Scratched EV battery? Your insurer may have to junk the whole car
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[March 20, 2023] By
Nick Carey, Paul Lienert and Sarah McFarlane
LONDON/DETROIT (Reuters) - For many electric vehicles, there is no way
to repair or assess even slightly damaged battery packs after accidents,
forcing insurance companies to write off cars with few miles - leading
to higher premiums and undercutting gains from going electric.
And now those battery packs are piling up in scrapyards in some
countries, a previously unreported and expensive gap in what was
supposed to be a "circular economy."
"We're buying electric cars for sustainability reasons," said Matthew
Avery, research director at automotive risk intelligence company
Thatcham Research. "But an EV isn't very sustainable if you've got to
throw the battery away after a minor collision."
Battery packs can cost tens of thousands of dollars and represent up to
50% of an EV's price tag, often making it uneconomical to replace them.
While some automakers like Ford Motor Co and General Motors Co said they
have made battery packs easier to repair, Tesla Inc has taken the
opposite tack with its Texas-built Model Y, whose new structural battery
pack has been described by experts as having "zero repairability."
Tesla did not respond to a request for comment.
A Reuters search of EV salvage sales in the U.S. and Europe shows a
large portion of low-mileage Teslas, but also models from Nissan Motor
Co, Hyundai Motor Co, Stellantis, BMW, Renault and others.
EVs constitute only a fraction of vehicles on the road, making
industry-wide data hard to come by, but the trend of low-mileage
zero-emission cars being written off with minor damage is growing.
Tesla's decision to make battery packs "structural" - part of the car's
body - has allowed it to cut production costs but risks pushing those
costs back to consumers and insurers.
Tesla has not referred to any problems with insurers writing off its
vehicles. But in January CEO Elon Musk said premiums from third-party
insurance companies "in some cases were unreasonably high."
Unless Tesla and other carmakers produce more easily repairable battery
packs and provide third-party access to battery cell data, already-high
insurance premiums will keep rising as EV sales grow and more
low-mileage cars get scrapped after collisions, insurers and industry
experts said.
"The number of cases is going to increase, so the handling of batteries
is a crucial point," said Christoph Lauterwasser, managing director of
the Allianz Center for Technology, a research institute owned by
Allianz.
Lauterwasser noted EV battery production emits far more CO2 than
fossil-fuel models, meaning EVs must be driven for thousands of miles
before they offset those extra emissions.
"If you throw away the vehicle at an early stage, you've lost pretty
much all advantage in terms of CO2 emissions," he said.
Most carmakers said their battery packs are repairable, though few seem
willing to share access to battery data. Insurers, leasing companies and
car repair shops are already fighting with carmakers in the EU over
access to lucrative connected-car data.
Lauterwasser said access to EV battery data is part of that fight.
Allianz has seen scratched battery packs where the cells inside are
likely undamaged, but without diagnostic data it has to write off those
vehicles.
Ford and GM tout their newer, more repairable packs. But the new, large
4680 cells in the Model Y made at Tesla's Austin, Texas, plant, are
glued into a pack that forms part of the car's structure and cannot be
easily removed or replaced, experts said.
In January, Tesla's Musk said the carmaker has been making design and
software changes to its vehicles to lower repair costs and insurance
premiums.
The company also offers its own insurance product in a dozen U.S. states
to Tesla owners at lower rates.
Insurers and industry experts also note that EVs, because they are
loaded with all the latest safety features, so far have had fewer
accidents than traditional cars.
'STRAIGHT TO THE GRINDER'
Sandy Munro, head of Michigan-based Munro & Associates, which tears down
vehicles and advises automakers on how to improve them, said the Model Y
battery pack has "zero repairability."
"A Tesla structural battery pack is going straight to the grinder,"
Munro said.
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Damaged electric vehicles that have been
written off by insurers are pictured at UK salvage company Synetiq's
yard in Doncaster, Britain, in this undated photo. Courtesy of
Synetiq/Handout via REUTERS
EV battery problems also expose a hole in the green "circular
economy" touted by carmakers.
At Synetiq, the UK's largest salvage company, head of operations
Michael Hill said over the last 12 months the number of EVs in the
isolation bay – where they must be checked to avoid fire risk - at
the firm's Doncaster yard has soared, from perhaps a dozen every
three days to up to 20 per day.
"We've seen a really big shift and it's across all manufacturers,"
Hill said.
The UK currently has no EV battery recycling facilities, so Synetiq
has to remove the batteries from written-off cars and store them in
containers. Hill estimated at least 95% of the cells in the hundreds
of EV battery packs - and thousands of hybrid battery packs -
Synetiq has stored at Doncaster are undamaged and should be reused.
It already costs more to insure most EVs than traditional cars.
According to online brokerage Policygenius, the average U.S. monthly
EV insurance payment in 2023 is $206, 27% more than for a
combustion-engine model.
According to Bankrate, an online publisher of financial content,
U.S. insurers know that "if even a minor accident results in damage
to the battery pack ... the cost to replace this key component may
exceed $15,000."
A replacement battery for a Tesla Model 3 can cost up to $20,000,
for a vehicle that retails at around $43,000 but depreciates quickly
over time.
Andy Keane, UK commercial motor product manager at French insurer
AXA, said expensive replacement batteries "may sometimes make
replacing a battery unfeasible."
There are a growing number of repair shops specializing in repairing
EVs and replacing batteries. In Phoenix, Arizona, Gruber Motor Co
has mostly focused on replacing batteries in older Tesla models.
But insurers cannot access Tesla's battery data, so they have taken
a cautious approach, owner Peter Gruber said.
"An insurance company is not going to take that risk because they're
facing a lawsuit later on if something happens with that vehicle and
they did not total it," he said.
'PAIN POINTS'
The British government is funding research into EV insurance "pain
points" led by Thatcham, Synetiq and insurer LV=.
Recently adopted EU battery regulations do not specifically address
battery repairs, but they did ask the European Commission to
encourage standards to "facilitate maintenance, repair and
repurposing," a commission source said.
Insurers said they know how to fix the problem - make batteries in
smaller sections, or modules, that are simpler to fix, and open
diagnostics data to third parties to determine battery cell health.
Individual U.S. insurers declined to comment.
But Tony Cotto, director of auto and underwriting policy at the
National Association of Mutual Insurance Companies, said "consumer
access to vehicle-generated data will further enhance driver safety
and policyholders' satisfaction ... by facilitating the entire
repair process."
Lack of access to critical diagnostic data was raised in mid-March
in a class action filed against Tesla in U.S. District Court in
California.
Insurers said failure to act will cost consumers.
EV battery damage makes up just a few percent of Allianz's motor
insurance claims, but 8% of claims costs in Germany, Lauterwasser
said. Germany's insurers pool data on vehicle claims data and adjust
premium rates annually.
"If the cost for a certain model gets higher it will raise premium
levels because the rating goes up," Lauterwasser said.
(Reporting by Nick Carey and Sarah McFarlane in London, Paul Lienert
in Detroit, Gilles Guillaume in Paris and Giulio Piovaccari in
Milan; Additional reporting by Victoria Waldersee in Berlin; Editing
by Ben Klayman and Matthew Lewis)
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