# Scratched EV battery? Your insurer may have to junk the whole car Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-21 Category: TECHNOLOGY Category URL: https://financedigest.com/category/technology Meta Title: The Dark Side of Electric Cars: Battery Repairability Issues Meta Description: Learn why insurers are forced to write off EVs after minor damage due to costly and unrepairable battery packs. Find out more here. URL: https://financedigest.com/scratched-ev-battery-your-insurer-may-have-to-junk-the-whole-carhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-20t132258z3lynxmpej2j04zrtroptp4autos-electric-insurance-1736814295439-compressed.jpg) By Nick Carey, Paul Lienert and Sarah McFarlane LONDON/DETROIT (Reuters) -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](https://www.financedigest.com/4-things-to-consider-before-buying-your-dream-car.html "4 Things To Consider Before Buying Your Dream Car") 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.” Battery packs can cost tens of thousands of dollars and represent up to 50% of an EV’s price tag, often making it uneconomical to replace them. While some automakers like Ford Motor Co and General Motors Co said they have made battery packs easier to repair, [Tesla Inc has taken the opposite tack with its Texas-built Model](https://www.financedigest.com/tesla-cuts-u-s-model-s-and-model-x-prices-between-4-and-9.html "Tesla cuts U.S. Model S and Model X prices between 4% and 9%") Y, whose new structural battery pack has been described by experts as having “zero repairability. Tesla did not respond to a request for comment. A Reuters search of EV salvage sales in the U.S. and Europe shows a large portion of low-mileage Teslas, but also [models from Nissan](https://www.financedigest.com/nissan-renault-to-invest-600-million-to-make-6-new-models-in-india.html "Nissan, Renault to invest 0 million to make 6 new models in India") Motor Co, Hyundai Motor Co, Stellantis, BMW, Renault and others. EVs constitute only a fraction of vehicles on the road, making industry-wide data hard to come by, but the trend of low-mileage zero-emission [cars being written off with minor damage is growing](https://www.financedigest.com/uk-car-sales-hit-30-year-low-in-2022-but-could-grow-15-this-year-smmt.html "UK car sales hit 30-year low in 2022, but could grow 15% this year – SMMT"). Tesla’s decision to make battery packs “structural” – part of the [car’s body – has allowed it to cut production costs but risks pushing those costs back to consumers and insurers](https://www.financedigest.com/5-tips-for-selecting-the-best-car-insurance-coverage.html "5 Tips for Selecting the Best Car Insurance Coverage"). [Tesla has not referred to any problems](https://www.financedigest.com/with-big-bets-on-musk-these-funds-may-have-a-tesla-problem-in-23.html "With big bets on Musk, these funds may have a Tesla problem in ’23") with insurers writing off its vehicles. But in January [CEO Elon Musk said premiums from third-party insurance companies](https://www.financedigest.com/in-listening-mode-new-bayer-ceo-keeps-open-mind-on-company-split.html "In listening mode, new Bayer CEO keeps ‘open mind’ on company split") “in some cases were unreasonably high. Unless Tesla and other carmakers produce more easily repairable battery packs and provide third-party access to battery cell data, already-high insurance premiums will keep rising as EV sales grow and more low-mileage cars get scrapped after collisions, [insurers and industry](https://www.financedigest.com/how-can-the-insurance-industry-avoid-having-a-kodak-moment.html "How can the insurance industry avoid having a ‘Kodak Moment?’") experts said. The number of cases is going to increase, so the handling of batteries is a crucial point,” said Christoph Lauterwasser, [managing director](https://www.financedigest.com/anya-libova-joins-apester-as-uk-managing-director.html "Anya Libova joins Apester as UK Managing Director") of the Allianz Center for Technology, a research institute owned by Allianz. Lauterwasser noted EV battery production emits far more CO2 than fossil-fuel models, meaning EVs 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,”](https://www.financedigest.com/global-energy-related-co2-emissions-edged-up-to-record-high-in-2022-iea.html "Global energy-related CO2 emissions edged up to record high in 2022 – IEA") he said. Most carmakers said their battery packs are repairable, though few seem willing to [share access to battery data](https://www.financedigest.com/who-urges-china-to-share-specific-data-regularly-on-covid-situation.html "WHO urges China to share specific data regularly on COVID situation"). Insurers, leasing companies and [car repair shops are already fighting with carmakers in the EU over access to lucrative connected-car data](https://www.financedigest.com/how-data-is-revolutionising-car-insurance.html "How data is revolutionising car insurance"). Lauterwasser said access to EV battery data is part of that fight. Allianz has seen scratched [battery packs where the cells](https://www.financedigest.com/bmw-to-make-solid-powers-battery-cells-under-expanded-agreement.html "BMW to make Solid Power’s battery cells under expanded agreement") inside are likely undamaged, but without diagnostic data it has to write off those vehicles. Ford and GM tout their newer, more repairable packs. But the new, large 4680 cells in the Model Y made at Tesla’s Austin, Texas, plant, are glued into a pack that forms part of the car’s structure and cannot be easily removed or replaced, experts said. In January, Tesla’s Musk said the carmaker has been making [design and software changes to its vehicles to lower repair costs](https://www.financedigest.com/bmw-bets-on-design-and-recycling-not-mining-to-lower-battery-costs.html "BMW bets on design and recycling, not mining, to lower battery costs") and insurance premiums. The [company also offers its own insurance](https://www.financedigest.com/incentive-fm-wins-contract-with-global-insurance-services-company.html "Incentive FM wins contract with global insurance services company") product in a dozen U.S. states to Tesla owners at [lower rates](https://www.financedigest.com/how-insurtech-is-helping-to-lower-car-insurance-rates.html "How InsurTech is Helping to Lower Car Insurance Rates"). Insurers and industry experts also note that EVs, because they are loaded with all the latest safety features, so far have had fewer accidents than traditional cars. ‘STRAIGHT TO THE GRINDER’ Sandy Munro, head of Michigan-based Munro & Associates, which tears down vehicles and advises automakers on how to improve them, said the Model Y battery pack has “zero repairability.” “A Tesla structural battery pack is going straight to the grinder,” Munro said. EV battery problems also expose a hole in the green “circular economy” touted by carmakers. At Synetiq, the UK’s largest salvage company, head of operations Michael Hill said over the last 12 months the number of EVs in the isolation bay – where they must be checked to [avoid fire risk – at the firm’s Doncaster yard has soared](https://www.financedigest.com/uks-argo-blockchain-shares-soar-on-deals-to-avoid-bankruptcy.html "UK’s Argo Blockchain shares soar on deals to avoid bankruptcy"), from perhaps a dozen every three days to up to 20 per day. “We’ve seen a really big shift and it’s across all manufacturers,” Hill said. The UK currently has no EV [battery recycling facilities](https://www.financedigest.com/li-cycle-to-build-french-battery-processing-facility.html "Li-Cycle to build French battery processing facility"), so Synetiq has to remove the batteries from written-off cars and store them in containers. Hill estimated at least 95% of the cells in the hundreds of EV battery packs – and thousands of hybrid battery packs – Synetiq has stored at Doncaster are undamaged and should be reused. It already costs more to [insure most EVs than traditional cars](https://www.financedigest.com/ten-things-youre-doing-that-are-invalidating-your-car-insurance.html "TEN THINGS YOU’RE DOING THAT ARE INVALIDATING YOUR CAR INSURANCE"). According to online brokerage Policygenius, the average U.S. monthly EV insurance payment in 2023 is $206, 27% more than for a combustion-engine model. According to Bankrate, an online publisher of financial content, U.S. insurers know that “if even a minor accident results in damage to the battery pack … the [cost to replace this key](https://www.financedigest.com/as-the-cost-of-living-bites-tackling-insurance-quote-manipulation-is-key.html "As the cost of living bites, tackling insurance quote manipulation is key") component may exceed $15,000. A replacement battery for a Tesla Model 3 can cost up to $20,000, for a vehicle that retails at around $43,000 but depreciates quickly over time. Andy Keane, UK commercial [motor product manager at French insurer](https://www.financedigest.com/2020-the-paradoxical-year-that-has-reshaped-the-future-of-motor-insurance-and-related-sectors.html "2020: The paradoxical year that has reshaped the future of motor insurance and related sectors") AXA, said expensive replacement batteries “may sometimes make replacing a battery unfeasible. There are a growing number of repair shops specializing in repairing EVs and replacing batteries. In Phoenix, Arizona, Gruber [Motor Co has mostly focused on replacing batteries](https://www.financedigest.com/toyota-motor-to-invest-5-3-billion-in-japan-u-s-for-ev-battery-supply.html "Toyota Motor to invest .3 billion in Japan, U.S. for EV battery supply") in older Tesla models. But [insurers cannot access Tesla’s battery data](https://www.financedigest.com/should-insurers-buy-data-direct-from-their-customers.html "Should insurers buy data direct from their customers?"), so they have taken a cautious approach, owner Peter Gruber said. “An insurance company is not going to take that risk because they’re facing a lawsuit later on if something happens with that vehicle and they did not total it,” he said. ‘PAIN POINTS’ The [British government is funding](https://www.financedigest.com/british-ev-startup-arrival-gets-300-million-funding-aims-to-slow-cash-burn.html "British EV startup Arrival gets 0 million funding, aims to slow cash-burn") research into EV insurance “pain points” led by Thatcham, Synetiq and insurer LV=. Recently adopted EU battery regulations do not specifically address battery repairs, but they did ask the European Commission to encourage standards to “facilitate maintenance, repair and repurposing,” a commission source said. Insurers said they know how to fix the problem – make batteries in smaller sections, or modules, that are simpler to fix, and open diagnostics data to third parties to determine battery cell health. Individual U.S. insurers declined to comment. But Tony Cotto, director of auto and [underwriting policy at the National Association of Mutual Insurance](https://www.financedigest.com/the-glorious-twelfth-what-underwriters-should-be-doing-as-the-insurance-act-comes-into-force.html "The Glorious Twelfth: What Underwriters Should Be Doing As the Insurance Act Comes Into Force") Companies, said “consumer access to vehicle-generated data will further enhance driver safety and policyholders’ satisfaction … by facilitating the entire repair process.” Lack of access to critical diagnostic [data was raised in mid-March in a class action filed against Tesla](https://www.financedigest.com/tesla-to-warn-of-data-privacy-risk-from-car-security-cameras-in-germany.html "Tesla to warn of data privacy risk from car security cameras in Germany") in U.S. District Court in California. [Insurers said failure to act will cost consumers](https://www.financedigest.com/whats-driving-consumer-opinion-in-the-insurance-sector.html "What’s driving consumer opinion in the Insurance Sector?"). EV battery damage makes up just a few percent of Allianz’s [motor insurance](https://www.financedigest.com/uk-motor-and-home-insurers-headed-for-heavy-losses-ey-warns.html "UK motor and home insurers headed for heavy losses, EY warns") claims, but 8% of claims costs in Germany, Lauterwasser said. Germany’s insurers pool data on vehicle [claims](https://www.financedigest.com/avoiding-a-big-data-car-crash-how-to-organise-your-data-to-detect-fraudulent-claims.html "Avoiding a big data car crash: How to organise your data to detect fraudulent claims") data and adjust premium rates annually. If the cost for a certain model gets [higher it will raise premium levels because the rating](https://www.financedigest.com/wall-st-indexes-mixed-treasury-yields-tick-up-as-higher-rates-loom.html "Wall St indexes mixed, Treasury yields tick up as higher rates loom") goes up,” Lauterwasser said. (Reporting by Nick Carey and Sarah McFarlane in London, Paul Lienert in Detroit, Gilles Guillaume in Paris and Giulio Piovaccari in MilanAdditional reporting by Victoria Waldersee in BerlinEditing by Ben Klayman and Matthew Lewis) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---