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.”
Battery packs can cost tens of thousands of dollars and represent up to 50 per cent of an EV’s price tag, often making it uneconomical to replace them. While some automakers like Ford and General Motors said they have made battery packs easier to repair, Tesla has taken the opposite tack with its Texas-built Model Y, whose new structural battery pack has been described by experts as having “zero repairability.” Tesla did not respond to a request for comment.
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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, Hyundai, Stellantis, BMW, 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. 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.
Tesla has not referred to any problems with insurers writing off its vehicles. But in January CEO Elon Musk said premiums from third-party insurance companies “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 experts said.
“The number of cases is going to increase, so the handling of batteries is a crucial point,” said Christoph Lauterwasser, 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,” he said.
Tesla cars sit inside the service garage at a Tesla dealership in the Red Hook neighborhood in Brooklyn, August 7, 2018 in New York City Photo by Drew Angerer /Getty
Most carmakers said their battery packs are repairable, though few seem willing to share access to battery data. Insurers, leasing companies, and car repair shops are already fighting with carmakers in the E.U. over access to lucrative connected-car data. Lauterwasser said access to EV battery data is part of that fight. Allianz has seen scratched battery packs where the cells 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 and insurance premiums. The company also offers its own insurance product in a dozen U.S. states to Tesla owners at lower 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.
If you throw away the vehicle at an early stage, you’ve lost pretty much all advantage in terms of CO2 emissions
Christoph Lauterwasser, managing director of the Allianz Center for Technology
At Synetiq, the U.K.’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, 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 U.K. currently has no EV battery recycling facilities, so Synetiq has to remove the batteries from written-off cars and store them in containers. Hill estimated at least 95 per cent 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.
Parts of a Ford pre-production all-electric F-150 Lightning truck prototype are seen at the Rouge Electric Vehicle Center in Dearborn, Michigan, U.S. September 16, 2021 Photo by Rebecca Cook /Reuters
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 component may exceed US$15,000.” A replacement battery for a Tesla Model 3 can cost up to US$20,000, for a vehicle that retails at around US$43,000 but depreciates quickly over time.
There are a growing number of repair shops specializing in repairing EVs and replacing batteries. In Phoenix, Arizona, Gruber Motor has mostly focused on replacing batteries in older Tesla models. But insurers cannot access Tesla’s battery data, 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.
Keyword: Scratched EV battery? Your insurer may junk your whole car