China Specifies Insurance Terms for New Energy Vehicles, Tesla Premiums Surge

People charge their Tesla vehicles at a charging station inside a mall in Shanghai on October 23, 2017. (Chandan Khanna/AFP via Getty Images)

Tesla owners saw insurance premiums soar in China after the authorities implemented commercial insurance rules for new energy vehicles at the end of last year.

The exclusive insurance terms took effect on Dec. 27, 2021.

Tesla told Jwview, a state-run financial media on Dec. 30, 2021, that Tesla vehicle’s insurance premiums increased by about 10 percent on average and that for high-performance models they rose about 20 percent based on the statistics of the day.

However, according to a comparison made by a netizen on Weibo, China’s Twitter, the cost of insurance for the Tesla Model Y rose to 14,900 Yuan (about $2,340) per year after the new insurance regulations were applied, up 80 percent from 8,278 Yuan ($1,300) per year on Dec. 23 (before the effective date.)

As a response, Tesla said the specific amount would be different subject to the local insurance quotations.

China’s new energy vehicles were using the same car insurance rates as traditional fuel vehicles before the new insurance terms began.

Yu Ze, president of People’s Insurance Company of China, admitted that new energy vehicles have higher payout rates than conventionally fueled vehicles mainly because of the higher accident risk, Caijing, a Chinese financial media, reported on August 23, 2021.

From January to October 2021, China saw more than 65 electric vehicle fires, some of which occurred in underground garages and affected nearby vehicles; 2020 saw at least 72 new energy vehicle fires in China, according to a report by Tencent, a Chinese portal site.

According to new insurance regulations issued by China Insurance Association on December 14, the primary insurance liability includes “three electrical systems” of the vehicle: battery, electric drive, and electric control. Usage scenarios cover driving, parking, charging, and working. That is to say, new insurance can pay for the spontaneous combustion of new energy vehicles.

New energy vehicles include pure electric vehicles (EVs), plug-in hybrid vehicles (PHEVs), and fuel cell vehicles (FCEVs). Hybrid electric vehicles (HEVs) are not included as they need no charging.

Compared with traditional auto insurance, the exclusive clause has three add-ons: external grid failure loss; self-charging station loss; and self-charging station liability.

Although the new insurance terms will allow auto owners to be compensated for their losses, they will have to face an increase in premiums, which likely means new energy vehicles are losing some of their advantages.

New energy vehicles have been popular in the Chinese market. According to the China Association of Automobile Manufacturers, as of the third quarter of 2021, the number of people in China owning new energy vehicles has reached 6.78 million.

This figure is still growing. From January to November 2021, sales of new energy vehicles reached 2.99 million units, climbing by 166.8 percent year-on-year, reported Shanghai Security News on Dec. 10, 2021.