Local water shortages caused by lithium sourcing in South America, where up to a third of the world’s supply is captured in underground water pools and put through a rigorous extraction process, is causing shortages – not to mention pollution problems – in active mining areas. Likewise, battery production has received much environmental criticism. “Beyond that, the long-term damage to the environment of disposing batteries, and even to our health, isn’t known.” This could lead to potential liability and reputational exposures to BEV manufacturers due to environmentally dangerous battery disposal. “ For current lithium-based batteries, there’s no economical possibility to recycle when they reach the end of their life-cycle,” says Bemm. “If the defective part in the battery pack can be clearly identified, the liability then will fall back to the supplier or sub-supplier of the defective part,” says Wuesteney, “However, if this cannot be proven, the issue of replacing and disposing of the battery pack would then stay with the car manufacturer.”įinally, what happens when a battery has reached the end of its life span? Environmentally, it’s a valid question. With the possibility of numerous BEV batteries falling short of their warranty period, manufacturers could be impacted. The potential failure to live up to the promised battery warranty period exposes the question of liability – namely, who is responsible if batteries underperform? How easily can parts be dismantled and reinstalled? With potentially high costs, determining liability can be a point of friction between the supplier and the manufacturer. Other conditions, such as the climate of where the vehicle is situated, could play a part in the battery’s longevity, as studies have shown that batteries need more frequent charging if exposed to extreme temperatures. “Manufacturers are pushing their suppliers to develop new batteries with ten to 12 year or even lifetime guarantees,” says Andreas Bemm, Senior Risk Consultant at AGCS. However, battery life before replacement is still a significant issue for manufacturers. With a battery-powered vehicle, motorists get the benefit of no refueling costs and zero exhaust emissions and with many BEVs now capable of over 300 miles driving range from a single charge, “range anxiety” – the fear that the BEV will run out of power before the next charging possibility – has lessened. In time, new products are likely to be introduced to cover specific BEV exposures. Although exposures and responsible parties may shift somewhat, as we will see, most insurance products will be available for BEV exposures. Insurers are supporting the automotive industry, whether it be for traditional manufacturers with very complex supply chains and numbers of components, to BEV manufacturers, with slightly less complex mechanics but equally complex supply chains, with a full-range of property, third-party and products liability, marine, financial services and other insurance products. “From production processes to the supply chain – as well as the product itself – the automotive industry is having to evolve, which creates new exposures along the value chain – from data quality to operational transparency to just-in-time manufacturing to more obvious things like the weather and cyber-attacks,” says Daphne Ricken, Senior Underwriter Liability at AGCS. While 2020 is set to be a landmark year for BEV sales – over one million are expected to be sold in Europe alone, contributing to the rapid growth of a market forecasted to reach 8.4 million sales globally by 2025 – there are still concerns about how legacy car brands will transition into the new market. Insurers and manufacturers alike must adapt and welcome the transformation to a carbon-neutral economy,” says Wuesteney. “We will see a rise in BEVs over the next few years. New legislation such as the EU’s 2030 carbon dioxide emissions limits aims to push manufacturers and suppliers into the technology. “Political promises and targets are certainly influencing the market,” says Harald Wuesteney, Liability Risk Consultant at AGCS. And it seems that outside factors have as much to do with this as advancements in the technology. ![]() While the concept of an electric-powered vehicle is far from new (see below), its widespread adoption is. With so much skin in the game, some insurers and industry experts are looking at the rapid shift to BEVs with some trepidation.
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