Combustion engine-centric ecosystem must adapt to sustain EV surge

With around 370 different electric vehicle (EV) models available globally in 2020, EV buyers’ options have improved significantly over the last decade, and product offerings now stretch from low-cost mainstream vehicles up to high-performance and luxury EVs. That level of choice, combined with varying degrees of carrot-and-stick policies by governments around the world, has seen the global EV fleet grow to 7 million units.

In 2020, EU registrations of plug-in or electrically chargeable vehicles grew by an astonishing 170%, to 1.046 million units in 2020. It was a different story in the US, where plug-in light duty EVs totalled just 296,000 units, but Chinese consumers bought almost 1.3 million new plug-in vehicles, for a market share of 6.3%. In the UK, battery and plug-in hybrid vehicles took 10.7% of the market, equivalent to more than one in ten registrations; in 2019, it was one in 30.

The IEA anticipates the world’s roads playing host to 100 million electric cars by 2030. With accelerated EV growth as one of the COP26 targets, we can reasonably expect EV sales in the next few years to outstrip that 2030 forecast.

The EV industry’s Achilles’ heel right now is the lack of battery repairability

However, this growth is taking place within an ecosystem shaped by the internal combustion engine (ICE) and designed entirely to support the ICE. The automotive industry—from manufacturing to sales, and from insurance to repair—has had over a century to get to where it is now: literally, a well-oiled machine. Now the booming EV market urgently needs all of the supporting infrastructure that ICEs enjoy—but it doesn’t have the luxury of time to get it right.

Au revoir and not goodbye

That’s why what happens after an EV rolls off the forecourt needs to be built into a collaboratively developed and mutually beneficial business model.

Securing customer loyalty and engagement has been an issue of increasing concern in recent years for automakers and for dealers. With fewer moving parts, EVs require less in the way of servicing and maintenance than ICEs, and without oil changes and brake servicing, dealers stand to lose out on established sources of revenue. It’s for the automakers and the dealers to ensure that when their customer drives away, they’re waving au revoir and not goodbye.

Indeed, EVs present manufacturers and dealers with a unique opportunity to make the ownership experience a core part of their sales strategy.

True, the low-hanging fruit here is charging. Driving out of the dealership is the start of the EV experience, and the charging infrastructure is an essential part. But what’s needed is more than a branded charging network and a home or workplace charge point. Because truly covering the full EV ownership experience involves factoring in insurance and repair.

Seen by most consumers as a frustrating legal requirement—until, of course, they need it—the insurance process needs to be competitive and attractive, giving EV owners peace of mind that the repair network can work for them if it’s called upon. Get it right, and it can create a new level of customer loyalty and engagement from which all parties can gain—and that’s why insurance and repair in fact play key roles in the customer experience, and by extension, the adoption of EVs.

Batteries: repair, reuse, recycle—but don’t just replace

EVs may have fewer moving parts, but they introduce new complexity to the vehicle architecture. Firstly, the battery itself, but secondly the way the high voltage system is integrated throughout the vehicle. ICE vehicle design has evolved over decades, and technicians have good access to repair information. To achieve an equivalent level in EVs, the vehicle design process must factor in repairability. This is complicated by national variations; in some markets, such as Germany, repair networks are manufacturer-led, while in others, such as the UK, the independent network plays a greater role.

Regardless of the market, however, automakers lean on the additional capacity that an independent repair network provides, and those independents thrive when they have access to repair information and technology, and their job is made easier if repair has been built into the vehicle design from the outset. Ensuring EV repairs are carried out correctly is essential, but insistence on the use of proprietary diagnostics equipment and in-house technicians, for example, can slow the process. This keeps the car in the workshop, and harms the customer experience.

The EV industry’s Achilles’ heel right now is the lack of battery repairability. With zero emissions at point of use, EVs are essential for urban air quality improvement, but they can only be central to a sustainable mobility strategy if they themselves are fully sustainable. At present, however, if the battery needs repair, there’s only one option: replacement. It’s costly, and the inefficiencies need no further explanation. Furthermore, insurers understandably balk at the idea of putting an all-new battery into an older car. Any semblance of sustainability is lost if a damaged battery can only be replaced.

This growth is taking place within an ecosystem shaped by the internal combustion engine (ICE) and designed entirely to support the ICE

Putting repairability at the heart of design is Thatcham’s long-standing call-to-action, but EV batteries give it new meaning. With the battery accounting for up to 40% of the price of a vehicle, repairability must be an option; if the cost of repair outstrips the value of the vehicle, the insurer is likely to write off the vehicle. As battery performance improves, so does consumer interest in EVs—but performance cannot be delivered at the expense of repairability. The end doesn’t justify the means: sustainable mobility is wholly incompatible with disposable or uninsurable cars.

Then there are questions about what happens to the battery that’s been replaced. Recycling of any item requires minimum volumes for efficiency, and with EVs still in their infancy, there’s a lack of critical mass in end-of-life batteries for that efficiency to be achieved. Battery recycling is a problem that will present itself very clearly in the future, as EVs begin to reach the end of their life, but preparations for high-volume recycling must begin now.

As with repair, so with insurance. Despite country-specific variations, the fundamentals of insurance remain the same, namely risk and claims based on algorithms and experience. Yet the nascent EV market has yet to generate sufficient data to reduce insurers’ risk evaluations; and that is compounded by insufficient guidance and a lack of clarity from automakers about vehicle repairability, and the cost and availability of replacement parts.

Collaboration’s what you need

There’s only one way for stakeholders to put the EV ecosystem on a par with the long-established ICE experience: positive collaboration. And that needs to include, among many others, the automakers, suppliers, dealers, repairers, salvage and recycling companies, and of course the insurers. And since such a collaboration would help directly with national net zero targets, there’s a strong argument for government to play a role here, too.

The automotive industry has spent decades developing highly efficient support networks for ICE vehicles. If sales of EVs seems steep, it’s nothing compared to the speed with which a supportive EV ecosystem needs to mature. To support this growth, automakers must always be there for their customers, not just to wave them out of the dealership. And for customers to perceive EVs as normal, automakers have to think about them differently.

About the author: Richard Billyeald is Chief Technology Officer at Thatcham Research