China’s new electric cars cost more to insure than fuel-powered cars

BEIJING — While Chinese companies are churning out new electric cars, local insurers think they are more expensive to cover.

In general, the insurance premium for new energy cars, which includes electric cars, is about 20% higher than it would be for comparable traditional fuel-powered cars, said Wenwen Chen, director of S&P Global Ratings, who leads the firm’s research for insurance in China. . .

Many factors go into determining the price. But Chen said insurance companies find that the loss rate, a measure of cost to insurers, tends to be higher for new energy vehicles than for internal combustion engine cars.

One of the main reasons he cited for a higher accident rate is more accidents, especially costly ones, as new energy vehicles often use parts that are not yet mass-produced.

In the US, insurance for electric cars is also typically 15% more expensive than for cars with a combustion engine, mainly because electric cars in the US tend to be luxury vehicles, according to Chase Gardner of Insurify, which compares car insurance rates in the United States

But repair costs are another reason for higher insurance prices, as “fewer places have the ability to service electric cars in the US,” Gardner said. “Typically, people who drive electric vehicles end up paying lower maintenance costs over time. Again, the big question is, do you have an accident?”

In the US, Insurify’s analysis of the US market found that there were no difference in accident rates between electric cars, hybrids and cars with a combustion engine.

But according to official Chinese statistics, new energy vehicles in the country are more prone to fires than traditional fuel-powered ones. In the first quarter, 640 new energy vehicles reported fires, 32% more than a year ago, according to the Fire and Rescue Department of the Ministry of Emergency Management.

That increase was far more than the 8.8% rise in transport vehicle fires overall, the ministry said. More recent figures were not available. The ministry did not respond to a request for comment from CNBC.

For all of 2021, the ministry reported at least 3,000 new energy vehicle fires. He said the risk of fire was generally higher for those cars than for traditional vehicles, without disclosing specific figures.

The rising number of fires comes as the number of new energy vehicles has increased in China.

From January to August, 3.26 million new energy passenger cars were sold – more than double the same period last year and about 25% of all passenger cars sold in the country, according to the China Passenger Car Association. That share was about 15% last year.

By contrast, new energy vehicles remain a much smaller part of the US car market.

Hybrid, plug-in hybrid and electric vehicles accounted for 11% of US light vehicle sales in the fourth quarter of 2021. said the US Energy Information Administration., citing data from Wards Intelligence. A more recent report was not available. Light vehicles also include trucks and vans.

During the first seven months of this year, tax exemptions for the purchase of new energy vehicles totaled 40.68 billion yuan ($5.9 billion), and the equivalent of more than $1 billion in July alone, according to official figures. . The tax administration said both amounts were more than double what they were a year ago.

Many Chinese companies have rushed to launch new-energy vehicles, although it is unclear what their specific accident risk is.

New energy vehicles tend to be simpler, especially in design, than internal combustion vehicles, said Cui Dongshu, secretary general of the China Passenger Car Association.

Electric cars are based on a platform system and certifying safety can be faster, he said, noting the potential use of virtual test scenarios or the ability to test individual parts.

In less than a year, Chinese telecom and smartphone giant Huawei has teamed up with automaker Seres to launch three new energy vehicles under the Aito brand. The cars are the first to use Huawei’s HarmonyOS operating system.

At a launch event in July, Huawei Consumer Business Group CEO Richard Yu bragged about how quickly his team and Seres were able to conduct many vehicle safety tests in such a short time, to develop and launch two models in no time. more than a year.

“In the hundred years of the auto industry, there is no record of anyone doing it this fast before,” Yu said in Mandarin, translated by CNBC.

Two of the three cars have already reached consumers. Deliveries of the first model exceeded 10,000 units in just 87 days, an industry record for a new car brand, Huawei said in August.

Typically, it takes three to four years to build and develop a car, said Helen Chai, director of consulting at China Insights Consultancy. She said that if the car is based on an existing one, a new model would only take two to three years.

She said the steps to develop and certify a new energy vehicle and an internal combustion engine car are generally the same.

Other local players are rapidly launching new models, although, in particular, Tesla does not have

For example, in the last 12 months, child started deliveries of its first electric sedan, launched a second sedan, and launched and delivered a new SUV.

Last year, Baidu and Geely announced the launch of their joint electric car project, Jidu. Next year, the first Jidu car is ready to start deliveries to customers.

Huawei did not comment. Nio and Jidu did not respond to a request for comment from CNBC.