EV cars come at 2x the cost of petrol cars, and the same applies to insurance premiums. The article explains the reason behind this disparity and whether high EV premiums will persist.
Today let’s start our feature with an eye-opening scenario.
Imagine yourself at a car showroom, ready to purchase a brand-new Tata Nexon. You are given two options: a petrol variant priced around Rs. 7.80 lakh and an EV version costing a whopping Rs. 14.99 lakh.
As an environmentally conscious individual, you choose the EV model, expecting to save money and contribute to a greener future. However, brace yourself for a shocking disclosure. When it’s time to insure your new car, you discover a stark contrast in premiums.
A comprehensive insurance policy for Tata Nexon EV from HDFC Ergo could cost you Rs 23,873 with taxes, while the petrol variant’s insurance is merely Rs 12,883 with taxes – less than half the price!
This is not just with Tata Nexon, but with every EV vs petrol insurance, you would look at. Not just that, the repairs and maintenance for EV cars also prove more expensive compared to their petrol counterparts. Why does this disparity exist?
Let’s find out.
What’s Happening?
The price tag of an electric vehicle (EV) is nearly double that of a petrol car. Similarly, the cost of insuring an EV is also significantly higher compared to a petrol car. But why?
EVs have a simpler mechanical structure than Internal Combustion Engine (ICE) or petrol and diesel cars. They have fewer moving parts and don’t require engine oil for lubrication, cooling, or occasional replacement.
With fewer parts and no need for oil changes, maintenance costs for EVs should be lower. And if maintenance costs are lower, shouldn’t repair and insurance costs follow suit? However, the surprising truth is that while EVs have fewer parts, the ones they do have can be quite expensive to repair or replace.
Reason Behind Expensive Car Repairs and Insurance
- Higher insurance premiums for EVs can be attributed to several factors. Firstly, most EVs have advanced technology, including Advanced Driver Assistance Systems (ADAS), that enhance safety. However, these ADAS features often require expensive sensors located in vulnerable areas prone to damage during collisions, leading to higher repair costs.
- Additionally, EVs tend to be heavier than comparable petrol or diesel vehicles due to their battery packs. This increased weight can result in collisions with greater momentum, causing more substantial damage. Also, EVs utilise expensive lightweight materials to compensate for the battery weight, further adding to repair costs.
- Lastly, the battery replacement cost is way too high. Hence, the insurance premium is high.
What’s Next?
For insurance premiums for electric vehicles (EVs) to decrease, it is crucial for the cost of acquiring an EV to become more affordable. This can be achieved through local battery manufacturing, improved EV charging infrastructure, and the availability of swapping stations. The recent reduction in GST from 12% to 5% on EV sales, as introduced in the Union Budget, aims to encourage the widespread adoption of EVs in India.
According to the Times of India, Tesla has shown interest in entering India’s EV market since 2019, but high taxes pose a significant hurdle. Back then, India imposed a 60% import tax on EVs priced under $40,000 and a 100% tax on those priced above $40,000. This means a Tesla car priced at Rs 34 lakh in the US would retail for around Rs 60 lakh in India.
According to Hindustan Times, Tesla is in talks with the government and is in the process of entering the Indian automobile market, which is among the top four global automotive markets. This entry is anticipated to revitalise the EV segment and stimulate local supply chain development. This, in turn, is expected to have a positive impact on battery manufacturing, advancements in battery technology, and overall improvements in the EV industry.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned are for information purposes only. This is not an investment advice.
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