Russia-Ukraine conflict stirs up the car market: high oil prices, black swans of new energy vehicle insurance?

Wen | Wang Jue, Sanzang, and Pingxiang

The effects of the ongoing conflict between Russia and Ukraine are spreading in a highly globalized world. It not only makes the capital market fluctuate and oscillate, but also promotes the changes in many industries in an invisible way.

For example, the car insurance market, which seems to be far away from this conflict, has suddenly begun to accelerate the agglomeration of changing factors under a series of chain reactions:

Due to the sharp rise in crude oil costs caused by the Russian-Ukrainian war, which is destined to affect the traditional automotive industry that relies on gasoline fuel, Western countries such as Europe and the United States have once again accelerated the layout of new energy vehicles such as electric vehicles, and insurance products around new energy vehicles and related facilities and equipment have also begun to accelerate.

It can be said that the conflict between Russia and Ukraine has also become a black swan for the development of new energy vehicle insurance, which has made the new energy vehicles and corresponding car insurance markets with high voices and slow progress for a long time stir up in an instant. And the transmission speed of this trend will obviously be faster than we think.

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-Insurance Today-

Oil prices continue to rise, breaking through a major obstacle to the development of new energy vehicles

Almost all over the world, the rise in fuel costs has been evident. Domestic oil prices have appeared "six consecutive rises", and are still in the stage of continuous rise, and even the birth of "95 full" and other segments. In the European and American markets with higher per capita car ownership, the rising price of fuel has shown a more social impact.

Some US media analyzed the decision-making behavior of US consumers in buying cars over the years and said,

"Over the past few decades, as fuel prices have been low for a long time, the automotive industry has shifted from small cars to larger, more profitable trucks and SUVs. As a result, consumers are also being guided to buy bigger, more fuel-hungry models, pushing automakers to gradually abandon their most fuel-efficient models."

As gasoline prices rise as the war in Ukraine ferments, more and more U.S. consumers are already considering replacing their cars. However, "the American people have always wanted to use fuel-efficient cars to combat gasoline price increases, but this is unlikely to happen in today's auto market."

The report quoted the American Automobile Association (AAA) as saying that "the average price of gasoline in the United States reached $4.33 per gallon on March 12, local time, after breaking the record set since July 2008." And this price has not yet reached the end of the price increase.

In the face of rising oil prices, it seems that western people can no longer cope with cost factors with more fuel-efficient cars. This also makes electric vehicles suddenly usher in an unprecedented market and consumer interest.

After all, the impact of today's international situation is unpredictable, and people can't expect a turnaround in a short period of time, which means that high and even rising oil prices are likely to be the norm. Before that, it was the regular decline in oil prices, so that manufacturers and consumers still chose traditional fuel vehicles with more mature technology, resulting in the long-term breakthrough development of new energy vehicles in the world.

In fact, in recent days, the US electric vehicle and fuel-efficient car market has seen a tight inventory of new cars, coupled with the pressure of green environmental protection, the rising oil price is further stimulating consumer awareness of electric vehicles.

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Attention has increased, and the overall new energy vehicle insurance has been revealed

The rising price of fuel is an important reason that directly guides consumers to change their car purchase decisions. Jay Joseph, vice president of marketing and consumer experience at Honda Motor Company, said:

"Normally, a $2 increase in gasoline prices per gallon would be enough to change consumer behavior, but in today's market, it's hard to quantify that change."

This difficult to quantify change has also affected people's attention to new energy vehicle insurance. On March 8, the Wall Street Journal published an article to answer consumers' questions about electric vehicle insurance. The text states,

"If you're planning to swap your fuel car for an electric car, maybe you should consider insurance as an important consideration before making a decision."

This also reflects the new market choices of American consumers in this period from another side.

According to the article, the current premium for electric vehicles is 64% more expensive than that of traditional internal combustion engine cars, mainly due to the relatively high component costs and labor costs of electric vehicles when repairing or replacing.

And "with the popularity of electric vehicles, the gap in maintenance costs between them and traditional cars is narrowing, although recent supply chain disruptions and corresponding labor shortages have pushed up insurance costs." ”

The article also deliberately describes the premiums for electric vehicle supporting equipment such as charging stations and solar panels, especially

"If consumers upgrade their power systems (i.e. install charging stations) to power electric vehicles, insurance rates will fall."

These also reflect that the current US market is gradually forming a holistic new energy vehicle protection program, especially in the traditional consumption scenarios of the United States, cars are often included as part of family property; and under the more hardware supporting facilities of new energy vehicles, the emergence of a new energy vehicle insurance that is more closely integrated with family property insurance is bound to be expected.

In summary, under the chain reaction of the rise in oil prices caused by the Russian-Ukrainian conflict, the Americans have obviously accelerated the pace of application scenarios and various situations of new energy vehicle insurance.

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During the Chinese auto insurance window, do insurance companies need a more visionary way of playing?

For the domestic auto insurance industry under the comprehensive reform, it is now a rare industry window period. The return of premiums to a steady pace of growth and a significant improvement in profitability have given insurers a certain amount of room for preparedness for the changes that may come.

In fact, this black swan event has begun to affect the domestic auto insurance market. The shortage of related supply chains and raw materials has led to an increase in the prices of components for traditional automobiles and new energy vehicles.

For example, some important raw materials for new energy vehicle batteries:

Relevant data show that on March 18, the domestic price of lithium carbonate was reported at 504,000 yuan / ton, up 73.8% from the beginning of the year and up 479.3% year-on-year; the price of nickel, another raw material, was the highest "5 times" in the year.

This all indicates that the compensation costs of insurance companies are bound to increase a lot.

The acceleration of the international market in various fields of new energy vehicle insurance will soon be transmitted to The domestic market, which may also greatly change the choices and behaviors of the domestic market and consumers. At that time, for insurance companies operating car insurance, whether they can find a new "way of playing" as soon as possible under the pressure of car insurance compensation costs may be the most important thing that needs to be continuously considered today.

Whether it is to seize the definition and pricing power of new energy vehicle insurance, take the lead in establishing a new type of car insurance and related accessories protection system with Chinese market characteristics;

Or on the basis of following the international trend, forward-looking extension of the domestic market layout. For example, not only the responsibility of replacing batteries and charging piles, but also the communication networks and satellite signals related to the use of vehicles should be included in the new car insurance clauses, and even directly extend the more complex car service ecology.

This obviously requires insurers to have a vision that goes far beyond today's auto insurance business methods. Of course, insurance companies still have time to play their own imagination.

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