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This paper presents a diagnostic and prognostic condition monitoring method for insulated-gate bipolar transistor (IGBT) power modules for use primarily in electric vehicle applications. The wire-bond-related failure, one of the most commonly observed packaging failures, is investigated by analytical and experimental methods using the on-state voltage drop as a failure indicator. A sophisticated test bench is developed to generate and apply the required current/power pulses to the device under test. The proposed method is capable of detecting small changes in the failure indicators of the IGBTs and freewheeling diodes and its effectiveness is validated experimentally. The novelty of the work lies in the accurate online testing capacity for diagnostics and prognostics of the power module with a focus on the wire bonding faults, by injecting external currents into the power unit during the idle time. Test results show that the IGBT may sustain a loss of half the bond wires before the impending fault becomes catastrophic. The measurement circuitry can be embedded in the IGBT drive circuits and the measurements can be performed in situ when the electric vehicle stops in stop-and-go, red light traffic conditions, or during routine servicing.