EVs Are Rewiring Risk For Manufacturers

The internal combustion engine (ICE) has been steadily improving for more than 100 years, giving us cars that are almost unrecognisable from those early, groundbreaking days of the Ford Model T. This, in turn, has made driving a faster, safer, more fuel-efficient, and more enjoyable experience for everyone.

Now electric vehicles (EVs) mark a fundamental shift. One that not only paves the way to innovative changes in how passenger vehicles are designed, built, and maintained, but that will also kickstart a whole new era of risk for manufacturers.

Three drivers of change

Driving this transformation are three key factors, the first of which is consumer dynamics. To date, EV adoption has actually been slower than many projected with only a quarter of car buyers seriously considering going fully electric due to concerns around cost, range and charging time. This has seen the manufacturing industry double down on addressing these concerns with new models that travel further and charge faster.

The second factor is battery innovation. Right now, lithium-ion is found in 90% of US EVs, but their performance and safety features don’t completely meet all customer requirements. Interest in alternative designs is therefore accelerating too – from iron- and sulphur-based lithium variants to sodium-ion and hydrogen cells. All have their own advantages and disadvantages, leading manufacturers to invest in understanding how they perform in the full life cycle of a user experience.

The third and final driver of change is the supply chain itself. EVs use up to three times more chips than ICE vehicles and therefore rely heavily on materials sourced and processed overseas. China alone accounts for 70% of global battery production. Add in geopolitical volatility, tariff controversies, ongoing labor shortages, and localized incidents like the collapse of the Francis Scott Key Bridge, and it’s clear: EV supply chains are more stretched and unpredictable than ever – requiring flexible and proactive risk mitigation frameworks to match.

New risks on the rise

There are new, less familiar threats for manufacturers to counter too. While ICE and hybrid vehicles actually catch fire more frequently, EV fires tend to burn hotter and longer – with several high-profile cases making the news and rocking consumer trust. Responding to this risk requires specialized equipment and training for staff, along with a deeper knowledge of chemistry, housing, and fire suppression.

Then there’s cyber. EVs are, by nature, software-defined machines that are deeply integrated with networks and cloud platforms. From code-level bugs to coordinated hacks, this opens up new areas of potential vulnerability, all capable of causing costly reputational damage and liability claims.

Even product recalls are changing. In contrast to ICE vehicle breakdowns, EV issues can often be fixed with over-the-air updates and patches. Yet while the National Highway Traffic Safety Administration (NHTSA) still classifies these events as recalls, the cost and customer experience are entirely different. This, in turn, forces insurers and manufacturers to re-examine the way they calculate risk along with how they structure mitigation strategies going forward.

Eyes on the road (ahead)

So how should the manufacturing industry respond? First and foremost, by empowering risk managers to lead in this evolving environment and become a central part of a broader, stronger, more connected ecosystem within their own companies. One that connects stakeholders across R&D, supply chain, operations, IT, and even government relations to create a comprehensive framework for analysing and responding to risk.

The way manufacturers deploy data must evolve too. Unlike with ICE vehicles, firms don’t have decades of EV insights to fall back on in their decision-making and planning. So instead, they should lean into forward-looking indicators, using machinery data on the shop floor to identify quality risks and limit the likelihood of product liability and recall. Leveraging smarter building data in areas like fire protection and structural soundness will also be vital, as will utilizing supply chain visibility information and scoring models for business tax.

Encouragingly, much of this data is already available today; it now just needs to be viewed with a risk lens. Rather than simply present data at renewal time, manufacturers and brokers should therefore engage in an ongoing dialogue with carriers about emerging threats, evolving mitigations, and the specific steps they are taking to reduce exposure. This will help shape limits and premiums that fit the realities of their operating landscape.

In fact, this ability to focus on the future is, perhaps, the most important shift of all. As EVs become an ever more frequent sight on our roads and in our factories, the passenger vehicle market will be defined by both new methods of manufacturing and new approaches to risk. The firms that lead this new era will be those with their eyes on the road ahead, not in the rear view mirror.