> On one hand, how would it benefit their/Lime's business to have loads of people owning electric scooters and bikes?

It stimulates demand for cycling/scooting infrastructure. A few owners of scooters aren't competing with renters.

> auction off the stuff as-is

That's pretty close to what recycling does, for items that can't be practically used due to design issues. The metals and batteries are resold as scrap.