Electric vehicles (EVs) are gaining traction in retail automotive. According to Forbes, the U.S. passed 1 million total EVs sold in 2018. Looking forward, consumers expect to have more choices in EVs, as automakers announce expansions of their product offering. 2019 marks the first year the average battery range for all models is greater than 200 miles. While analysts do not believe 2019 will be an inflection point for EVs, they do expect costs to continue to drop. Lithium-ion battery prices have decreased an estimated 80% since 2010, and are expected to fall another 45% by 2021. As battery prices decline, vehicle prices should decrease, especially since battery costs currently compose nearly half the price of an EV.
In the F&I office and service drive, EVs pose a different challenge. Historically, warranty administrators underwrite the risk of mechanical breakdown in automobiles so that consumers don’t have to worry about those unanticipated financial shocks. Service contracts are priced based on the likelihood of each part failing times a projected cost to replace the part. In other words, the price of the service contract implicitly includes an assumption around the probability that, say, a fuel injection pump might fail and what it would likely cost to replace it.
For traditional internal combustion engines (ICEs), administrators have decades of data on part failure specific for every vehicle model. Every time an OEM rolls out a new drive train, administrators reprice the risk in the coverage and begin building loss history. EVs are a different story, with far fewer mechanical parts and a tremendously expensive battery that can stop the vehicle in its tracks. Because ICEs are totally different technology from EVs, offering the same coverage on both really doesn’t make sense. Because of this, EFG Companies recently released a new Motorist Assistance Plan for Electric Vehicles (MAP® Electric Vehicle Protection) to exclusively cover the unique technology of EVs.
What Makes MAP Electric Vehicle Protection Different?
Many of the items in a traditional vehicle service contract are unnecessary with an EV. Let’s continue the analogy of the fuel system. ICEs require complex fuel system components, including a fuel injection pump, fuel injectors, the fuel tank, metal fuel lines, an engine control module, etc. These parts don’t exist in EVs. There is no reason to charge a consumer to cover the risk of a fuel injection pump failing. But a traditional service contract for an ICE vehicle includes those irrelevant coverages. Is it good customer service to an EV customer to provide coverage on parts their vehicle doesn’t even have?
So, what is valuable protection for EV customers? These customers do need additional coverage for specific EV components, such as inverters that convert the power from the battery pack to turn the induction motor that turns the drive wheel. Battery coverage is also critical. Most OEMs cover the battery for the first eight years. At EFG, we believe more coverage is needed, considering consumers are holding on to their vehicles for much longer than historical norms. So, we have optimized MAP Electric Vehicle Protection to cover the battery up to 11 years, providing three more years of coverage.
The EV market is growing and evolving. And, so is the retail automotive industry. To capture your share of the market, optimization around EV is key. At EFG, we pride ourselves on keeping our clients ahead of the trends affecting their business. Contact us today to learn more about MAP Electric Vehicle Protection and our unmatched client engagement model.