(Bloomberg) -- Electric vehicles may be less prone to catch fire than gas guzzlers, but recent blazes involving Tesla Inc. and NIO Inc. cars in Greater China are prompting the industry to take steps to alleviate concerns from potential customers.
Worries heightened after reports emerged of a fire involving a Tesla in a Hong Kong parking lot. Weeks earlier, a video on Chinese social media platforms showed a Tesla bursting into flames in a Shanghai garage. Separately, NIO said last month that one of its ES8 vehicles caught fire in the northwestern city of Xi’an while being repaired.
“Battery combustion is a very serious incident for consumers, and it could lead to consumer aversion to electric vehicles,” Automotive Energy Supply Corp., whose batteries power about 430,000 Nissan Motor Co. vehicles, said in an email. “We are determined not to cause serious accidents and put damage on the industry, and we believe that now it is more important to proceed with caution.”
Early findings on the incident in Hong Kong showed only a few battery modules -- clusters of smaller cells -- were affected, and that the majority of the car’s battery pack was undamaged, according to Tesla. Hong Kong’s Transport Department said it’s liaising closely with the company on the May 12 incident and the one in Shanghai, given the similarity of the cases.
Panasonic Corp., which makes Tesla’s batteries, didn’t specifically address the fires in an email. “We are working with car manufacturers to develop battery systems with higher performance while putting safety as our top priority,” the company said.
For EVs, the risk of a fire or explosion is comparable -- or potentially slightly lower -- than for gas or diesel-fueled models, according to a 2017 report commissioned by the U.S. National Highway Traffic Safety Administration. However, safety risks may increase as manufacturers work to boost performance and push battery cells closer to their limits, the study found.
The recent incidents weren’t unprecedented. In 2018, China recorded at least 40 fire-related cases involving new-energy vehicles -- a category that includes pure-electric, hybrids and fuel-cell vehicles -- according to the State Administration for Market Regulation.
The electric-car sector is grappling with the challenges of quality control, boosting performance and expanding capacity to meet rising demand for batteries, said Simon Moores, London-based managing director of industry consultant Benchmark Mineral Intelligence. Demand for lithium-ion batteries for EVs will surge by more than 10 times through 2030, while prices will continue to tumble, according to BNEF.
Rapid growth means the sector “will no doubt see increasing quality control issues with the supply chain,” Moores said. “The biggest challenge for all EV makers is to ensure quality and consistency runs right through the supply chain -- from raw material selection to chemicals to battery cell -- and into the pack and vehicle.”
Though recent fires are negative for automakers, any impact on sales will probably be limited, said Toliver Ma, a Hong Kong-based analyst at Guotai Junan Securities Co.
“Tesla and NIO have built up a large fan base and should be able to minimize the impact,” Ma said.
It’s not just cars. A series of at least 21 fires at energy-storage projects in South Korea between August 2017 and February, as well as a blaze at an Arizona facility last month fueled concern about the safety of lithium-ion batteries. Korean Reinsurance Co. almost tripled its rate for local storage projects in response, while new deployments in the nation this year may be about half of those in 2018, according to BNEF.