Thursday, July 18, 2024
HomeInsuranceElectric dreams: what will it take for British fleets to go electric?

Electric dreams: what will it take for British fleets to go electric?


Authored by QBE Director of Underwriting, Motor, Jon Dye

Fleet operators are being encouraged to spearhead the transition to electric vehicles (EV) – but it’s a big challenge

Misinformation on the strengths and weaknesses of EVs is widespread. Earlier this year, one newspaper was forced to apologise for “making up a story about electric vehicles causing potholes”, while Richard Bruce at the Department for Transport recently argued that the British media operates within “a concerted campaign of misinformation” on EVs. 

But while mainstream media often loves to hate EVs, current research shows that more than one in five cars sold worldwide in 2024 is expected to be an electric vehicle.

In fact, the growth is so steady that the number of EVs sold in the first three months of this year was roughly equal to the number sold in all of 2020, accepting vehicle sales were supressed in 2020 due to the pandemic.

Despite the mixed headlines, this positive trend isn’t just global – EV demand is on the rise in the UK. There was a ten-fold increase in new electric car registrations in the UK from 2015 to 2022– and as we move further into 2024, many companies and employees are also considering the switch to EVs.

In the fleet sector, 2023 saw significant growth in EV adoption with 242,235 fully electric vehicles registered from a fleet total of just over 1 million – an increase of just under 40% compared to the previous year.

However, despite a positive jump in registrations, the EV market share has fallen to 16.5%, showing a lingering preference for internal combustion engines (ICE) for fleet use. In some cases, companies are also returning to ICE fleets from electric – Hertz in the US announced the sale of 20,000 of its EV fleet in January due, in part, to high repair costs.

So, what will it take for fleet managers in the UK to follow their ‘electric dreams’ and transition to electric?

A different league of repair costs

While EVs are more expensive out of the box than ICE there are more subtle factors preventing a smooth transition. Insurance claims alone for EVs are 25.5% more expensive compared with their petrol equivalents.

While above average premiums may be one blocker, the higher cost of repairs is one factor holding back EV adoption – and the price of insurance is purely reflective of this.

The most significant claims challenges originate from high voltage battery damage. EV design largely positions the battery and related systems in the floor of the vehicle chassis with mounting points under the side sills, making them vulnerable to collision damage. In short, repairs will be more expensive and complicated because multiple areas of the car can need repair, even when a collision is minor.

A Thatcham Research assessment indicated that EVs with single-zone body damage have a battery damage probability of 1.5-7.5%. In comparison, EVs sustaining damage to multiple zones have a 25-35% probability, and damage to the vehicle’s underside was considered to represent an 85% probability of battery damage.

A battery may allow manufacturers to reduce the number of components in a vehicle, but this also means it is very difficult to isolate any problem within the battery, even if it only relates to a single cell. Replacing an entire battery is a significant cost, in some examples higher than the list price of the vehicle, not to mention additional charges to dispose of a damaged battery.

It’s possible that a great many EVs could be classified as a total write-off after an accident, as repair and/or battery replacement could cost more than the residual value of the car.

Data-driven modelling produced for Thatcham Research shows that 9,400 vehicles on UK roads were involved in an accident which could result in battery inclusion in 2022 – and this figure could hit 260,000 vehicles annually by 2035.

We expect insurance premiums in the short-term to continue to increase, reflecting the higher cost of repair – but the UK’s sophisticated insurance market can play a role to make substantial investments in understanding EVs, mitigating risks, and reducing costs in the longer-term.

Addressing the impact of skills shortages

Repairing EVs requires entirely new and specialised skills, which involve training, infrastructure and most importantly, funding.  

The Association of British Insurers (ABI) says EVs are taking 14% longer to repair. Our own data from QBE shows that when looking at Tesla in isolation, there was a 93% increase in repair costs compared with ICE vehicles and a 25% increase in time off the road.

A big reason for this is a shortage of mechanics qualified to handle Li-Ion batteries. Repairing electric vehicles is infinitely more complex and costly compared to ICE. You do not want to touch a damaged electric vehicle unless you’ve isolated the battery and are trained to repair or dispose of it – unqualified mechanics put themselves and those around them at risk of fatality.

According to the Institute of the Motor Industry (IMI), there could be a shortage of well over 16,000 EV-qualified mechanics by 2032 due to a declining uptake of EV qualifications and new training requirements.

The ABI says this deficit may further impact the cost of repair and cost of insurance. To mitigate this, the sector must prioritise recruitment and upskilling in 2024, attracting newcomers and evolving current skill sets, ensuring a sustainable next generation of mechanics.

Infrastructure lags behind

Nationwide fleet operators face serious charging challenges when travelling long distances. Despite private funding like ChargeUK announcing a £6 billion investment in EV charging infrastructure, the issue does not wholly lie with money or motive – but with location too. EVs have an average range of 250 miles – but over 45% of UK charging points are in London and Southeast England.

EV charge point operator Believe also found that 33% of all local authorities surveyed said they have no formal EV infrastructure plan, which won’t go far to reassure fleet managers that infrastructure can keep pace with growing demand.

Improved and considered charging infrastructure across the UK could allay range fears and increase EV sales amongst fleets in 2024. Increased vehicle range as battery technology evolves also will play a role in supporting more sustained adoption.

Targets and incentives

Faltering EV uptake for British fleets may also be attributed to the government’s decision to push the ban on new ICE car sales to 2035 but to propel the EV industry forward we need more than just targets. 

Incentives are vital: over 77% of UK EVs consist of fleet cars or company cars which have been spurred forward by company car and salary sacrifice tax breaks – noting these are planned to diminish over the next few years but will still be attractive to many. The government needs to do more to support both businesses and consumers to take the leap. The Zero Emission Vehicle (ZEV) mandate, which drives car manufacturers to increase EV sales, may be one lever but more are required.

The road ahead

EVs behave differently and they drive differently. The UK needs substantial investment to equip workers with the right skills for swift and affordable EV repairs – and to establish a nationwide charging network that eradicates range anxiety.

The good news is that the UK has got one of the most sophisticated and developed insurance markets in the world. As proved from the past, we will research, adapt, and find solutions that support the EV transition and the broader economic growth that should align to this. Insurers continue to invest heavily in understanding EVs and with the right skills, incentives and investments, the shift from petrol and diesel vehicles to EVs will hopefully become an obvious and practical choice for fleet managers across the UK.



Source link

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments