My experience with wires that are carrying too much current is that they tend to show evidence of heating along most of, if not all of, the wire run. This is not the case with this cable. The fact that the damage is localized suggest something else is going on. Do you still have the old cable? If you do, I would carefully slice the insulation open along the length of the wire with the tip of a knife from the insulation on the lug to past the damaged wire insulation, and peel it off carefully, to see what happened. Look for evidence of arching to ground, broken strands or a loose crimp. It may be difficult to see anything, severe overheating has a tendency to destroy all the evidence in the process. My gut feeling is your dealing with a vibration problem, all the flexing of the cable is occurring right near the lug.