EV Insurance Cost

Investment Analysis Clubs Macro Economic Trends and Risks
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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.”

The above would seem to mean insurance premiums for EVs will go through the roof in the short term. I assume EV manufacturers will strengthen battery pack compartments to prevent the totaling of an EV vehicle.

First, I believe dealers don’t wish to fool around with repairing battery packs. They just want to replace the whole pack. 2 reason methinks. 1)more profit in battery pack replacement. 2) Finding bad cells then returning vehicle to customer might lead to service headaches as a “repaired” battery pack might stay repaired for very long & then might have to be repaired for free under warranty.

Second, I know there are independent EV & hybrid service centers that repair battery packs. But I doubt all EV service centers are on the Tesla approved list. Repairing a Tesla at an unapproved shop would likely void the Tesla warranty. But if one’s Tesla is out of warranty, it might behoove an insurance company to worker with an insured to get their EV repaired at such a shop rather than totaling an EV. Or that might lead to a insurance company’s claim department headache that the insurance company may not wish to assume. Easier to total a EV & raise premiums.

Tesla is currently being sued in a class action suit over their repair monopoly power. Tesla is under siege as they has insufficient repair parts & state “right to repair” laws in some states.
I am sure this will shake out but the potential hassle of an EV accident might deter some potential risk adverse buyers.

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Repair and maintenance costs are something that should be on every car buyer’s mind.

I didn’t learn to pay attention to this until recently. More correctly, I have generally owned cars that are not that expensive to maintain, and have been amenable to doing some of my own work. That changed when I bought a Mercedes van to transport my wife and son and their respective wheelchairs. This van is much more expensive to repair and maintain than my previous Chrysler, Toyota, Ford, and Honda vehicles. Of course, the passing of time and relative complexity of newer cars is also a factor.

While there are independent shops for various Mercedes vehicles, few of them will work on vans, so most of my work has been done at a dealer. The work has always been good, but it’s considerably more expensive, inconvenient, and time consuming. My local independent shop - located a block from my office - could handle routine maintenance and most repairs in a day. Rarely did I have to leave a car overnight. The dealer needs the car for two days to handle oil and filter changes plus all of the various inspections that go along with the scheduled maintenance. And the cost is considerably higher - as much as 4 or 5 times higher. (In significant part due to the large amount of oil this vehicle has - it’s a diesel.) The routine 20,000 mile service is about $1000, when I’m used to paying $150 - $200 for oil and various filters on the car.

Needless to say, cost and time to repair are now squarely on my radar - as is a replacement for this expensive vehicle. (On my to-do list after my busy season.)

The difficulty of getting crash repairs done on a Tesla is just one of many reasons I won’t own one at this time. Tesla has had 10 years to address this issue, with virtually no improvement. That leads me to believe that top management views dealing with a repair chain as an inconvenience.

This is an area where I suspect legacy auto makers will have an advantage as they produce more EVs. They’re already used to dealing with providing parts for repairs, and will likely continue to do the same for their EV cars. Yes, supplies of batteries are going to be tight for the foreseeable future. But it is a conscious decision on the part of each company as to how many batteries and battery packs to make available for the repairs chain rather than use for building new vehicles. I also fully expect legacy makers to take those damaged batteries back and refurbish them as they currently do for engines.

It is not uncommon for an engine that has failed under warranty to be replaced with a remanufactured engine. The failed engine typically goes back to be refurbished or remanufactured, eventually making its way back into the repair chain. Battery packs that have premature failures or crash damage could similarly be refurbished or remanfuactured. That would significantly lower the cost of replacing those packs.

Keep in mind that remanufacturing would involve inspecting and testing each component of the battery pack before reusing it. A good quality remanfuacturing would subject each individual battery cell to the same acceptance testing that new batteries undergo. Control components and wiring would also be tested, as would overall enclosures. Selected parts of the assembly could be replaced with new items, or with good items from some other battery pack. In practice, I would expect the good cells from physically damaged packs to make their way into packs with failed cells.

I no longer want to own a vehicle that is difficult or inconvenient to repair. That is part of the overall ownership experience, and I’m getting too old to put up with that kind of inconvenience. I’m happier with cars that are more convenient to own.

–Peter

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Ditto! This is why I keep saying “Tesla is still, not yet, a mature car company”.

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That’s one of the things I like a LOT about my Tesla. So far, in 19+ months of ownership, I’ve only been to the service center once (2 days after taking delivery). And all service/maintenance since then has been in my driveway at home. Super convenient. I just schedule it in their app and someone comes with all the equipment they will need. Based on many stories I’ve read, I suspect that I may be less happy than that if I ever need real repairs someday. I’ve heard of crazy long waits for parts.

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So have I. One of many reasons I won’t own a Tesla. A car I can’t use for weeks at a time waiting for parts is useless. That’s a risk I’m not willing to take.

On the other hand, refurbishing Tesla battery packs might make a really good business venture. Or a Tesla-specific junk yard, if I could find appropriately cheap space somewhere in the desert near by.

–Peter

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Well they have some things to learn, that’s for sure. Here’s a guy with a wee issue on his expensive Tesla steering yoke after just 19,000 miles.

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By the way, during the last 3 years, I’ve heard similar stories about long delays for parts for cars made by other manufacturers (ICE and EV). Last year we had our Nissan in for repairs (body panels+windows) and it took almost a month to get all the parts.

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Indeed, there are still parts shortages all around the automotive industry that trace back to the pandemic. But Tesla’s issues pre-date that. It’s a conscious decision by Tesla management to prioritize parts for new car assembly over repair parts for the existing fleet.

–Peter

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the yoke? a horn button? So as someone gets close to backing into me I look for a little button? Sure! Or is the horn button even more foolish to turn on and off the center pad on the yoke?

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The article that started this thread was mostly unsupported nonsense.

And your fear is also unsupported. Please provide data showing that Tesla is slower than average, or slower than anybody else in the business.

The two body shop repairs I’ve done on my Teslas have both gone to Tesla owned body shops and been repaired quickly and reasonably. Since then they have started having minor body repairs done directly by their regularly service centers. My experience is certainly anecdotal (to you), but your claims are simply repeating unsupported fear-mongering. And it’s clearly working on you.

Further anecdotal evidence. My daughter is driving my old 2017 Model 3. She heard a noise she didn’t like last Monday and had the two upper control arms replaced in a Tesla Service Center by Thursday. Scheduled in the app, diagnosed remotely, under $200 for the repair (out of warranty), and in the shop for three hours. Doesn’t get much better than that. Oh, actually it does. They also did a couple of minor deferred maintenance inspections while it was there.

This “I read on the interwebs that somebody somewhere says they had a problem” stuff gets really old. If what you care about is a car being easy to maintain, it doesn’t get better than Tesla.

-IGU-

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As a Tesla owner (4 years in), the delay in body repair or part replacement is the big concern I had and still have. I don’t drive much anymore thankfully, no commuting (lockdown, remote work) so the risk is reduced., IF (IF) the legacy carmakers can produce enough parts for repairs and provide reasonable service for their new, “competitive” EVs at the same time as growing their sales, THAT is what will slow down Tesla’s growth. People don’t want to be treated with condescension and wait months for body part fixes when they’ve paid $40K or $50K for a car. And my insurance is “only” $55 a month.

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People always have “concerns”. This is very different from having any evidence that their concerns are warranted. Have you had problems? As I just described my daughter’s recent experience, parts availability and repair was pretty much instantaneous.

I don’t know of anybody anywhere who wants to be “treated with condescension and wait months for body part fixes” no matter what they paid for their car. Are you referring to something in particular or just expressing another “concern”?

And by the way, $40-50K is what the average new car purchase costs today in the US. Yeah, I know, it’s kind of crazy. But that ought to mean that it comes with average expectations, whatever those would be.

-IGU-

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Maybe you should broaden your experience beyond the one, to looking at Reddit’s teslalounge forum or the Tesla Motors Club. I thought it was obvious from my description of driving frequency that I haven’t had any problems (knock wood) - but with a broader lens applied, yeah I hope I don’t get in an accident requiring body repair. Apparently you disagree that’s a “concern”. Your opinion based on a sample size of 1.

Again, your assumption is quite frankly annoying. Same suggestion as above, there is plenty of evidence out there of a significant amount of customer dissatisfaction with the way they’ve been treated by some service centers and dealerships. My neighbor bought a brand new $110K Model S last year. The staff in NJ treated him like he was privileged just to be there - no assistance with paperwork or communications, delivery options, they couldn’t be bothered to walk him to his vehicle, let alone the barest familiarity session.

Tesla has not prioritized customer service institutionally, in general. If they can’t be bothered to keep their customers consistently happy and damaged cars on the road in a reasonable amount of time for that $40 to $50K minimum - especially when other car makers do generally better than they can for the same or less money - then yeah, they’re going to continue to take a reputational hit for pure arrogance.

Bye now.

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Sounds similar to how I was treated when I bought my very first car in 1978, a Honda Accord. The sales guy did absolutely nothing to be useful, and when I asked about it he looked bored and said if I didn’t buy it today then somebody would buy it tomorrow. He didn’t care.

What your friend’s experience sounds like is expecting/wanting a high touch purchase experience, while Tesla does everything it can to make it as low touch as possible. Pretty much all the paperwork, delivery options, and familiarization is usually done online beforehand. Have you seen Tesla’s video guides?

https://www.tesla.com/support/videos

So what? I mean, clearly some customers are annoyed. But that’s true of every manufacturer everywhere. Find something that looks like data indicating that’s true of Tesla customers to some outsize degree and I’ll pay attention. Everything I’ve seen indicates that Tesla customers are the happiest with their vehicles of anybody.

So, sure, you’re concerned. But it’s irrational. It’s like being concerned that your Tesla battery will catch on fire. Sure, it’s possible. But the chance of it happening is basically zero. And anything you might do in the way of making an alternate choice of vehicle would just increase your chance of a fire. Pointing at news articles that say “A Tesla caught on fire.” doesn’t change that at all.

If that were true, there would be a problem. But none of it is. Tesla service is great. Their communications are usually pretty bad, and they always have been, but that’s not quite the same thing. I’ve seen nothing to indicate that Tesla cars are off the road when damaged for any longer than other cars. Have you? I’ve seen nothing to indicate that Teslas have serious issues any more than other cars. Have you? And we already know that Teslas are in crashes far less often than other cars, as Tesla publishes that data, which is a huge win in itself (since crashes are a source of serious issues).

So explain to me which of your concerns I should take seriously. All I hear are worries over imagined potential problems. Is there anything about your car and your experience that you find unacceptable?

By the way, I’ve heard Bloomberg is repeating this customer satisfaction survey they did a while back. Maybe it will provide some useful information.

-IGU-

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https://archive.li/JiK8a
In the U.S., the average severity of a claim for a repairable EV was $6,066 in the first quarter, nearly 30% higher than for internal-combustion-engine (ICE) vehicles, according to Mitchell, which provides software and data to auto insurers and the collision-repair industry…

Part of that cost can be the greater work involved: over three mechanical labor hours on average for a repairable EV claim estimate, versus less than two for ICE vehicles…

The so-called combined ratio for U.S. personal auto insurers industrywide hit 112% in 2022 and 105% last year, according to Fitch Ratings. This ratio means an insurer made an underwriting loss, paying out more in claims and expenses than they collected in premiums. It isn’t just an American problem. In China, where EVs now account for about two-fifths of sales, the combined ratio on EV policies for insurers was over 100% in 2023, according to a review of company reports by economists at the Swiss Re Institute.

DB2

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I’m sure this is true. I’m also sure there’s some sugar in the numbers.

EVs are “new”. They have more sensors and electronic gizmos that can be damaged in a collision. That is also true of ICE vehicles that are “new”, but the collision reports are for “all” ICE vehicles, which include a majority for older vehicles without such things.

I would guess it’s also true that EVs, largely being from Tesla and a few other upstarts, do not have the infrastructure in place (nor knowledge base) to deal with collisions as timely as more established brands, which keep a ready supply of parts at distributorships - even dealerships for the most common needs. Add to that all the body shops which are clueless when it comes to working on a new technology such as an EV versus something they’ve done their whole career.

Sidebar example: I went to get a dash cam installed on my EV; the guy in town, pretty much the only guy on my side of town, won’t do it. He’s afraid of hacking into the wrong something or other and screwing it up. He’ll learn eventually, of course, because his whole business is dashcams and stereo systems, but at the moment he doesn’t want the risk.

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That was mentioned in the WSJ piece.

As the recycling and secondary parts and vehicles market evolves, mechanics learn and manufacturers adapt. “My belief is that you will see the insurability costs begin to come down as EVs scale,” says Craig Carrington, who runs commercial-vehicle insurance and financing for Ford…

In addition…

One complication is the trend toward “gigacasting”—using smaller numbers of larger cast parts to make vehicles. Tesla has championed the technology, and others, including Toyota, are now following. But it could make cars even more expensive to repair.

DB2

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YES.

And the longer term knock on effect, anticipated by Musk and others, is that the need to minimize traffic accidents will escalate. The best solution is to stop idiot easily distracted and inebriated humans from driving. The longer term solution is to design highways and vehicles as intercommunicating cooperating entities.

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I doubt this will happen.
First, any system has to allow for the fact that there are older cars that are on the roads that are not part of the system. There will also always be pedestrians that have to be watched for.
Second, there has already been a IEEE standard for V2V communications to do all this and virtually no one has implemented it. You can see that 802.11p was started in 2004 and its now 20 years later. Maybe in another 20 years we’ll see it if that is what you mean by long term.

Mike

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Yes, that is what I mean as “long term”.

And I see a useful and possible intermediate term wherein “exclusive to cooperating robotic vehicles only” lanes, one in each direction with spaced passing lanes, are established coincident with segments of e.g. Interstate 5 and 85.

Implementing such infrastructure, starting with useful specifications for the intercommunication of vehicles and full self driving, would make the perfect American continental substitute for far denser Europe’s high speed trains.

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