In Focus: Petrol crisis fuels interest in electric vehicles

Following the UK’s petrol crisis in early October, caused by a shortage of drivers for heavy goods vehicles (HGV) and fuel tanks which subsequently saw a bottleneck in the supply chain, interest in electric vehicles (EVs) has escalated.

Increasing the use of EVs is already on prime minister Boris Johnson’s agenda. In October, the PM introduced his net zero strategy, outlining ways in which Britain can gain a competitive edge when it comes to low carbon technologies - for him, EVs form a part of this.

Speaking about last month’s petrol shortage, Jane Pocock, managing director for the UK and Ireland at Copart UK, told Insurance Times: “It had a positive impact on claims - people were quite cautious [about] hanging on to the fuel they did have or cancelling events and meetings to stay home.

“What it did do is highlight other fuel types for vehicles. It was a good marketing ploy for EVs and cleaner fuel types.”

The government’s Transitioning to Zero Emissions Cars and Vans: 2035 Delivery Plan, published in July 2021, detailed its road map towards a greener future in the UK.

The report stated that by 2030, the sale of all new petrol and diesel cars and vans would end. This means that all new cars and vans will be required to be fully zero emission at the tailpipe by 2035.

Supporting this ambition, on 1 September 2021, E10 petrol became the default fuel in England, Scotland, and Wales as part of the government’s efforts to reduce carbon dioxide (CO2) emissions.

E10 petrol contains up to 10% renewable ethanol, compared to the previous used E5 petrol that has 5% renewable ethanol.

However, this move towards EVs and new fuel types also brings with it new and evolving risks - is the insurance sector ready?

Two crises at once

Russell Harrison, Markerstudy’s divisional head, said: “The private car and commercial white vans were probably more impacted [by the petrol crisis].”

He noted that motoring and cycling retailer Halfords saw a 106% sales increase in electric bikes during the petrol crisis.

“Enquiries for EVs went up rapidly, but has quickly reverted back to normal - part of that is because of the energy crisis happening at the same time. There’s been a lot of issues around electricity at the same time [and] one has almost offset the other,” Harrison continued.

“We have seen from the likes of Auto Trader and Carwow that enquiries for EVs have shot up by 60%. There are people considering them, but one of the main barriers to entry is the cost, [while some] private individuals don’t necessarily understand the benefits in terms of reduced servicing costs, such as braking pads. They look at the initial high outlay and do not understand the long-term value.”

Harrison said that Markerstudy has seen a lot more interest in EVs from commercial clients too, such as company car fleets.

In September this year, Markerstudy noted that there were more EV sales in this month alone compared to the whole of 2019. However, range anxiety and sourcing charging points remain customers’ key concerns.

“We have seen massive differences between London, where charging points are quite freely available, compared to the likes of the south west. You have almost got blackspots around the country in the way you can charge,” he added.

For example, he said the south west has one charging point to every 1,400 people.

This means there will be a reliance on charging at home - Harrison said this creates a different set of concerns around the safety of using cables and the potential of cable theft. He even predicted that ”trip for cash” claims, similar to crash for cash scams, could arise. 

For Harrison, battery cost is the main concern with EVs because these are pricey. The Jaguar I-Pace battery, for example, costs £27,000 on average.

Furthermore, there is no recycling market for EV batteries once they have reached the end of their life. The same is true around salvage, for example if a vehicle is damaged beyond repair yet the battery is still usable.

“Ultimately, our costs for EVs at the moment are a lot higher than they are or other vehicles,” Harrison said. ”Once EVs reach a more sustainable point, we will be more confident that recycling would be set up, so we can reduce those costs.”

Overall, he deemed the petrol crisis as a “watching brief”.

Beached whales

Paul Coates, director at wheels-based broker McCarron Coates, noted the impact of the UK’s petrol crisis on fleet operators, “but none more so than the beleaguered coach sector, already hit harder than any other transport segment by an absence of Covid-19 support”.

He continued: “Coach firms starting their recovery, as hospitality and overseas tourism sectors reopen, have found coaches [are] ‘beached whales’ once again.”

He added that van fleet operators covering any sort of distance do not have faith in the nationwide charging infrastructure for EVs. Although fuel shortages ”might mean that next day delivery promises crumble”, it is still ”better the devil you know” compared to relying on charging points.

”Until the UK has an EV recharging network [that can stand] up to scrutiny, UK fleet operators will continue to be victims of panic buying,” Coates said.

Pocock agreed that the use of electric power for large vans and HGVs is unlikely to come to fruition for some time.

Meanwhile, Kirsty McKno, Cogent Hire’s managing director, said the impact of the UK’s petrol crisis on the credit hire sector was “a bit of an unusual one”.

“It had an immediate impact that was transitory,” she said. “As soon as we went back to normal, everything was fine, but what it did do was send a shockwave of ‘if this happens again, it could be a lot worse’.”

Cogent Hire deals with vehicle replacement after an accident. McKno saw concerns from customers about not having the right fuel available when looking to return hire vehicles with a full tank.

“Even though we are all pushing towards a low carbon emission world, we are all still using vehicles from a logistical perspective in the UK and that has been highlighted by the lack of HGV drivers,” she said.

McKno believes there is still more to learn about EVs.

“The insurance industry has not really got an EV policy awareness. At the moment, ordinary levels of cover are being provided without understanding the risks in EVs are different,” she said.

For example, an EV cannot be towed on a recovery truck because the energy that is created could potentially create a firebomb.

Alternative fuel

Regarding E10 petrol, Harrison said there is a still lack of understanding about it. Markerstudy has seen a couple of claims where drivers have been inappropriately fuelling their vehicles.

Copart, meanwhile, runs a transporter fleet of more than 400 vehicles. Although it stores some fuel on-site in bunkers, the firm is very conscious about environmentally friendly fuel.

It is currently exploring hydrogen fuel, which gained more visibility in October following Boris Johnson pledging to introduce 4,000 UK-made zero emission buses that use this type of fuel.

Pocock said: “The beauty of looking at hydrogen is a hydrogen cell can be fitted to a combustion engine – it’s a transformation of existing engines rather than a complete and total rebuild, which is what electric is.

“The other issue with EVs [is] batteries charging. With hydrogen, you can run it in the same way that you would any conventional fuel. It’s a very viable alternative for insurers that cover commercial fleets, transporting networks, buses and the like.”

Hydrogen fuel works in the same way as petrol or diesel fuel - when consumed in a hydrogen cell, it produces only water. It can be sourced from domestic resources such as natural gas, nuclear power, biomass and renewable energy, like solar and wind.

“The problem at the moment is storing it and making it accessible, similar to the pain we went through looking at charging points for EVs,” Pocock said.