Increased insurance costs for electric vehicles in the UAE, yet industry professionals remain optimistic as the market expands
Electric Vehicles in the UAE: A Growing Trend with Changing Insurance Landscape
In the United Arab Emirates (UAE), electric vehicles (EVs) are becoming increasingly popular, with more and more residents opting for these eco-friendly vehicles. However, one aspect that has been a concern for potential buyers is the higher insurance cost associated with EVs.
According to data, insuring an EV in the UAE costs on average 72% more than a petrol or diesel-powered alternative. The average comprehensive EV policy stands at about Dh4,992 a year compared to Dh2,895 for regular internal combustion engine vehicles [1]. This higher cost is primarily due to the expensive and specialized components of EVs, such as batteries, which often require international shipping and limited local repair expertise, driving up claim expenses [2][3].
Recent events like the April 2004 floods, which caused mass EV battery failures and drove up insurance claims, have further highlighted the repair problems associated with EVs [3].
However, as the EV market in the UAE matures, insurance costs are expected to evolve. Insurers are beginning to adopt data-driven pricing models that consider factors such as battery health, charging habits, and vehicle technology [1][4]. Collaborations with authorized repair networks aim to streamline claims and reduce long-term repair costs, which may lead to more competitive premiums over time. Additionally, EVs equipped with advanced safety features tend to attract lower premiums due to reduced accident risks [1][4].
Comprehensive insurance plans with add-ons, covering battery failure, roadside assistance, and sensor protection, can further influence costs [1][4]. Roberto Lopes Da Silva, UAE general manager of electric car brand Nio, expects pricing for EV insurance to normalize as more data becomes available [5].
The UAE's EV market has enjoyed healthy growth in recent years. In 2023, EVs made up 13% of new car sales, up from 0.7% in 2021. This represents between 28,000 and 33,000 new EVs sold in 2023, compared to only a few thousand in 2021 [6]. The UAE leads the Middle East in EV penetration, with electric models accounting for more than one percent of new car sales in neighboring countries [6].
One of the popular EV models in the UAE is the Nio ET5 Long Range variant, which has a certified range of up to 615 kilometers [7]. For daily use, under mixed driving conditions, customers can realistically expect between 500km to 550km on a full charge from the Nio ET5 Long Range variant [7].
The Nio brand appeals to "forward-thinking individuals who are enthusiastic about technology and sustainability, especially in the premium to luxury segment" [8]. Toshita Chauhan, chief business officer at Policybazaar.ae, bought a Tesla three years ago primarily for its long-term value and fuel savings, despite higher insurance premiums for electric vehicles [9].
A joint venture between Adnoc and Taqa aims to install 70,000 EV chargers in the UAE by 2030 [10]. As infrastructure expands and resale values are expected to stabilize, the barriers to EV adoption in the UAE are expected to decrease, making EVs more accessible to a wider audience.
In conclusion, while the currently higher EV insurance premiums in the UAE are due to repair complexity and cost, especially battery-related, as insurers gain better data and repair infrastructure improves, premiums are expected to become more aligned and potentially decrease relative to today’s levels [1][4]. The UAE's commitment to a net-zero drive, coupled with the growing popularity of EVs, suggests that the EV market in the UAE will continue to grow and evolve in the coming years.
[1] https://www.arabianbusiness.com/transport/770111-electric-vehicle-insurance-premiums-in-the-uae-are-higher-than-for-petrol-or-diesel-cars [2] https://www.thenationalnews.com/business/transport/2022/02/03/electric-cars-in-the-uae-cost-more-to-insure-than-petrol-cars/ [3] https://www.thenationalnews.com/business/transport/2021/04/12/uae-floods-cause-battery-failures-in-electric-vehicles/ [4] https://www.arabianbusiness.com/transport/770111-electric-vehicle-insurance-premiums-in-the-uae-are-higher-than-for-petrol-or-diesel-cars [5] https://www.zawya.com/mena/en/business/story/UAE_General_Manager_of_NIO_anticipates_normalization_of_EV_insurance_pricing_with_more_data/ [6] https://www.arabianbusiness.com/transport/770111-electric-vehicle-insurance-premiums-in-the-uae-are-higher-than-for-petrol-or-diesel-cars [7] https://www.thenationalnews.com/business/transport/2023/01/31/nio-et5-long-range-variant-has-certified-range-of-up-to-615-kilometers/ [8] https://www.autoblog.com/2022/01/18/nio-us-launch-electric-vehicle-brand/ [9] https://www.gulfnews.com/business/autos/electric-vehicle-buyer-s-guide-how-to-choose-the-right-one-for-you-1.1646299094769 [10] https://www.arabianbusiness.com/transport/770111-electric-vehicle-insurance-premiums-in-the-uae-are-higher-than-for-petrol-or-diesel-cars
- In the world, the growth of electric vehicles (EVs) is not limited to the UAE, as countries across the globe are adopting the technology.
- The UAE's Middle East neighbors are also experiencing an increase in EV sales, with electric models representing a significant portion of new car sales in various countries.
- The UAE's commitment to reducing carbon emissions extends beyond the automotive sector, with the government focusing on promoting renewable energy sources in the overall economy.
- Besides cars, technology has been instrumental in several sectors in the UAE, including healthcare, where the government is investing heavily in electronic health records and telemedicine platforms.
- In the coming years, the adoption of electric vehicles (EVs) in the UAE is likely to impact the country's energy consumption, as the widespread use of EVs could reduce dependency on fossil fuels.
- The travel industry in the UAE is closely tied to the cost of fuel, and the widespread adoption of electric vehicles (EVs) could potentially lead to a decrease in car rental and fuel costs over time.
- The lifestyle choices of UAE residents are diversifying, with more emphasis being placed on sustainable and eco-friendly options, such as electric cars, solar-powered homes, and organic food.
- The UAE's focus on climate change and sustainability extends to its educational institutions, with many universities offering courses and research programs focused on environmental issues and clean technology.
- Egypt, a neighboring country focused on improving its transportation infrastructure, has also shown interest in the electric vehicle market and is expected to see an increase in EV sales in the coming years.
