Insurers Scrapping Low-Mileage EVs Because of Battery Non-Repairability

An electric car charges at a mall parking lot in Corte Madera, Calif., on June 27, 2022. Justin Sullivan/Getty Images

Industry experts are warning electric vehicle (EV) makers like Tesla to produce battery packs that are more easily repairable and to provide third-party access to battery cell data, or risk already-high insurance premiums surging further and effectively wiping out the incentives of going electric.

EVs have been regularly touted among Americans by the Biden administration amid the president’s bid to ensure that half of all new vehicles sold in the country in 2030 are electric or plug-in electric hybrids.

However, for the majority of EVs, there is simply no way to repair or assess even slightly damaged battery packs after accidents, collisions, or fires, meaning that insurance companies are forced to write off even low-mileage EVs, which simultaneously raises insurance premiums.

In addition, many electric vehicle batteries, which can cost tens of thousands of dollars and typically make up 50 percent of an EV’s price tag, are difficult to replace.

This means that consumers who purchased the vehicle in the hopes of reducing their monthly costs are instead left facing higher losses.

The batteries—which are made up of an array of raw materials, including lithium-ion, cobalt, and nickel, predominantly sourced from China—have also now begun piling up in scrapyards, adding environmental concerns, Reuters reports.

A Reuters search of EV salvage sales in the United States and Europe reportedly shows a large portion of low-mileage Teslas, but also models from Nissan, Hyundai Motor, Stellantis, BMW, Renault, and others.

According to Kelly Blue Book, 5.8 percent of the new cars Americans bought in 2022 were electric, up from 3.2 percent in 2021, and total EV sales topped 800,000 for the first time.

The new Nissan LEAF vehicle is seen in Melbourne, Australia, on July 11, 2019. Michael Dodge/Getty Images

‘Handling of Batteries a Crucial Point’

However, EVs still make up just a fraction of vehicles on the road, meaning that industry-wide data are hard to come by, although Reuters noted that the number of low-mileage zero-emission cars being written off with minor damage is increasing.

“We are buying electric cars for sustainability reasons,” Matthew Avery, research director at automotive risk intelligence company Thatcham Research, told Automotive News. “But an EV isn’t very sustainable if you’ve got to throw the battery away after a minor collision.”

Other industry experts are warning that unless changes are made to make EV batteries more easily repairable, more batteries will be scrapped and insurance premiums will continue to rise.

“The number of cases is going to increase, so the handling of batteries is a crucial point,” Christoph Lauterwasser, managing director of the Allianz Center for Technology, a research institute owned by Allianz, told Reuters.

Lauterwasser also noted that EV battery production emits far more CO2 than fossil-fuel models, meaning that the vehicles, which have been touted as more environmentally friendly, 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.

Multiple vehicle makers such as Ford and GM have said they have made battery packs easier to repair and replace, with the former currently looking into developing closed-loop EV battery recycling to make the vehicles more affordable.

However, the large 4680 cells used in Tesla’s Model Y vehicles made at Tesla’s Austin, Texas, plant have been described by experts as having “zero repairability” because they are effectively built into the car’s body.

Model Y cars are pictured during the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, on March 22, 2022. Patrick Pleul/Pool via REUTERS

Musk Says Insurance Premiums ‘Unreasonably High’

“A Tesla structural battery pack is going straight to the grinder,” Sandy Munro, head of Michigan-based Munro & Associates, which helps with the analyzing, pricing, and design of EVs, told Reuters.

The Epoch Times has contacted Tesla for comment.

In January, Tesla CEO Elon Musk said the company was looking at making design and software changes to its vehicles in an effort to bring down repair costs and insurance premiums.

“We’ve actually adjusted the design of the car and made changes in the software of the car to minimize the cost of repair … So it’s giving us this really good feedback before, again, reducing cost,” Musk said during Tesla’s fourth-quarter earnings call.

He also noted that premiums from third-party insurance companies “in some cases were unreasonably high.”

The latest concerns from industry experts come amid growing concerns over EV fires, which are typically prompted by battery packs overheating.

Last year, Florida’s chief financial officer and state fire marshal, Jimmy Patronis, said there had been an increased number of waterlogged EV batteries erupting in flames in the wake of Hurricane Ian.

“That’s a new challenge that our firefighters haven’t faced before,” Patronis said, “at least on this kind of scale.”

An analysis of vehicle fires by AutoInsuranceEZ published in November 2022 found that there were 199,533 gas-powered vehicle fires in 2021, while hybrid cars caught fire about 16,051 times and fully electric vehicles caught fire 52 times.

However, the auto insurance comparison website noted that while electric vehicles catch fire less often, they can be harder to put out than gas car fires, and most firefighters aren’t familiar with how to put out EV fires since electric cars are relatively new.

Amid increasing concerns over EV fires, lawmakers in the state of Virginia last month passed a bill that would mandate all firefighters be trained on how to put out EV battery fires.

Reuters contributed to this report.