Cost of electronic vehicle repair wiping out sustainability gains

High cost of repair is resulting in too many electric vehicles being written off, eroding any sustainability benefits, warns vehicle risk specialist Thatcham Research and fleet motor insurer QBE.

Many of the largest commercial fleets are switching over to electric vehicles by 2030, or earlier, under net-zero commitments. Global EV sales in the first half of 2023 increased 42%. Sales were up 28% in Europe, almost double the growth rate in 2022, while sales in North America were 50% higher, according to data from EV Volumes.

However, the cost of repairing an electric vehicle following an accident is significantly higher than for petrol and diesel vehicles, said QBE’s Matt Porter on a recent webinar. The average cost of repairing a Tesla is 93% more than a petrol or diesel vehicle, while the average off-road time for a Tesla is 25% longer. The average cost of repair is 50% higher for EVs and the time off road is 10% longer, according to QBE.

The insurer is already differentiating between EV and petrol/diesel vehicles in its underwriting, according to Porter. EVs and hybrids now account for more than 40% of the insurer’s commercial motor portfolio, having doubled since 2020.

“We are looking at how exposure is changing on these fleets year after year, and taking into account all the data we have – both our own and that from Thatcham – along the lines of increased repair times, longer off-road times etc. Our ambition is for sustainable and consistent pricing… Volatility is never good for customers, certainly commercial customers and businesses where you are trying to forecast and budget,” said Porter.

The higher cost of repair and time off road for EVs is the result of several factors, including higher salvage costs, the cost of repairing or replacing damaged batteries and shortages of EV technicians.

Vehicle salvage, transport and storage for EVs is more complex. Damaged EVs must be lifted onto a trailer, and may need to be quarantined and stored away from other vehicles to minimise fire risk. Quarantine requirements alone could add £900m to post-accident storage costs by 2050.

“There are challenges for insurers in terms of longer repair times, increased cost and space requirements for storage and isolation, as well as the higher cost of replacement vehicles, which are adding to cost pressures,” said Mark Fry, engineering manager at Thatcham Research.

A key driver for EV claims is their high voltage battery, which can cost around 50% to 60% of the vehicle list price to replace. For some models, the cost of battery replacement is greater than buying a replacement vehicle new. Thatcham estimates there will be 260,000 damaged batteries each year by 2030, rising to 360,000 by 2050.

In some cases, it is easier for insurers to total loss the vehicle, rather than repair it, according to Fry. “If vehicles are written off at their current rate, any benefit you are seeing in terms of carbon reduction out of the tail pipe will be significantly lost,” he warned.

There is currently a general lack of vehicle repair guidance from manufacturers around batteries, according to Fry. More than half of the EVs examined by Thatcham had little or no advice or information on battery repair, he said. Some manufacturers require a damaged vehicle to be sent to an approved dealer to assess battery repair, he added.

“We want to find a way that the cost of the battery versus the cost of the vehicle isn’t affecting total loss decisions. That means working with vehicle manufacturers to make sure that there is either design changes to accommodate this, or that parts are available, and methods are available to the repair sector that they know, if there is a damaged battery, they can repair it and get that vehicle back on the road,” he said.

“There is still a lot changing in vehicle design, and there is a lot changing within the battery chemistry, so we need to make sure that as that settles, repairability is a key focus of manufacturers,” he added.

Sustainability issues go further than writing off vehicles unnecessarily, according to Fry.

“There is a lack of adequate focus on sustainability at the moment, particularly in terms of battery diagnostics, repair and recycling. When we look at salvage, we see places storing EV batteries because they do not know what to do with them. There are companies out there recycling batteries, but they charge significant fees to take batteries away,” he said.

“We need to make sure there is sustainability across the entire ecosystem,” he added.