New Chinese electric cars have higher insurance prices than fuel-powered cars

In China, new energy vehicles often receive green number plates – this is often easier for residents to register than the blue number plates of traditional fuel cars. system.

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BEIJING – While Chinese companies roll out new electric cars, local insurance companies say they are more expensive to cover.

Overall, premiums for new energy cars – including electric – are about 20% higher than comparable traditional fuel-powered cars, said Wenwen Chen, director at S&P Global Ratings, who The company’s head of research on Chinese insurance said. .

Many factors go into determining the price. But Chen said insurers have found that loss rates – a measure of insurers’ costs – tend to be higher for new energy vehicles than for internal combustion engine vehicles.

One of the main reasons she cites for the higher loss rates is more accidents, especially the more expensive ones – as new energy vehicles often use parts that haven’t been tested yet. mass production.

In the US, insurance for electric cars also tends to be about 15% more expensive than for cars with internal combustion engines – mainly because electric cars in the US tend to be luxury vehicles, according to Chase Gardner at Insurify, Compare car insurance rates in the US

But repair costs are another reason for higher insurance prices, as “fewer places can afford electric vehicle maintenance in the US,” Gardner said. “In general, EV drivers end up paying lower maintenance costs over time. Again, the big question is do you have an accident?”

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In the US, Insurify’s analysis of the US market shows that there are no difference in accident rate between electric, hybrid and internal combustion engine cars.

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

That increase was much higher than the 8.8% increase in fires to vehicles, the ministry said. More recent figures are not available. The department did not respond to CNBC’s request for comment.

For all of 2021, the ministry reported at least 3,000 new energy vehicle fires. It said the overall fire risk for such vehicles was higher than for traditional vehicles, but did not disclose specific figures.

More and more fires occur as the number of new energy vehicles increases in China.

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

In contrast, new energy vehicles are still a much smaller part of the US auto market.

Hybrids, plug-in hybrids, and electric vehicles accounted for 11% of U.S. light vehicle sales in the fourth quarter of 2021. According to the US Energy Information Administration, citing data from Wards Intelligence. A more recent report is not available. Light vehicles also include pickup trucks and vans.

A variety of new cars

China, home to the world’s largest auto market, has supported new energy vehicle growth with policies that make it easier to obtain license plates, as well as purchase subsidies.

In the first seven months of this year, the total amount of tax exemptions for new energy vehicle purchases was 40.68 billion yuan ($5.9 billion) — and the equivalent of more than $1 billion in July alone. according to official data. Tax administration said both amounts are more twice as much as a year ago.

Many Chinese companies have rushed to launch new energy vehicles, although it is not yet clear what their specific accident risk is.

Cui Dongshu, general secretary of the China Tourist Vehicle Association, said that new energy vehicles tend to be simpler, especially in terms of design, compared to internal combustion vehicles.

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

Read more about electric vehicles from CNBC Pro

In less than a year, Chinese smartphone and telecommunications giant Huawei has partnered with automaker Seres to launch three new Aito-branded energy vehicles. These 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 that his team and Seres were able to conduct multiple vehicle safety tests over a period of time. how short, to develop and launch two models in just over a year.

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

Two out of three cars have already reached consumers. Huawei has claimed deliveries of its first model hit 10,000 units in just 87 days – an industry record for a new car brand.

“Normally, it takes three to four years to manufacture and develop a car,” said Helen Chai, consulting director at China Insights Consultancy. She said if the car is based on an existing one, a new model will only take two to three years.

She said the steps for developing and certifying new energy vehicles and internal combustion engine vehicles are generally the same.

Other local companies are rapidly rolling out new models, though, notably Tesla are not.

For example, in the past 12 months, Nio started delivering the first electric sedan, launched the second sedan – and launched and delivered a new SUV.

Last year, Baidu and Geely announced the launch of their joint electric vehicle project, Jidu. Next year, the first Jidu car is set to start shipping to the customer.

Huawei was not available for comment. Nio and Jidu did not respond to CNBC’s request for comment.

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