The Future of Automotive: EV Repairs and Insurance Costs
Welcome back to “The Future of Automotive” on CBT News, where we delve into the latest trends impacting the mobility sector. I’m Steve Greenfield from Automotive Ventures, and today we’re examining a critical issue: the rising cost of vehicle insurance, with a focus on its impact on electric vehicles (EVs).
Last year, the automotive and insurance industries experienced significant fluctuations, with nearly all major U.S. auto insurers raising rates. According to a report from S&P Global, increases in severe auto crashes, combined with extreme weather and a surge in vehicle thefts, contributed to higher losses in comprehensive coverage; however, the report also highlights the impact of EVs on consumer insurance burdens. The industry is facing a tough period, as rate increases struggled to keep pace with the escalating frequency and severity of claims.
EV Repair Costs: A Growing Concern
One of the critical factors driving up insurance costs involves EV repair expenses. While EVs are promoted for their cost-saving maintenance benefits, their repair costs are significantly greater than those of traditional gasoline-powered vehicles. CCC Intelligent Solutions reports the average repair bill for a traditional vehicle at $4,437. For EVs, that cost jumps to $6,618, a 49% increase.
This disparity is attributed to the complex technology within EVs, coupled with the specialized handling required for their electric powertrains. There are also longer wait times for parts and repairs due to a shortage of skilled technicians capable of working on EV batteries. Such a mismatch between marketing and practical maintenance is contributing to higher insurance premiums in the long run.
These higher repair costs directly impact the insurance premiums for EV owners, who currently pay on average $357 per month compared to $248 for gasoline vehicle owners. Insurers have reacted by aggressively hiking premiums.
The Impact of Tech Complexity and Road Conditions
The increasing complexity of cars, and the shift toward innovative manufacturing techniques, could have a ripple effect on the automotive industry. Tesla’s exploration of 3D-printed components could significantly change vehicle design and manufacturing timelines, potentially reducing the number of parts in a car’s underbody from 400 to one.
While this could speed up development, it raises questions about repairability. If vehicles become difficult or impossible to repair after a crash, insurance premiums may continue to rise.
Additionally, road conditions are a major factor driving up repair costs. Pothole-related vehicle damage reported by U.S. drivers increased by 57% from 2021 to 2022, with 44 million drivers reporting damage from potholes.
As we transition to EVs, there will be fewer tax dollars allocated to road repairs. For example, California’s budget for road repair and maintenance depends on the state’s motor fuel taxes, and that revenue is expected to plunge. Electric vehicles don’t use gasoline, so EV drivers don’t pay the gas tax. A recent report from the California Legislative Analyst’s Office warns that loss of state fuel tax revenues could have dire consequences for the upkeep of roadways. Taxes on gasoline and diesel fuel now total about $14.2 billion a year in California. More than $4 billion annually could disappear by 2035, when the state’s ban on the sale of new fossil fuel cars takes full effect. This is due to EVs not using gasoline, so they do not pay the gas tax, and taxes on gasoline and diesel fuel in California total about $14.2 billion annually.
These factors highlight the need to keep a close eye on vehicle insurance affordability, particularly as the gap between the monthly insurance premiums for EVs and internal combustion engine vehicles widens. Companies across industries, from auto insurance providers to vehicle manufactures, will need to address these issues.
Company to Watch: Revoy
Each week, we spotlight companies in the automotive technology sector. This week, we’re looking at Revoy, a company that’s addressing the environmental challenges that are plaguing the industry today. Revoy allows truck operators to use their existing trucks, while burning less diesel fuel. This can provide immediate fuel and emissions savings, with no retrofits required.
Revoy works by adding electric power to existing trucks. It also offers instant swaps at battery swapping stations to avoid downtime. This offers an immediate solution for fleet operators looking to reduce emissions without the high cost of new electric vehicles. You can learn more about Revoy at www.revoy.com.
That concludes this week’s “Future of Automotive.” Don’t forget to check out my book, The Future of Automotive Retail, which is available on Amazon.com. And keep an eye out for my new book, “The Future of Mobility”, which is almost done, and will be out early this year. Thanks for tuning in.
