Company News from yesinsurance

11 June 2008 Oil Crisis Spells End For Gas-Guzzlers, Says Motor Insurer


Researchers at yesinsurance.co.uk, the UK motor insurance provider, say that the combination of record petrol prices and the onset of an economic downturn are about to bring about a dramatic shift towards alternative-fuel vehicles – both among consumers and manufacturers.

“Latest SMMT (Society of Motor Manufacturers and Traders) figures show that UK demand for gas-guzzling 4x4s fell by 18% in the year to May, with Land Rover sales down by 32%,” said Paul Purdy of yesinsurance.co.uk.

“In America, where petrol costs around a third of the UK price, we are seeing manufacturers moving away from SUV production towards more fuel-efficient vehicles,” he said.

The yesinsurance research says that there will be five significant changes in the UK motoring market over the next five to ten years:

  • Fewer SUVs: Decreasing demand for SUVs and other gas-guzzling vehicles as the effects of high oil prices and worsening economic conditions bite deeper.
  • Electric vehicles: A shift in the priorities of motor manufacturers towards the launch of a new range of electric vehicles.
  • Battery replacement: The launch of battery replacement schemes at service stations, to replace refuelling with petrol.
  • Diesel: Maintenance of demand for diesel-powered vehicles over the next three years (diesel accounted for almost 45% of the market in May, compared with just 15% in 1998). Longer term, a gradual decline in diesel and petrol usage as alternative fuels gain ground.
  • Greater mix of fuel types: An increase in the mix of alternatively-fuelled vehicles on UK roads, with electric vehicles showing the fastest rate of growth.

“In April, UK demand for alternatively fuelled vehicles rose by 14.4% in the year-to-date. Longer-term we are expecting the rising cost of fuel to shift consumer and manufacturer attention to this sector of the market. Our research indicates that electric vehicles will be a significant growth area,” said Paul Purdy.

“Nissan plans to launch a battery-powered car in the US in 2010 and by 2012 Renault-Nissan will be providing a complete range of electric vehicles in every large car market,” he said.

Whilst battery-powered vehicles are zero-emission, they depend partly on electricity generated by power stations. However, the insurer says that total emissions from this source will be much lower, as a mix of wind, wave and nuclear technology, rather than fossil fuels, will be behind much of the increase in electricity generation.

“Advances in technology indicate that manufacturers will soon be producing batteries that considerably extend the range of miles that can be driven on one charge,” said Paul Purdy.

“We consequently expect to see the introduction of battery replacement schemes, where drivers replace their batteries with freshly charged ones at service stations, rather than filling up with petrol,” he said.

The insurer says that whilst the general level of risk is expected to be similar to that for conventional vehicles, the introduction of electric vehicles could lead to an increase in the number of accidents with pedestrians, due to the quietness of the engine. Manufacturers will consequently need to find a way of generating sound that can warn people that a vehicle is approaching.

Overall repair costs are likely to be slightly higher when the sector first takes off, but longer term are expected to be as good, if not better, than those for conventional petrol-driven vehicles.

“The demise of the petrol engine will be the equivalent of moving from steam to electric trains,” said Paul Purdy.