New electric cars in China cost more to insure than fuel-powered cars

BEIJING – As Chinese companies produce new electric cars, local insurers think they are more expensive to cover.

Overall, said Wenwen Chen, director of S&P Global Ratings, who leads the company’s research on Chinese insurance, premiums for new energy vehicles — which include electric cars — are about 20% higher than they would be for conventional fuel-powered vehicles. .

Many factors go into determining prices. But Chen said insurers find the loss ratio – a cost measure for insurers – tends to be higher for new energy vehicles than for internal combustion engine vehicles.

One of the main reasons she points to the high rate of loss is the increase in accidents, especially the more expensive ones – since new energy vehicles often use parts that have not yet been mass-produced.

In the US, electric car insurance also tends to be about 15% more expensive than combustion engine car insurance — mainly because electric cars in the US tend to be luxury cars, according to Chase Gardner at Insurify, which compares insurance rates. On cars in the United States

But repair costs are another reason for insurance rates to go up, as “fewer places have the capacity to service electric vehicles in the United States,” Gardner said. “Generally, people who drive electric cars end up paying less maintenance costs over time. Again, the big question is, do you get in an accident?”

In the United States, Insurify’s analysis of the US market found its presence No difference in accident rates Among electric cars, hybrids and combustion engine cars.

But according to official Chinese statistics, the country’s new energy vehicles are more susceptible to fires than those powered by conventional fuels. In the first quarter, 640 new energy vehicles reported fires, up 32% from a year ago, according to Fire and Rescue Department of the Ministry of Emergencies.

The increase far exceeds the 8.8% increase in transport vehicle fires in general, the ministry said. Latest numbers are not available. The department did not respond to CNBC’s request for comment.

For the whole of 2021, the ministry has reported at least 3,000 new energy vehicle fires. She said that the risks of fire in general in such cars are higher than in conventional vehicles, without disclosing specific figures.

The increasing number of fires comes with the rise in the number of new energy vehicles 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.

In contrast, NEVs remain a much smaller part of the US auto market.

Hybrid and electric vehicles accounted for 11% of light vehicle sales in the United States in the fourth quarter of 2021, The US Energy Information Administration said, citing data from Wards Intelligence. No more recent report is available. Light vehicles also include pickup trucks and vans.

In the first seven months of this year, tax credits for new energy vehicle purchases totaled 40.68 billion yuan ($5.9 billion) — the equivalent of more than $1 billion in July alone, according to official figures. The IRS said both amounts were more than Double what they were a year ago.

Many Chinese companies have rushed to release new energy vehicles, although it is unclear what their accident risks are.

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

Electric cars are platform-based, and safety certification could be faster, he said, noting the potential use of hypothetical test scenarios, or the ability to test individual parts.

In less than a year, telecommunications and smartphone giant Huawei has partnered with automaker Seres to launch three new energy vehicles under the Aito brand. Cars are the first to use Huawei’s HarmonyOS operating system.

At a launch event in July, Richard Yu, CEO of Huawei Consumer Business Group, bragged about how quickly his team and Seres were able to run so many vehicle safety tests in such a short amount of time, developing and launching two models in just over a year.

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

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

It usually takes three to four years to manufacture and develop a vehicle, said Helen Chai, a consulting director at China Insights Consultancy. She said if the car was based on an existing car, the new model would only take two to three years.

She said that the steps for developing and adopting a new energy car and an internal combustion engine car are generally the same.

Other local players are rapidly releasing new models, though, in particular, Tesla did not.

For example, in the last 12 months, New Deliveries of its first electric sedan began, a second sedan was launched – and a new SUV was launched and delivered.

Last year, Baidu and Geely announced the launch of their electric car joint venture, Jidu. Next year, the first Jidu . car A group to start customer deliveries.

Huawei has no comment. Nio and Jidu did not respond to CNBC’s request for comment.