High Insurance Premiums Are the Latest Thing Weighing on China’s EV Market

image is BloomburgMedia_SB9CF8DWRGG000_05-04-2024_11-00-08_638478720000000000.jpg

An EV at a charging station in Wuhan, China

In another setback for electric car demand in China, where uptake has slowed in recent months, some drivers are now finding themselves paying more for insurance — and are taking to social media to complain.

In one report last week, a person said their yearly EV premium came to 8,000 yuan ($1,100), some 2,000 yuan more than a comparable fuel-powered car. Another said their renewal premium increased despite the fact they haven’t had any accident. Some EV owners say they’ve even been rejected by insurance companies, as their daily long commutes and high mileage are seen as an elevated risk factor.

The costlier premiums stem from electric vehicles’ higher repair and servicing costs because their parts are more expensive and harder to come by, US-headquartered credit rating agency AM Best said. The “lack of claims history, combined with differences among EV manufacturers, poses a challenge to accurate pricing and risk assessments,” AM Best director of analytics James Chan said.

There are also fewer qualified repair and maintenance technicians for EVs.

According to S&P Global Ratings, that means the premiums for electric cars can range from 20% higher to double fuel-powered vehicles. In China, most people providing online car-hailing services also drive EVs, which is another risk factor insurers are looking at, S&P analyst Wenwen Chen said.

Finding it more difficult or more costly to get insurance for an EV will likely become another thing that weighs on consumers’ minds in China, even as automakers cut the sticker prices of EVs amid fierce competition.

People naturally worry about range anxiety when making the shift from combustion-engine cars, and although China’s EV charging infrastructure is better than many other countries, it’s still relatively sparse outside of major cities.

As is the case in many parts of the world, growth in China’s EV market is slowing. Shipments of new-energy vehicles are projected to increase 25% to 11 million units this year, China’s Passenger Car Association data has said. While still expanding, that’s down from 36% in 2023 and 96% in 2022.

Higher insurance premiums for EVs also aren’t unique to China — drivers in the US and the UK have seen a similar trend.

“The EV market is still evolving, which is also the case when it comes to data collection and expertise on assessing risk,” Chen said. “Many factors go into determining premium pricing.”

©2024 Bloomberg L.P.

By Yihui Xie


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