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Costly repairs could mean higher premiums for EV drivers: report – CBC.ca

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After Benjamin Vassalle hit a deer during a nighttime drive in northern Ontario in January, he and his partner knew that repairing their damaged electric vehicle would come at a cost.

Yet when their insurance company sent the car to an independent garage, the vehicle stayed there untouched for weeks — because the mechanic didn’t have the parts or expertise required to fix an EV.

The couple had little choice but to send their car to its manufacturer, Tesla, which fixed the broken headlight and crushed bumper.

A car's left headlight and bumper is destroyed.
A photo shows the damage on Vassalle’s Model 3 Tesla following a collision with a deer during a nighttime drive. Vassalle is worried that his insurer will hike their premiums as a result of the expensive repair claim. (CBC)

Although the ensuing $18,000 bill was covered by their insurance company, the couple is now worried that their insurer will hike their premiums in the future.

“I think there’s a lack of knowledge from insurance companies about [electric] cars and all the repairs that can occur when you have that type of car,” Vassalle said.

Electric vehicles are more costly and complicated to repair than traditional cars, experts say. And more people are buying them. For those reasons, insurance claims for EVs are on the rise in other countries — and the same might soon be true for the Canadian market, according to a new report. 

Report says EV premiums could start rising in Canada

A recent report by credit rating agency Morningstar DBRS assessed how a higher uptake of electric vehicles could lead to higher insurance premiums.

EV sales in the U.K., Europe and U.S. have boomed since 2019, according to the report. Boosted by government incentives and investments in charging infrastructure, these drivers will be the first to bear the brunt of higher insurance premiums on EVs — and Canada could be next, the report says.

In Canada, about 12 per cent of all new motor vehicles registered in the third quarter of 2023 were zero-emissions vehicles, according to Statistics Canada. That’s an increase from the same period in 2022, where they made up 8.7 per cent of all new registrations.

“Insurance is a pool business, whereby you have insurance premiums from a lot of people [that] are used to pay claims for very few people,” said Victor Adesanya, vice-president of insurance at Morningstar DBRS and a co-author of the report.

In the U.K., for example, the average cost of EV insurance rose by 72 per cent in 2023, compared to 29 per cent for internal combustion engine vehicles (heat engines that combust fuel or gas, like most cars), according to the Financial Times

An increase in insurance premiums for EVs will be gradual for Canadians — mostly because the provinces regulate sharp insurance hikes — but they could be driven up by claims experience as more people transition to electric cars, Adesanya explained.

“Once you get more EVs into the mix, then the experience of that pool begins to change,” he explained, noting that rates are driven by everything from inflation to repair costs to theft to the cost of a vehicle’s parts.

WATCH | Why EVs are easy to find but difficult to afford in Canada: 

U.S. announces rule aimed at expanding EV sales

1 day ago

Duration 2:00

The U.S. is moving forward with an ambitious plan aimed at shifting its auto industry toward making more electric vehicles — and Canadian companies could stand to benefit.

While EV sales are still growing, experts say they’ve cooled off due to concerns about range and charging infrastructure. But the federal government announced in December that it would implement an electric vehicle standard, aiming for a target of 100 per cent zero-emissions vehicle sales by 2035.

While Canada doesn’t have as many EVs on the road as the other regions covered by the report — mostly due to range anxiety, high prices and concerns about maintaining the cars in extreme temperatures — the cars are entering the mainstream, said Adesanya.

“In the next 10 years, we’ll most likely all be driving EVs, or close to all of us will have to start buying EVs,” he added. “So it’s going to affect both the insurance companies and the car owners.”

Kicking the tires doesn’t work for EVs, says prof

Electric vehicles have fewer parts compared to a traditional vehicle with an internal combustion engine, but an EV’s parts can be far more expensive, says Colin Simpson, who developed an EV technician program at George Brown College.

In five or 10 years, there will be a significant increase in used EVs on the market, and with that, certain repair requirements, said Simpson, who is also the dean of George Brown’s Centre for Continuous Learning. 

The problem is that customers might not be able to identify what those repairs should be, using the same methods they would for a traditional car, for which you can “get a visual idea of how well the vehicle has been cared for.”

EVs could have less wear and tear and lower mileage, but if the battery needs a replacement, it can cost up to $20,000.

A blue electric vehicle charging station with the words 'Powered by water' and the B.C. Hydro logo.
An electric vehicle charging station is pictured in Surrey, B.C., in April 2021. (Ben Nelms/CBC)

“So the used vehicle market is going to be, I think, a challenge, because for one thing, people don’t have that same ability to recognize what’s a good deal and what is not when they’re buying a used electric vehicle.”

Understanding the state of an EV battery’s health is a “far more complicated process,” as well, which could pose difficulties for insurance companies trying to determine a pricing model for EV premiums, he said.

“This whole mystery around ‘what’s the state of health of the battery’ … the usual signs aren’t there, like the actual mileage.”

When comparing non-electric and electric vehicles from the same manufacturer, “that electric version might be more costly to initially purchase because of those [repair] costs can be higher and that can also influence the premiums,” said Rob de Pruis, national director of consumer and industry relations at the Insurance Bureau of Canada.

The agency is working with auto manufacturers and vehicle associations to collaborate on ways to reduce some of those claim costs. But they’re not simple solutions, de Pruis added.

“We don’t have a lot of influence over these vehicle manufacturers, and that’s where we’re also talking with the government.”

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Politics likely pushed Air Canada toward deal with ‘unheard of’ gains for pilots

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MONTREAL – Politics, public opinion and salary hikes south of the border helped push Air Canada toward a deal that secures major pay gains for pilots, experts say.

Hammered out over the weekend, the would-be agreement includes a cumulative wage hike of nearly 42 per cent over four years — an enormous bump by historical standards — according to one source who was not authorized to speak publicly on the matter. The previous 10-year contract granted increases of just two per cent annually.

The federal government’s stated unwillingness to step in paved the way for a deal, noted John Gradek, after Prime Minister Justin Trudeau made it plain the two sides should hash one out themselves.

“Public opinion basically pressed the federal cabinet, including the prime minister, to keep their hands clear of negotiations and looking at imposing a settlement,” said Gradek, who teaches aviation management at McGill University.

After late-night talks at a hotel near Toronto’s Pearson airport, the country’s biggest airline and the union representing 5,200-plus aviators announced early Sunday morning they had reached a tentative agreement, averting a strike that would have grounded flights and affected some 110,000 passengers daily.

The relative precariousness of the Liberal minority government as well as a push to appear more pro-labour underlay the prime minister’s hands-off approach to the negotiations.

Trudeau said Friday the government would not step in to fix the impasse — unlike during a massive railway work stoppage last month and a strike by WestJet mechanics over the Canada Day long weekend that workers claimed road roughshod over their constitutional right to collective bargaining. Trudeau said the government respects the right to strike and would only intervene if it became apparent no negotiated deal was possible.

“They felt that they really didn’t want to try for a third attempt at intervention and basically said, ‘Let’s let the airline decide how they want to deal with this one,'” said Gradek.

“Air Canada ran out of support as the week wore on, and by the time they got to Friday night, Saturday morning, there was nothing left for them to do but to basically try to get a deal set up and accepted by ALPA (Air Line Pilots Association).”

Trudeau’s government was also unlikely to consider back-to-work legislation after the NDP tore up its agreement to support the Liberal minority in Parliament, Gradek said. Conservative Leader Pierre Poilievre, whose party has traditionally toed a more pro-business line, also said last week that Tories “stand with the pilots” and swore off “pre-empting” the negotiations.

Air Canada CEO Michael Rousseau had asked Ottawa on Thursday to impose binding arbitration pre-emptively — “before any travel disruption starts” — if talks failed. Backed by business leaders, he’d hoped for an effective repeat of the Conservatives’ move to head off a strike in 2012 by legislating Air Canada pilots and ground crew to stick to their posts before any work stoppage could start.

The request may have fallen flat, however. Gradek said he believes there was less anxiety over the fallout from an airline strike than from the countrywide railway shutdown.

He also speculated that public frustration over thousands of cancelled flights would have flowed toward Air Canada rather than Ottawa, prompting the carrier to concede to a deal yielding “unheard of” gains for employees.

“It really was a total collapse of the Air Canada bargaining position,” he said.

Pilots are slated to vote in the coming weeks on the four-year contract.

Last year, pilots at Delta Air Lines, United Airlines and American Airlines secured agreements that included four-year pay boosts ranging from 34 per cent to 40 per cent, ramping up pressure on other carriers to raise wages.

After more than a year of bargaining, Air Canada put forward an offer in August centred around a 30 per cent wage hike over four years.

But the final deal, should union members approve it, grants a 26 per cent increase in the first year alone, retroactive to September 2023, according to the source. Three wage bumps of four per cent would follow in 2024 through 2026.

Passengers may wind up shouldering some of that financial load, one expert noted.

“At the end of the day, it’s all us consumers who are paying,” said Barry Prentice, who heads the University of Manitoba’s transport institute.

Higher fares may be mitigated by the persistence of budget carrier Flair Airlines and the rapid expansion of Porter Airlines — a growing Air Canada rival — as well as waning demand for leisure trips. Corporate travel also remains below pre-COVID-19 levels.

Air Canada said Sunday the tentative contract “recognizes the contributions and professionalism of Air Canada’s pilot group, while providing a framework for the future growth of the airline.”

The union issued a statement saying that, if ratified, the agreement will generate about $1.9 billion of additional value for Air Canada pilots over the course of the deal.

Meanwhile, labour tension with cabin crew looms on the horizon. Air Canada is poised to kick off negotiations with the union representing more than 10,000 flight attendants this year before the contract expires on March 31.

This report by The Canadian Press was first published Sept. 16, 2024.

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Federal $500M bailout for Muskrat Falls power delays to keep N.S. rate hikes in check

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HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.

Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.

Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”

Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.

The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.

Those delays forced Nova Scotia Power to spend more on generating its own electricity.

This report by The Canadian Press was first published Sept. 16, 2024.

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Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

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TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.

The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.

“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.

The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.

But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.

Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.

“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.

“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”

Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.

The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.

In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.

Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.

The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.

The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.

Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.

Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.

It will also re-evaluate its design ranks.

Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.

Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:ROOT)

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