This paper presents an analysis of the stability of an electric vehicle equipped with in-wheel motors of permanent-magnet type during a class of electrical faults. Due to the constant excitation from the permanent magnets, the output torque from a faulted wheel cannot easily be removed if an inverter shuts down, which directly affects the vehicle stability. In this paper, the impact of an electrical fault during two driving scenarios is investigated by simulations; using parameters from a 30 kW in-wheel motor and experimentally obtained tire data. It is shown that the electrical fault risks to seriously degrading the vehicle stability if the correct counteraction is not taken quickly. However, it is also demonstrated that vehicle stability during an electrical fault can be maintained with only minor lateral displacements when a closed-loop path controller and a simple method to allocate the individual tire forces are used. This inherent capacity to handle an important class of electrical faults is attractive; especially since no additional fault-handling strategy or hardware is needed.