Expensive EV Repairs Provide Glimpse into High-Tech Future
Posted on Mar 8th, 2021
by Ed McMenamin, Senior Editor, Risk Information Inc.
March 1, 2021
Electric vehicles cost more to repair than conventional vehicles, but that distinction could fade as auto body shops upgrade skills and as more cars – gas or electric – share the latest high-tech features. In fact, the latest study from the Highway Loss Data Institute shows that the difference in claim severity between electric vehicles (EVs) and their di- rect combustion engine counterparts has narrowed.
While repair costs have been quite high for market leading Tesla vehicles – luxury cars loaded with the latest safety and comfort features – EVs may not be inherently more expensive to fix. Some less expensive EVs, like the Chevrolet Bolt, have a lower-than-average claim severity, according to HLDI.
For now, however, the simultaneous introduction of plug-in battery-powered electric cars and advanced driver-assistance systems (ADAS) technology is con- tributing to rising claims costs industrywide. With so few EVs on the road, the cost impact isn’t great right now, but insurers are proactively monitoring what is sure to become a greater con- cern as EVs become a bigger part of the automotive fleet.
Sales of EVs are forecast to quadruple from 2020 to 2025, by then accounting for 4.8% of the U.S. auto market, according to an LMC Au- tomotive projection cited by CCC in its 2020 Crash Course publication. Deloitte and Bloom- berg analysts both predict EV sales will account for about 30% of all new car sales globally by 2030, largely driven by emissions requirements in China and Europe.
Claims software vendor Solera reported Electric vehicles accounted for just 0.4% of all repairs pro- cessed for insurers by CCC in 2020. That will soon change.
higher repair costs for EVs in Europe. The 2020 Volkswagen e-Golf’s repair costs were, on aver- age, about 9.7% higher than the non-electric vession. Repair costs were also about 10% higher for the Mercedes Benz B250e and the Renault Fluence Z.E. compared to their conventional counterparts.
The number of EVs on the books of the larg- est U.S. auto insurer has quadrupled since 2018, and those cars have lower claim frequency and higher severity, said State Farm claims consul- tant Chris Evans, a presenter at the Collision Industry Electronic Commerce Association (CIECA) webinar “Preparing for the EV Revolu- tion.”
American Family sees similar claim trends with EVs. Danny Henderson, associate vice president for enterprise auto claims, pointed to the abundant ADAS features in EVs that make them less likely to crash but, at least for now, more expensive to fix. The experience with EV claims reminds Henderson of the initial learning curve and higher costs for repairs when Ford launched the aluminum F-150 in 2015.
“We feel we will adapt, and over time the [higher] repair costs will likely be offset by in- creased part availability, repair facility options, and innovations to reduce overall claims cycle time,” he said.
Repair costs for EVs relative to conventional vehicles will also likely improve as the batter- ies used in the vehicles become less expensive. The price of lithium-ion batteries have dropped 89% since 2010, according to a BloombergNEF market survey.
Even with lower battery prices, it still costs more to repair EVs than conventional vehicles because they require more specialized skills, Zu- rich North America spokesman David Hilgen said.
In addition to having more expensive parts, EVs take longer to repair as shops struggle to keep pace with the necessary equipment and skills. For example, the procedures to properly turn off the battery and electrification systems can lengthen claim cycle times, increasing costs.
“In general, I think you’ve got an industry that’s not up-to-speed yet on how to repair a lot of these vehicles,” said Susanna Gotsch, direc- tor and industry analyst at CCC.
Pete Tagliapietra, founder and president of NuGen IT, a claims and repair software com- pany, estimated that roughly 10% to 15% of repair shops are currently capable of fully repairing an EV. For some owners, there just aren’t enough EVs on the road to justify the costs required to upgrade a shop. Just 2.3% of all repairs processed on behalf of insurers by CCC in 2020 were for EVs and hybrids; EVs alone accounted for just 0.4% of the volume.
“Just based on the slow rate of increase in the number of electric vehicles, on an individual claim-by-claim basis we might see an increase