require the laboratory environment, or such crazy work rounds, which we have heard people doing of like, "I'll just charge it up, drive it till it's empty, eight hours later, and then see how many miles it got." That doesn't work, because there's all kinds of weather related, and driving related variances, and it takes you all day. You cannot do a test drive where you're all day, and then go get a tow truck. So, there's just not great ways to do this, and we feel like this is a pretty reasonable way of doing it.
Yin Lu (23:49):
Hey everyone, I'm Yin, a partner at MCJ Collective. Here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning. And doing that goes beyond just listening to the podcast. We started in 2019, and have grown to thousands of members globally. Each week, we're inspired by people who join with different backgrounds, and points of view. What we all share is a deep curiosity to learn, and a bias to action around ways to accelerate solutions to climate change.
(24:15):
Some awesome initiatives have come out of the community, a number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events, and programming. Like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, or workshops and more. Whether you've been in the climate space for a while, or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com, and click on the members tab at the top. Thanks, and enjoy the rest of the show.
Cody Simms (24:49):
And are you all finding any patterns that reveal how and why a given car might underperform from a battery perspective? Is it mostly manufacturing issues? Or is it mostly environmental and situational issues related to how, and when, and where the car was driven?
Scott Case (25:05):
This is nature or nurture for EVs right here. It's a combination, there are highly publicized battery recalls that have happened where the manufacturer is like, "Something got screwed up." Every Chevy Bolt ever made between 2017, 2020 or 2021 has already gotten, or will get, a battery replacement. By the way, plug for Chevys, first of all, I think they did the right thing. They threw the book at that problem, and it cost them a lot of money to do it. But that was the right thing from a perspective of building confidence, and it was just a QA problem in the manufacturing process.
(25:39):
But the second thing I'll say here, this is on this sidebar, this is my Chevy Bolt sidebar, is, those used cars are great. They all have brand-new batteries that have a higher capacity, within a lot of them didn't when they were new. We actually had to change our scoring system for Bolts because they're regularly getting 120% of the arrangement what they had when they were new. So, you should definitely go buy a used Bolt, great car, and they're cheap, so great car to buy.
Cody Simms (26:04):
What are the environmental factors that influence car battery performance?
Scott Case (26:09):
Besides the manufacturing issues, which there are some in the manufacture by, and large doing a great job of. The environmental issues are, again, let's say in general, cars that grew up in very hot conditions, extremely hot conditions, tend to wear down faster than cars that grew up in very cold conditions. I don't know, do you remember when you were growing up keeping the Duracell batteries in the freezer? Did you do that?
Cody Simms (26:33):
Of course. Yeah, for sure.
Scott Case (26:35):
I don't know why we all did that, but it actually makes some sense. You don't need to be in freezing cold temperatures, you don't need to refrigerate your garage if you have an EV owner. But extreme heat does cause lithium-ion batteries to wear down faster. It's one of them. Regular use of DC fast charging. If you have a car, it's getting a steady diet exclusively of DC fast charging, it wears the battery down faster. Now, you should still go on road trips, and use DC fast charging, definitely do that. If that's all the car is getting, it's going to wear down faster than if it's getting level 1, level 2 charging most of the time.
Cody Simms (27:08):
And does Recurrent understand those causes? You're seeing this car is getting regular DC fast charging, or is it just you've now done enough use cases where you've said, "This car is clearly underperformance relative to its peer group." And you've gone, and interviewed the owner of the car to find out what their usage patterns were like to understand this?
Scott Case (27:28):
For the connected cars, we do see it in the data.
Cody Simms (27:30):
You see it in the data.
Scott Case (27:31):
We also see the impact of battery replacements in the data. We don't need anyone to report that they got a battery replacement. All of a sudden you could just see it, here comes the Chevy Bolt, the range is going down, down, down, down. And all of a sudden it skyrockets to something that's higher than when it was new, and we're like, "Yep, there's a battery replacement right there." For cars that show up at used car lots that were not connected to us, what we would be able to say is, "Gosh, this car is in great shape, this battery is in great shape. Or, this battery is in not great shape." We might not know why, for those cases, we might not know. It might be that this car just baked in the desert in Phoenix, or it might be that it lived in a very moderate climate but was just hammered with DC fast charging all the time. We might not know why, but ultimately it's actually not that important to the secondary buyer. They just need to know, "Is this good or not?"
Cody Simms (28:18):
Each of us have bought enough cars probably over the years that we have in our mind, "I wouldn't want to buy a car with this many miles." I have a sense of what zone of car is right for me. In the EV world, how does one thing about that, is it just age? Is it growth of mileage, or you have to have this degradation performance report to really have a view? Is there a certain amount of battery degradation that you would say no one should feel comfortable buying that car?
Scott Case (28:46):
It's too complicated because there's too many different chemistries, and too many different nature and nurture variables. So the plug for Recurrent, I would say what you should do, is let us do the hard work on this. And there's some real frigging data science here, data access, and modeling, and outlier detection, and all of that. We have spent the last three years doing this across 55 different makes and models of cars. So, if you don't have access to a Recurrent report, you should ask your dealer for it. But if they're still obstinate, probably go somewhere else. The other rule of thumb is, in general, if you know you can buy a car that was always plugged in at home, and grew up in a moderate climate, I'd probably do that all else equal.
Cody Simms (29:25):
Let me ask the question a different way. When you're buying an ICE car, you might feel totally comfortable buying a 20-year-old car with 200,000 miles on it, and that may be the right car for you. With an EV, there's got to be a limit somewhere of this battery is just only going to probably last for another two or three years, and it's just not going to be worth it. How does one know where that limit sits?
Scott Case (29:47):
This technology is so new still, that we just haven't seen it yet, in terms of the death of natural causes. Now, there are plenty of manufacturing issues that are getting fixed, there are plenty of cases where a card was just ridden hard, and put away wet. It dies early, basically. But natural causes, there's still plenty of 2011 Leafs, and 2011 Model S that are out there that are fine.
Cody Simms (30:11):
So, Recurrent it's going to help me understand this car relative to its pure cars is above or below expectation. But then me as a consumer, I'm still going to have to make the call of how old, and how much risk do I want to take in general. Even for a car that might be outperforming its peers from an older vintage.
Scott Case (30:28):
That's right. And right now, there are not really companies that are doing extended warranties that cover the battery. All of the batteries are covered in the original manufacturer warranty. Typically, it's eight years, 100,000 sometimes 120,000 miles, it varies a little bit. But mostly for those older cars there's nothing left besides just, "Hope I get a good one."
(30:46):
Now, the other thing I want to say is, it's not a binary test. It's not like, "Battery will die, or it won't." And much more of what we're doing it's interesting, is we're saying, "Here's two Tesla Model 3s, that are four years old, and they're priced pretty similarly, and they have a similar number of odometer miles." And we're like, "This one, you're going to get 220 miles of range in normal conditions, and this other one you're going to get 200." That's fine. Both of them are fine, they're great cars. People drive on the average 30 miles a day.
(31:14):
However, you shouldn't pay the same amount for the 200 versus the 220. So, I think it's about, essentially, price discrimination, one. And it's about making sure that that car fits to your lifestyle where you're going to drive. Because the other thing is we haven't even gotten into talking about weather variances. Some of these cars in the winter when you're driving them, you could lose 30% of your range in a very cold environment.
(31:36):
So that extra 220, you like to go up to a cabin in the mountains, or whatever you like to go skiing, and the 220 might be great, and the 200 might not be. And then even though it's a great today, what'll happen three years from now, a lot of it is about setting expectations. What am I getting? And gosh, the EPA number on all these cars, it's wrong on day one when they're brand new, because it doesn't take into account weather variation. And frankly, also the manufacturers, they can just put on a correction factor that is however they feel, literally how it works. So it's wrong on day one, and it gets more wrong over time, and in different weather conditions.
Cody Simms (32:10):
A brand-new Model 3 will perform very differently in Phoenix in the summer, in Los Angeles in November, and in Minneapolis in February.
Scott Case (32:20):
That's correct. And Tesla's in particular, rarely get their EPA range even when they're brand-new. Because of the way that the manufacturer applies adjustment factors compared to some of the other vehicles that are out there, non-Tesla EVs that their EPA range might be lower, but they regularly exceed it when they're new. That's the one number that's out there for new cars, and you can't even trust that number. In terms of real world, what you actually experience.
Cody Simms (32:48):
So, let's talk a little bit about how you see the used EV market evolving over the coming years. I have to assume we're about to see a tidal wave of first generation lease returns hitting the used EV market. And that market is poised to grow tremendously, but I don't have the numbers. I don't know what it looks like. So, this is what you live and breathe. What are we seeing over the next few years?
Scott Case (33:10):
An easy way of predicting the used EV numbers, is just look at what the sales were four years ago for new. That's basically the easiest way of doing it. And the thing that happened, four years ago, was the release of the Model 3. That single vehicle came out in such high volume, that it doubled the market right then. So essentially we're seeing now the echo of that. There are used Model 3s coming out, people's noses right now, lease returns, private party sales, dealer sales, everything.
(33:37):
So, we can predict now also what the used market is going to look like for the next couple of years, and it just keeps on step function growth, basically. The used EV market has been wild the last, let's say, year. Last year, every used EV on the market because there were such ship shortages on the new side meant that there were these huge long waiting lists. Everyone holding any EV of January 2022, basically, had an appreciating asset on their hands, all the way through most of the year.
(34:06):
Now, that really changed starting in about September, and then accelerating through to, so now we're in April 2023. A couple of different things going on there. One, is just as more new supply coming out. Two, is interest rates made it more expensive to buy cars. Three, is Tesla's been cut in prices left and right, six price cuts this calendar year already. And every time Tesla cuts price on the new side, there is a dollar for dollar impact on the used side. So that's crazy town. It's a little bit interesting, if you're an individual Tesla owner or EV owner, yeah, you probably should have sold your car eight months ago. You would've gotten more, but then you would've to buy another car.
(34:43):
So it's a little bit like how can you time the market. Now, if you're a fleet owner, you own a thousand of these, or 10,000 of these, that is a massive financial loss that you had that was just unanticipated. It all came because Elon decided to cut prices to choose a man on the new side. Now, if you're a dealer, you have this other issue of where you could be holding a hundred cars in inventory on January 1st, big price cut comes out, you just lost millions of dollars overnight. So the whiplash that's going on in the used market is crazy, and it has real impacts to all the parties that are in the space right now.
Cody Simms (35:19):
What do you think Recurrent business model, how do you think it adjusts and grows from today being an EV health report to ultimately leveraging the data you have on all these vehicles? It feels you're setting yourself up for a bigger business opportunity in the future.
Scott Case (35:40):
We think of our company now as we do two things. We sell data and we sell cars. That second thing is newer for us. So, the data thing, we've just realized that given a particular VIN at the moment that it transacts from the used market. There's a lot of people that want to know the buyer, the seller, the wholesaler, the insurance company, the financing company, the extended warranty companies that are emerging, the fleet. Everybody wants a sense of what should this car be worth? And a big part of that is, how's the battery, and how's that compared to all the other things out there? That's our data business, and that's going really well. And we've just realized that the questions that the shoppers are asking that we started out this conversation with, they're just starting to get answered now by all the parties in the used car ecosystem.
(36:21):
And that is a huge, huge market, over twice the size of the new car market. Definitionally, every car can be sold new only once, it gets sold used typically more than once. The second piece of it, I think this is one of those entrepreneurial, didn't occur to us at the beginning, I'll say this. But we realized that some of the people that were subscribed on our platform, like that EV owner platform, we saw them selling their cars. People sell their cars, and we would see it in the way that the car would disconnect from our service. And we had this automated email that would go out, and be like, "Hey, we lost connection to your car. Is it parked underground for a really long time, or what?" And then people would write back, and be like, "No, I sold it, and I got this Rivian, can I hook that up?" And we're like, "Yeah, definitely."
(37:02):
But the other thing is we realized some people were like, "Yeah, actually I printed out my last Recurrent report, and I showed it to the buyer, it went really well." And we were like, "Oh, that's interesting." So, we realized that there was a function that we could serve to the EV owners when they want to sell, to reduce that uncertainty, so we leaned into that a little bit. And essentially the impact to an EV owner that's working with us basically, again, for free tracking their data is they could sell their car for hundreds, or thousands of dollars more. And that's starting to really propagate that throughout the industry. That's a great value prop to the owner.
(37:36):
So we've actually leaned in even more, and now, we've done a partnership with Black Book. Which is one of the major valuation services, to start to suck up battery data into that valuation, and then, reflect that in the purchase price, both at wholesale, at trade-in, and ultimately a retail. So, the value prop becomes to an EV owner like, "Hey, track your battery. Make sure everything is okay. We'll give you a constant update on what your car is worth, including the battery. And then when you're ready to sell, you get to sell it for way more." That's a great value prop, and it works out for us financially. We just get a larger share of the wallet, because not only are we tracking data, we're also beginning to facilitate those transactions.
Cody Simms (38:12):
So you become a used EV marketplace?
Scott Case (38:15):
My parents sent me to all these fancy colleges. I got some advanced degrees, and yeah, I'm a used car salesman now. Yeah, I will say, technically we are not a car dealer. We're basically working with the same dealers that are subscribing to our condition report product, our data product, to essentially help them buy the best battery cars from our fleet owners.
Cody Simms (38:36):
That's what I was going to ask. So, you're not turning around and reselling it to other consumers, the neXgen, CarMax or Carvana, you are selling the inventory to dealerships, is that correct?
Scott Case (38:46):
Here's the other interesting wild card that's going on in the used EV market is, in the Inflation Reduction Act from last August. Most of the headlines have been written about the new EV tax credit, and now there's this emerging storyline on used commercial fleet EV credit switcher.
Cody Simms (39:02):
Isn't there 3,500 for used EVs? Is that right?
Scott Case (39:06):
There's three things that were part of that. There was a $7,500 tax credit for new EVs, there's income limits, and battery sourcing requirements. There is a $7,500 tax credit for cars that are purchased, and put into commercial fleets, and then could be leased out, or whatever. That actually doesn't have the battery sourcing requirements, or the income limits, so that's an interesting thing. And then, in addition to that, there is also a used EV tax credit. That is the first time that the federal government has ever put a tax credit on the used cars before. So like, "Whoa! This is different."
(39:37):
Now, what's wild about that, and the number here, it's $4,000 on a tax credit for a used EV. There's a bunch of interesting, and complicated requirements for that. Right now it's a tax credit, starting in January 2024, it's going to be a point of sale discount on these cars. Now, the key thing here, and why we think that the car dealer is going to be a really important player here. It's the car has to be sold by a licensed dealer in order for this tax credit to be redeemed. I think I see why the government did this, it's because imagine the potential for fraud if you just got your cousin selling your car, you sell it back to them, or whatever. So no, a dealer has to be involved in the reporting process here.
Cody Simms (40:14):
Is there income verification too, for that?
Scott Case (40:17):
There's an income limit for the used credit.
Cody Simms (40:19):
Will a dealer start applying that? They'll have to do some accreditation on your income? Like, "Holy smokes!"
Scott Case (40:24):
Yeah, it's going to be complicated to figure this all out. Right now, again, as a buyer, you file a form with your taxes the first time that'll get filed is next April for all the 2023 purchases moving forward. The government hasn't said how it's going to work starting in January. The dealers are going to be involved in this somehow. But what's interesting is that $4,000 basically cash on the hood. Right now, if you look at all used car sales, about 55% of them are sold by dealers, and 45% are direct sold to private parties.
(40:55):
I think with used EVs moving forward, because of that single tax credit, this is over the next 10-year a far higher percentage of them are going to be sold through dealers. Because of that, it basically tips the scales. So, our belief is that the dealer is really going to be central to this. Also, the other thing is, this is still new technology, so I think that people are still a little more comfortable going to a dealership, where there's some recourse. Versus if you're just doing a private party sale, you're meeting somebody in a McDonald's parking lot, and handing them a check. Maybe we get there at some point, but I think it's probably not the case with used EVs for a while.
Cody Simms (41:27):
And I know with used EVs, at least earlier on when we were more inventory constrained, we still are, but it sounds like that problem is loosening up.
Scott Case (41:36):
It's not. This is the other thing that's like crazy, crazy about the used car market in general, the used EV market too. During COVID-19 famously there were many millions of cars that were not produced, that would've been, because of chip shortages. Now that's 2020, 2021, 22, even 2023. Now, the most common period for a used car to show up is three to four years after it was produced new. So, what we are about to go into starting basically later this year, and running through 2027. It's this period where there were millions of cars that were not produced new, and so will not show up in the used market.
(42:14):
So we're about to enter this prolonged period of depressed inventory of used cars, basically. It's a ripple effect from the chip shortages during COVID-19. That's actually going to cause used car prices, I think long-term, to be actually somewhat inflated. But there's so many other factors including new car pricing, and interest rates, and everything like that, that are going to have cross impacts. But there's a real thing that's going to be the case over the next few years.
Cody Simms (42:39):
Let me rephrase the setup of my question then.
Scott Case (42:41):
Sorry.
Cody Simms (42:43):
So, in the early days of Tesla experimenting with used cars, it looked like they were trying to centralize the used car sales function through their national sales platform at tesla.com. It seems like that is rapidly decentralizing away just because there are so many Model 3s on the market, and people are trading it in for a BMW, or trading it in for a Rivian, or whatever they're doing. Do you expect that the used EV market, from a consumer perspective, at a dealership is going to feel similar to how we've all bought cars for decades? You're going to walk into a dealership, and you'll haggle with someone over the sticker price of this car, and it's up to the local dealership to set pricing?
Scott Case (43:28):
Tesla, here in the used market, is doing things a little differently than most other automakers, and they do sell some of their own used cars. When we look at the numbers it's not more than they have, last time I looked it was maybe a 10% share of used Teslas. It's a slice of a slice, but that's an option that other automakers don't offer.
Cody Simms (43:46):
But even given the context, the big difference there is Tesla owns all of the Tesla dealerships. There are no independent Tesla dealerships.
Scott Case (43:54):
Well, yeah, there are no Tesla dealerships at all. Tesla basically has service centers, and when you buy a used Tesla from Tesla, you're ordering it on their website, and then you're going to pick it up wherever.
Cody Simms (44:04):
It's like buying a Ford from Ford Motor Company, not buying a Ford from your local basketball stars local dealership of Ford.
Scott Case (44:10):
That's right. Yeah. I feel there's more really football stars than basketball stars. But anyway, some people will do that, but the majority of the time people either they're going to do it online with a Carvana, or a CarMax, or something like that. Or they will go to a dealership to trade in their old car, and buy a used EV Tesla, or other, from a dealership. And I think that's going to be the case for a long time, actually. I don't see that going away.
Cody Simms (44:35):
And Scott, talk us through a little bit about where the company is today. I know you've raised a little bit of financing. Where are you in terms of progress, size of the company, and what's next?
Scott Case (44:45):
Recurrent is, this is classic, we hit the timing right, basically. We started the company in 2020, it was well before any incumbent could justify paying attention to this 1% case, basically. And now, it's a 3% case, and going to a 5% case, so I think we just got out ahead, and built this huge data advantage, and that's turning into a huge brand advantage. That it just means that we're now, everyone is turning to us and going, "I need information on these cars." And then more and more people are turning to us, and saying, "Yeah, I want to track my car. I want to sell my car through you guys because I see the benefits to it." We spent a couple of years doing the hard data work, and setting up the frameworks for that.
(45:27):
And then we've just over the past six to nine months, the feeling, and I know other entrepreneurs will hear this with the way I intended is, you can feel product market fit. And that's where we've fit in the last six to nine months. So that means now, we basically did a seed round in 2020, and we did a little bit of convertible note last year. But we're heading towards the growth stage of our company, and that's just such an awesome feeling as an entrepreneur. Just this massive, three year long, "I told you so." It's like, "I saw it. And I saw it a long time before anybody else did, and we've been able to execute well, and not screw anything up too badly." That I think we have the chance to just roll up the market in this way, and just be part of every single used EV transaction that turns into every single used car transaction moving forward.
Cody Simms (46:14):
And where do you need help?
Scott Case (46:15):
If you are an EV owner, you should come and sign up your EV on our platform recurrentauto.com. You go to our owner section, great resource, and it's free. If you are an EV shopper, EV curious, we have a ton of resources, you can actually come to our site. You have a one you're looking at, you can type in the VIN, and/or copy and paste the VIN, and get essentially an estimated level report even if your dealer isn't doing it on Recurrent Auto. I don't know, how else we need help when we company is growing, again, my problem has never been, "Is this problem worth solving?" It's more just a, "Can we execute on it and not screw it up?" So I think we'll be adding people over time to do that.
Cody Simms (46:51):
Scott, I've learned a ton. Is there anything I should have asked that we didn't cover?
Scott Case (46:54):
You didn't ask me what I drive.
Cody Simms (46:55):
What do you drive, Scott?
Scott Case (46:57):
I don't even know why I brought this up. When I started the company, I didn't have an EV, because remember, I didn't have a place to plug it in. Like all good Seattleite, I drove a Subaru Outback. About a year and a half ago, bought a VW ID 4 because we moved, actually, I have a garage for the first time since high school. So I actually have a place to plug it in, and totally love the car. It's so fun to drive, and I just feel so smug every time I drive past a gas station.
Cody Simms (47:22):
I love it. I personally don't yet own an EV, I work from home, I never drive. It just haven't bothered, to make the investment yet, because I don't drive anywhere other than to and from neighborhood stuff. I was traveling, as I mentioned earlier this week, I rented an EV.
Scott Case (47:36):
Oh, cool. What did you have?
Cody Simms (47:38):
I was traveling, and it was lovely, it was wonderful. It was a Chevy Bolt.
Scott Case (47:41):
Chevy Bolt, there you go, yeah. There's a lot now. Hertz is doing a ton of EV rentals. They're doing Tesla Model 3s mostly. So, if you're in Denver, you're in Atlanta, a couple other cities where it's a great way to actually try one if you haven't before.
Cody Simms (47:55):
Mine was with Avis, and it was great. With a gas car, you have to bring back totally full. With an EV, you have to bring it back at least 70% charged, which I thought was an interesting requirement.
Scott Case (48:04):
Wow, that's interesting. There's going to be a lot of figuring that out from the rental car perspective. But the cool thing is, in most hotels now, there's level 2 chargers in the garages at the hotels. It's not a big thing, so interesting, though.
Cody Simms (48:16):
Scott, thanks for joining us on My Climate Journey. Thanks for sharing what you're building at Recurrent, and thanks for helping us all just learn more about how the used EV market is evolving.
Scott Case (48:25):
Awesome. That was super fun.
Jason Jacobs (48:26):
Thanks again for joining us on My Climate Journey podcast.
Cody Simms (48:30):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos, and unleashing problem-solving capacity.
Jason Jacobs (48:39):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com and if you have a guest suggestion, let us know that via Twitter at mjcpod.
Yin Lu (48:52):
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Cody Simms (49:02):
Thanks, and see you next episode.
