Considering an electric vehicle (EV) but worried about how much its value will drop over time? You're not alone! Depreciation is a natural part of car ownership, and EVs are no exception. But here's the good news - things are a little different when it comes to electric cars in India. Let's dive in.
Is the depreciation cost of EV the same as fuel vehicles?
No, not quite. Petrol and diesel vehicles depreciate at a fixed percentage as determined by the Insurance Regulatory and Development Authority of India (IRDAI). Hence, fuel-based and electric vehicles are depreciating at about the same rate right now.
However, there's a catch. The concern is the battery, a major and costly part of EVs. The longevity is much lower than that of a car engine (about 10-15 years) but is typical of what you would expect from an EV battery (around 8-10 years, with warranties typically around 8-10 years). This has led some to question the present uniform rate of depreciation.
That being said, experts in the industry speculate that a separate depreciation rate for EVs might come into effect in the future. If the EV market matures and data for depreciation becomes available, a different rate of depreciation may be specified by IRDAI for electric vehicles. But, until then, they are the same as fuel vehicles.
However, there's a catch: even though the standard rate of depreciation is equal, certain factors could actually cause EVs to depreciate slightly faster than their fuel-powered counterparts. Now let's look into more details on these factors.
Factors that affect the electric cars depreciation cost
- The vehicle cost: This is the most obvious one. Higher-priced EVs will experience more depreciation than the economical alternatives.
- Drive distance: Just like the fuel vehicles, how much you drive your EV will play a role. High mileage usually leads to quick depreciation. However, there's a small positive here: in contrast to petrol cars, where engine wear is far more significant, mileage should have slightly less effect on the value of an EV as it is constructed from fewer components.
- Vehicle size: SUVs and larger vehicles have slightly better resale value compared to their hatchback and sedan counterparts. This trend applies the same for electric cars and fuel vehicles alike.
- Age of vehicle: The older the vehicle, the worse its value will be. But, you must remember that the EV market is still pretty young in India. So, how soon the depreciation rate becomes set in a pattern is a fairytale yet to be narrated.
- Car brand reputation: Just like how you trust specific companies like Samsung and Apple for your mobile phone needs, certain vehicle brands have a reputation that affects the depreciation rate. The new EVs made by established carmakers are likely to retain value better than those by newer companies.
- Service history: Regular servicing gives potential buyers confidence you've looked after your EV. That can end up translating into a better resale value than the other car that has been neglected.
Conclusion
The depreciation rate for EVs in India is still at a nascent stage. Although, as of now, the official rate is on par with that of fuel vehicles, things like battery health and the fledgling nature of the EV area may see them lose value unfavourably. Hopefully, these points will help you make an intelligent decision about your electric dream machine. Having comprehensive car insurance is crucial—it not only covers unforeseen damages but also helps mitigate depreciation-related losses, ensuring better financial security for your EV.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the Insurance industry and products. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.