Electric vehicles are helping to power the green transition, but their growing popularity is also transforming the automotive sector, with important implications for liability insurance.
Growth in the electric car market remains robust, despite a slowdown in growth in some regions. Sales of electric cars – battery electric and plug-in hybrid combined – neared 14 million in 2023, a 35% year-on-year increase, according to the . A quarter of all cars sold in France and the UK last year were electric, rising to 30% in the Netherlands, 60% in Sweden, and almost 95% in Norway, the highest share in Europe.
With tax and other government incentives, investment in charging infrastructure, increased EV battery range (the average range of a new EV is now around , with some vehicles able to travel 450 miles on a single charge), falling costs and greater choice of models, electric car sales continue to increase year on year. Around 42% of respondents to a recent say they want their next car to be an EV.
As such, sales of electric vehicles are on track to reach around 17 million for the full year 2024, 20% more than 2023. Longer term, the global electric vehicle fleet is predicted to reach 25 million vehicles by 2035, with EVs accounting for half of new car sales, according to the .
As a consequence, electric vehicles are one of the cornerstones of the transition away from fossil fuels. The transport sector – cars, planes and shipping - is responsible for approximately of greenhouse gas emissions, accounting for around 57% of global oil demand. If EVs can achieve a 60% share of vehicles on the road, could be saved between now and 2050.
New players, new supply chains
The transition to EVs is having a profound effect on the automotive manufacturing industry and its supply chains. New players continue to enter the market, which consists of historical car manufacturers like VW, EV challengers and start-ups like Tesla, and Chinese car manufacturers like BYD. Big technology companies like Huawei and Foxconn have also set their sights on the EV market.
As electric vehicles grow in popularity, the automotive industry will need to re-engineer its supply chains. While demand for many combustion engine parts – like exhausts and fuel systems – will gradually decline, demand will increase for new materials and components used in EVs, such as batteries, charging and battery management systems, and DC converters.
Joint ventures are another emerging dynamic of the electric car market. Traditional car manufacturers, original equipment manufacturers (OEM), battery manufacturers, technology companies and others have formed joint venture partnerships to manufacture electric vehicles and batteries, as well as invest in charging infrastructure. Stellantis, for example, recently announced it will build Leapmotor's electric vehicles in Europe, while China's Chery Auto has signed a joint venture deal with Spain's EV Motors to build cars in Barcelona.
Global manufacturing footprint
The geographical footprint of the automotive industry is also changing, becoming more global, and with a growing role for China. As an early adopter of electric vehicles, China is now the world’s leading market for EV sales, accounting for 60% of new electric car registrations in 2023, followed by Europe (just under 25%) and the US (10%). More than one in three new car registrations in China was electric in 2023, compared with one in five in Europe, and one in ten in the United States.
China also leads the world in terms of manufacturing, and is poised to become the of cars in 2024. It exported 1.2 million electric vehicles in 2023, an 80% increase on the previous year. Chinese auto manufacturer BYD is vying with Tesla for the title of world’s largest electric vehicle maker, having overtaken the US firm in the fourth quarter of 2023. Several Chinese auto manufacturers have announced plans to in Europe, including BYD, which said last year it hopes EVs built in Hungary will roll off the production line within the next three years.
China also dominates the global supply of EV batteries: It accounts for over two thirds of EV battery manufacturing, and is responsible for more than half of the world’s processing and refining capacity for lithium, cobalt, and graphite, which are essential materials for making EV batteries. The US and Europe, however, are now investing heavily in building domestic EV battery capabilities: A between Stellantis, Mercedes-Benz and Total Energies, for example, plans to build three giga-battery factories in Europe for a total investment of $7 billion.
Developing liability landscape
The transition to electric vehicles will also have significant implications for automotive industry liability-related risks and insurance, including public liability, products liability and directors and officers. For example, EVs present a different fire risk than cars with internal combustion engines. While electric vehicles are no more prone to catch fire, when they do, the resulting fire burns more fiercely and is harder to extinguish. As such, EV battery fires pose an uncertain risk for third-party property damage and bodily injury, especially whilst charging and/or in covered car parks, as well as during vehicle manufacturing and transport.
Overall, electric vehicles have fewer moving parts than petrol cars, and have not been shown to be any more liable to product recalls. However, the nature of product liability and recall risks differ between EVs and petrol and diesel cars. For example, electric vehicles are typically heavier than petrol cars, yet they accelerate faster, which can cause premature wearing of tyres, braking and suspension systems. Hybrid and plug-in hybrid electric vehicles, which combine EV and internal combustion engine technologies, are more complex and may be more susceptible to problems.
The limited number of suppliers of critical EV components, such as batteries, electric vehicles could also pose a risk of serial defects, where one faulty or unsafe component leads to a large recall across multiple brands. Hyundai, Kia, and Genesis recently due to a problem with the Integrated Charging Control Unit, while Tesla issued a software update for 1.6 million electric vehicles in China to fix a safety issue, having previously recalled almost in the US over problems with the autopilot function.
Mitigating EV risks
Aggregation and accumulation of product liability risk poses a challenge for insurers, which need to diversify risk and manage potentially catastrophic claims. Joint ventures also pose a challenge, as insurers could face an accumulation of exposure where an OEM is insured in its own right, but also through its joint ventures. To manage this potential volatility, individual insurers need to carefully monitor exposures and manage limits, with greater emphasis on co-insurance to maintain levels of liability coverage.
Detailed risk analysis and risk engineering is also key to understanding the liability risks associated with EVs. Claims experience for electric vehicles is still limited, although with increased connectivity of vehicles, factories and supply chains, more risk-relevant data is becoming available. In addition, many aspects of EV production are a continuation of petrol and diesel cars, while the industry’s current standards of risk management and quality control are transferable.
The insurance industry must also respond to the changing geographical footprint of the automotive industry. Increasingly, car manufacturers and their suppliers are located outside the traditional markets of Europe, North America and Japan. As an industry, insurers are increasingly being called upon to provide liability cover to auto manufacturers in Asia and Eastern Europe, where domestic insurance markets are still developing in terms of serving automotive risks.
A stable partner for changing risks
Insurers have an important role to play in the transition to electric vehicles, supporting automotive clients and brokers in all markets as we navigate the significant challenges ahead. Our underwriters, risk consulting, actuarial, and claims teams are working together to stay ahead of the emerging risks for EVs, sharing knowledge and risk insights with our clients around the world. As a long-standing insurance partner to the automotive industry, and as a leading motor insurer, 色多多视频is committed to the development of a sustainable market for EVs.
Global Asset Protection Services, LLC, and its affiliates (鈥溕喽嗍悠礡isk Consulting鈥�) provides risk assessment reports and other loss prevention services, as requested. In this respect, our property loss prevention publications, services, and surveys do not address life safety or third party liability issues. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. The provision of any service does not imply that every possible hazard has been identified at a facility or that no other hazards exist. 色多多视频Risk Consulting does not assume, and shall have no liability for the control, correction, continuation or modification of any existing conditions or operations. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any document or other communication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, 色多多视频Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with our services, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.
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