Electric vehicles: The transition so far

EVs represent a significant opportunity for businesses and therefore brokers. However, while take up is increasing, there’s a lot of work to be done.

Electric vehicles (EVs) have long been talked about as being the long-term successor to internal combustion engine (ICE) vehicles as the world moves towards a sustainable transport solution with little to no environmental impact.

Proponents of EVs point to lower emissions, reduction in greenhouse gases and energy efficiency as being compelling reasons in the ‘for’ camp, while the more sceptical highlight range, charging issues and battery safety among the items in the ‘against’ column.

Globally, including here in Australia, the take up of EVs is growing by the year. In 2023, almost 14 million EVs were sold across the world – a 35% increase on 2022. This brought the number of EVs on the road to 40m.1

Today, EVs account for 18% of all vehicles globally, 2 and in 2023, more than one in three new car registrations in China was electric, as was more than one in five in Europe and one in 10 in the US. 3

In Australia, EV take-up is increasing too, albeit a little more slowly. At the end of April 2024, EVs represented 9.4% of new vehicle sales, compared to 8.4% in 2023 and 3.8% in 2022,4 with more than 180,000 on the road at the end of 2023. 5 EVs are forecast to make up 30% of the Australian market by 2027. 6

Samantha Johnson, CEO of the Electric Vehicle Council, says, “We are observing a steady rise in demand for EVs, particularly for battery electric vehicles (BEV), as more models become available at different price points, charging infrastructure continues to expand, and government policies such as the FBT exemption on novated leases makes EVs more affordable and supports take-up.

“Australians are making the switch to electric vehicles because they know it can save them thousands of dollars in fuel and maintenance costs, and they know it’s good for the environment.”

Supporting the transition process

Over the past few years, however, EV take-up is trending up – and it’s the right time for many businesses to begin the process of transitioning to EVs.

Because, while Federal Government statistics show that Australia’s emissions peaked in 2007 and have been declining since, one of the three areas in which emissions are not declining is transport.7

“A lot of businesses are approaching the deadlines for meeting sustainability targets, so now’s the right time to be having conversations about helping businesses to transition to EVs,” says Chris Wood, Emerging Risks Manager at Allianz Risk Consulting.

As Johnson identifies, authorities are doing their bit to help growth, too – both at home and overseas. In Britain, for example, 22% of manufacturers’ sales this year must be electric, with a fine of £15,000 per sale payable for each car sold under that figure. That percentage figure rises to 25% next year and 80% by 2030. 8 In the EU, there are stringent CO2 regulations for cars and vans which push manufacturers towards producing EVs, while China’s New Energy Vehicle mandate requires a certain percentage of new vehicle sales to be electric or hybrid.9

In Australia, there are a number of federal and state subsidies and grants available to help reduce the cost of EVs, while in August 2024 the government announced it had doubled the $250 million ‘Driving the Nation Fund’, which is supporting the national rollout of EV charging stations, as well as the hydrogen refuelling infrastructure.

Johnson says, “Electric vehicle uptake continues to grow in Australia despite broader economic pressures. The total number of BEVs and plug-in hybrid vehicles (PHEV) on Australian roads now exceeds 180,000. As of mid-2024, nearly 60,000 EVs have already been sold this year alone. BEV/PHEV sales represented 9.6% of new light vehicles sold in the second quarter of this year.”

Those economic pressures, however, are potentially slowing down the take-up of EVs. Data shows that in May 2024, 34% of people in Australia were considering buying an EV, compared to 56% in June 2022.10

EVs are forecast to make up 30% of the Australian market by 2027.

Add to that some of the common challenges and questions businesses have – including range anxiety, charging infrastructure and the policies and procedures that are required – and it’s clear that businesses need help, guidance and assistance to develop and implement pilot projects to begin their EV transition in earnest.11

Insuring EVs and getting back on the road

Insurance plays an important role in creating a sustainable future for EVs. Ensuring the vehicle is both protected and can be repaired and back on the road in good time, via a strong network of repairers that specialise in EVs, is critical.

While EVs effectively perform similar tasks to ICE vehicles, they’re very different under the bonnet – and require high voltage qualifications to fix and repair.

Fewer moving parts mean there are fewer things to go wrong, however, repairing EVs requires different skills.

Increasingly, repairers are developing their EV repair capabilities, and within Allianz’s Selected Repair Network a large proportion of repairers are equipped to work on EVs.

On average, EV repairs cost around 20% more than those for ICE vehicles ($8472 vs $7077). While both have a write-off rate of around 9%, EVs were found to require frame repairs less frequently.11

The EV opportunity for brokers

Just as EVs present opportunities for businesses – which we explore further in the articles that follow – they present opportunities for brokers to advise and guide businesses to ensure they’re considering all aspects.

To date, there has – in some quarters – been a ‘wait and see’ position taken by businesses in regard to their EV transition. Sometimes this has been born out of necessity, sometimes out of choice.

Statistically, however, we’re trailing behind other Western countries – and there’s a real risk in doing so when it comes to EVs.

With transport one of the three areas in which Australian emissions are still rising, EVs should be high up the priority list of every business.

Chris Jones, President of the Australian Electric Vehicle Association, says, “It’ll probably take until 2030 or 2035 until 100% of all new vehicle sales are EVs – and then it’ll take another 15 years for the fleet to become mostly electric as vehicles stay on the road for at least 15 years in Australia – so we’re already looking at 2050 before we start making genuine dents in the transport emissions budget.

“That’s why we all need to do a lot more than just electrify our cars – but electrifying our cars needs to happen, and it might as well start now.”

Summary for brokers

1. Transport is one of three areas in which emissions are still rising in Australia.

2. EVs are forecast to make up 30% of the Australian EV market by 2027.

3. Federal grants and subsidies are incentivising businesses to transition.

4. There are challenges however, and brokers need to be aware of these to have informed conversations.

1. https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars

2. https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars

3. https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars

4. National Electric Vehicle Annual Update 2023-24 (dcceew.gov.au)

5. EVC-Australian-EV-Industry-Recap-2023.pdf (electricvehiclecouncil.com.au)

6. https://electricvehiclecouncil.com.au/wp-content/uploads/2024/03/EVC-Australian-EVIndustry-Recap-2023.pdf

7. National Greenhouse Gas Inventory Quarterly Update: March 2021 - DCCEEW

8. Pathway for zero emission vehicle transition by 2035 becomes law - GOV.UK (www.gov.uk)

9. Policies to promote electric vehicle deployment – Global EV Outlook 2021 – Analysis - IEA

10. The current state of EV consideration among Australian consumers - business.carsales.com.au

11. Damning figures expose inflated EV repair costs | CarExpert