Auto Physical Damage

The Rise of the Electric Vehicle

June 26, 2018

Ryan Mandell

Director of Claims Performance, Auto Physical Damage

As production and deliveries of the Tesla Model 3 continue to increase, more attention is being drawn to the growing trend towards vehicle electrification. Bloomberg New Energy Finance estimates that by the year 2040, 33% of the cars on the road worldwide will be electric vehicles (“EVs”).

Automakers Electric Vehicle Strategy

This should not come as a surprise based on recent announcements from automakers over the past year concerning their electrification strategy. Volvo, for example, announced in July of last year that all models from 2019 on will only be offered as either a mild hybrid, plug-in hybrid or full electric vehicle. Volvo President and CEO Hakan Samuelsson stated that, "We will phase out cars with only an internal combustion engine, with petrol hybrid versions as a transitional option as we move towards full electrification.” Volvo’s strategy is hardly unique. Daimler CEO Dieter Zetsche said that the company intends to offer an electrified variant for every model in its portfolio by 2022. GM announced in October that it would produce 20 new, completely electric vehicles by 2023—including two crossovers by 2019 “based off learnings from the Chevrolet Bolt EV.”

EV Battery Production

One of the primary challenges automakers have faced has been the prohibitive cost of EV battery production. Significant investments in R&D and the resulting advancements in battery production technologies have resulted in drastically lower production costs. GM CEO, Mary Barra, described a trajectory at the 2017 Barclays Investor Conference that would cut battery production costs by 31 percent over what was achieved during production of the 2017 Chevy Bolt.

EV Materials

In order to gain maximum efficiency from hybrids and full electric propulsions, automakers are leaning on lighter weight construction substrates such as aluminum, advanced high strength steels, and carbon fiber, to name a few. As electric vehicles occupy a larger share of the car park, collision repair facilities will be faced with a greater percentage of claims that involve more complex, lighter weight materials, which consequently require specialized equipment and training in order to produce a safe and proper repair.

EV Demand Forecasts and Projections

The demand for EVs has not taken off as rapidly as some had forecasted. However, many are revising their forecast due to the nearly 50 percent surge in the price of crude oil over the past year, along with the lower production cost incentivizing automakers to increase the number of models offered, hence creating competitive pricing between electric and traditional internal combustion engine (ICE) vehicles. Colin McKerracher, lead advanced transport analyst at Bloomberg New Energy Finance, said: “We see a momentous inflection point for the global auto industry in the second half of the 2020s. Consumers will find that upfront selling prices for EVs are comparable or lower than those for average ICE vehicles in almost all big markets by 2029.” Though a future where EV’s make up one third of all cars on the road is hardly a guarantee, there is no question that a greater percentage of claims will involve EV’s in the future and will bring with them marked challenges to the collision repair process.

Bloomberg New Energy Finance estimates that by the year 2040, 33 percent of the cars on the road worldwide will be electric vehicles

Source: Bloomberg New Energy Finance