There are a multitude of initiatives that need to deliver if the UK is to meet its 2050 net zero target, but few sectors are being relied upon quite as much as the automotive industry. With domestic transport estimated to contribute nearly 30% of all the UK’s greenhouse gases, the pressure is on to make the transition to electric vehicles (EV) a reality.
The good news is that according to the Society of Motor Manufacturers and Traders (SMMT), 2024 saw rising EV sales. But crucially, these sales have been boosted by around £4.5bn worth of discounts provided by manufacturers. However, as Michael Hawes, the SMMT chief, pointed out: “Such incentives are unsustainable – industry cannot deliver the UK’s world-leading ambitions alone.”
His warning came hot on the heels of two announcements that indicate the UK auto industry is already feeling the pain. In late November, Stellantis - owner of the Vauxhall brand – announced plans to close its van-making plant in Luton, putting over 1,000 jobs at risk. The company, in part, blamed rules imposed to speed up the transition to EVs for the closure.
They were following the lead of Ford which had, a week earlier, also apportioned part of the blame for 800 jobs cuts on weak demand for EVs, with its UK Chair and MD, Lisa Brankin, telling the BBC: “The one thing we really need is Government-backed incentives to urgently boost the uptake of electric vehicles.”
All of which begs the question – is the EV market running out of juice? Probably not.
“There’s a general consensus that this transition to EVs needs to happen – dealers know it’s not going to go away and demand is escalating, albeit not at the pace predicted,” says Nick Tilley, Property Technical Risk Manager, AXA Commercial.
“The big dealers have invested huge sums in the EV market and at the second tier, huge investment and effort is also going into installing the necessary equipment and getting everyone trained up. There’s no reluctance amongst dealers but that doesn’t mean there aren’t challenges.”
One of these challenges, Nick points out, is infrastructure. To meet the targets, homes and commercial premises will need adequate charging facilities to support the transition and those facilities will need adequate access to energy which is a huge undertaking.
When you add in issues such as range anxiety, the cost of unsubsidised EVs, the complexity of the vehicles and the reliability and long-term safety of the lithium-ion batteries that power EVs, it becomes clear why manufacturers are starting to sweat.
The batteries are a key concern for insurers, as Nick explains: “Firechief Global, a fire protection firm, asked more than 500 companies whether or not they considered lithium-ion batteries in their fire risk assessment. Astonishingly, 85% hadn’t, despite these things being used in everything from forklifts and power tools to mobiles and alarm systems.”
This is why AXA is keeping a close eye on the development of the EV market as while they bring undoubted benefits to the environment, they do bring their own unique and potentially costly risks.
“We saw a loss at a dealership where an EV was in the garage for about five weeks. For four weeks, there were no problems but on week five, the EV’s battery caught fire which resulted in a total loss for the garage,” says Nick.
But AXA’s engagement with the growing EV market goes far beyond understanding the technical risks. This year, in response to multiple challenges, there has been a concerted effort to support the motor trade sector more broadly in its transition.
“We’ve engaged extensively with the Government over the last decade on driverless cars and EVs so we really understand the mechanics of the risks but also the challenges and opportunities this transition presents to dealers,” says Nick.
One of the challenges he highlights is the second-hand EV market, which is almost non-existent due to the lack of a standardised battery health test in the UK. A standardised test, certifying the ‘mileage’ a second-hand EV battery has left in it, has the potential to open up the second-hand car market.
“We’ll continue to lobby the Government hard on this and if we can get it over the line, we think it’ll really breathe some life into the used EV market,” says Nick.
AXA is also leveraging the relationships it has in this space to support the motor trade sector, such as the introduction of Pod Point, an EV charger installation firm and Guardian, a company that maintains charging points as a service.
“These are our partners but if we can introduce their expertise and support to our motor trade customers, we can help clear some of the hurdles in their way,” says Nick.
But key to a successful transition is flexibility, on all fronts. To that end, AXA has been exploring other alternatives, such as hydrogen-powered cars.
“We’re getting enquiries about covering commercial hydrogen use and even vehicles and there are many in the automotive sector who think this is the way forward,” says Nick.
“Hydrogen doesn’t have the infrastructure issue, they recharge quickly, it’s very safe and as the discharge is water and steam, it’s neutral for the environment.”
The transition to greener transportation has to happen and if the appetite in the motor trade sector is anything to go by, it will. The only real question remaining is how it will happen and when. With the strain already showing, it’s clear the sector can’t do it on its own which is why AXA will continue to look for new ways, beyond risk management, to support the motor trade sector in completing the transition.
“Keep the faith, it won’t always be this difficult, and we’re always here to support” advises Nick.