That's awful. But also why are the battery terminals rusty and the exposed copper oxidised so much? Do you have some water ingress/severe damp going on that might be a seperate issue?
I think that the oxidization is ,more from the cable overheating and a reaction with the pvc/whatever insulation as there are not any obvious signs of water elsewhere. I would hazard a guess at a poor ground point causing high resistance leading to overheating.
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