Gearing up for the electric vehicles ecosystem

The risk landscape around the EV value chain is complex. Some of these risks (outlined in Figure 1 below) are customer facing (such as range anxiety, inadequate charging infrastructure, heavier vehicles); while others are production related (availability of materials, quality control, unknowns of battery or vehicle degradation). In the previous publication (Gearing up for the electric vehicles ecosystem- Risks along the value chain – Part I), we have guided the reader through a forward-looking and holistic view of EV ecosystem risk, focusing on the vehicle use phase.

New and unknown risks could arise during EV construction, distribution and ultimately disposal including: i) rapid construction of manufacturing facilities; ii) sourcing of raw materials; iii) assembly, transportation and usage of vehicles; and iv) disposal and recycling of old batteries. Each activity carries distinct risk vulnerabilities and insurers will need to develop a deeper understanding of processes to underwrite these effectively. 

In this publication, we focus on these risks which are mostly related to batteries- the key distinguisher of EVs from ICEs. Battery quality resulting from rushed innovation is an emerging risk. Conditions such as high battery state of charge (SoC) and EV stowage in close proximity may increase fire risk during transportation. A breakdown in the production chain can lead to property damage and business interruption. Contractor experience in battery manufacturing is still evolving, which could cause significant delays. There are also risks related to battery recycling scale and cost, environmental damage, safe transportation of used batteries and quality of recycled batteries.

Insurers can get involved early on with advice on EV factory design and international and local standards. They can partner with battery research labs to better understand links between battery performance, degradation and the external environment. Real time supply chain analytics can help better identify automotive risks during transportation while risk engineering services can provide recycling risk assessments.