EVs attract as much as 20% higher insurance premiums in China. Know why
China is the largest market for passenger cars and new energy vehicles such as electric and hybrid vehicles as well. The country promotes new energy vehicles aggressively but has been imposing at least 20 per cent higher insurance charges on electric and hybrid vehicles as compared to traditional internal combustion engine-powered vehicles, claims a report by CNBC. The high rate of insurance premiums comes as a side effect of the rapid pace of electrification of the Chinese mobility sector.
The report claims that insurance companies have found that the loss ratio is significantly higher for new energy vehicles than for internal combustion vehicles. This is one of many factors determining insurance pricing, which eventually results in high insurance premiums. The report further states that this may be one of the reasons why the insurance charges are higher for new energy vehicles which use parts that are not yet mass-produced and therefore come as costlier.
Another possible reason behind this could be the higher potential for costly incidents. Data from the Chinese Ministry of Energy Management's Fire and Rescue Department has revealed that in the first quarter of this year, 640 new energy vehicle fires have been registered, which is 32 per cent higher than over the same period in 2021. It is also far higher than the total increase in fire incidents for transportation vehicles overall, which was 8.8 per cent. The ministry further claimed that the fire risk is greater for NEVs than traditional ICE vehicles.
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The rise of fire incidents involving new energy vehicles comes on the heels of massive growth in the segment in China. In this segment, 3.26 million vehicles have been sold between January and August this year, which is more than double the totals for the same period in 2021 and accounted for around 25 per cent of the total passenger car sales in China.