Cost of insuring electric vehicles could skyrocket amid Trump's trade war on China

Yahoo

24-03-2025

Concerns around charging infrastructure and higher insurance costs are among the factors dissuading US consumers from transitioning to a fully electric vehicle (EV) as per a GlobalData survey. EV insurance premiums have gradually fallen, with data now suggesting that premiums could soon be on par with combustion engine vehicles, but President Donald Trump's leadership may halt progress and lead to sharp increases in the US.
According to GlobalData's 2024 Emerging Trends Insurance Consumer Survey, limited public charging infrastructure (50.1%) is the main barrier for US consumers to transition to a fully electric vehicle. This is closely followed by the purchase price/resale value (49.9%) and long charging times (48.4%). Other factors, including insurance costs, also play an important role in deterring consumers from making the switch. Despite the barriers to entry, close to half (46.3%) of US drivers stated they would switch their car to a fully electric one within the next five years as per further findings from the survey.
EVs have traditionally attracted higher insurance premiums than traditional combustion engine vehicles. EVs are generally more expensive compared to similar combustion-powered vehicles, which has a direct impact on premiums. In addition, specialised components associated with EVs—in particular, lithium batteries—can make repairs more costly. Such components are difficult to source and typically require specialised labour for replacing or repairing, further adding to the cost of insurance premiums.
It was expected that EVs would become more cost-effective to manufacture and command less expensive repairs as the market matured and repair infrastructure expanded. Indeed, according to Mitchell, a provider of smart technology solutions to auto repair centres, the average cost of repairing an EV in 2024 in the US had come down and was comparable to that of newer combustion vehicles. The average claim for repairable EVs was $6,236 in 2024, 3% lower than the previous year. Meanwhile, the average insurance claim was $5,066 for all combustion vehicles, with newer combustion models topping average claims of $6,127.
Government-led targets for net-zero transitions play a crucial role in both incentivising consumers to switch to EVs and pressurising motor insurers to offer adequate cover for such vehicles. The Biden administration set a goal of all new vehicle sales to be electric by
2030, but Trump's election victory creates uncertainty for the EV insurance market. Trump has expressed inconsistent views on EVs and been sceptical about them, although Tesla CEO Elon Musk's endorsement has softened his stance. However, Trump's heightened tariffs on Chinese imports, including EV components and batteries, are anticipated to raise EV manufacturing and repair costs while potentially also disrupting supply chains. In turn, this would lead to a reversal of the progress made so far, leading insurers to potentially have to revise premiums up for EVs. Furthermore, it could slow down EV adoption altogether if purchase prices underwent significant hikes. As it stands, progress made by the insurance industry in bringing prices down and understanding risks could be eroded by Trump's trade war on China.
"Cost of insuring electric vehicles could skyrocket amid Trump's trade war on China" was originally created and published by Life Insurance International, a GlobalData owned brand.
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