Tesla Inc’s (TSLA.O) electric vehicles are expensive to repair – so much so that the automaker and insurers are dealing with the issue in distinctly different ways. Chief Executive Elon Musk says Tesla is making software and design changes to its vehicles to reduce repair costs and insurance premiums.
Insurance carriers, meanwhile, are writing off low-mileage Tesla Model Ys that have been in crashes, and sending them to salvage auctions after finding many too costly to repair.
During Tesla’s fourth-quarter earnings call on Wednesday, Musk said premiums from third-party insurance firms “in some cases were unreasonably high” and that the EV maker’s insurance arm was putting pressure on those carriers by offering smaller rates to Tesla owners.
Musk also said “we want to minimize the cost of repairing a Tesla if it’s in a collision,” pointing to changes to vehicle design and software.
“It’s remarkable how small changes in the design of the bumper (and) providing spare parts needed for collision repair have an enormous effect on the repair cost,” he said. “Most accidents are actually small — a broken fender or scratched side of the car.”
Tesla would not reply to a request for further comment.
So far, Tesla’s reputation for costly vehicle repairs does not appear to have weakened demand, which Musk says is outclassing the company’s ability to produce.
Salvaged
The data on crashed low-mileage Teslas turning up at auction suggests a slightly different – and previously undisclosed – picture, according to a Reuters analysis.
Of more than 120 Model Ys that were wrecked after collisions, then listed at auction last month and early this month, the biggest majority had less than 10,000 miles on the odometer, according to online data from IAA and Copart, the two biggest salvage auction houses in the United States.
The retail prices of those vehicles ranged from about $60,000 to over $80,000.
IAA and Copart auction listings note whether the vehicles were involved in front, side, or rear collisions, and usually include after-crash photos of every vehicle. But the listings do not reveal specific details on the type of damage suffered.
Insurance firms usually “total” a vehicle – that is, choose to scrap it and reimburse the owner – when the estimated cost of repair is found to be too high.
Copart listings in some cases comprised the names of insurance firms that had bought back crashed vehicles, then listed them at auction. Those companies include Geico, State Farm, Progressive (PGR.N), and Farmers. Geico is part of Warren Buffet’s Berkshire Hathaway Inc (BRKa.N).
Insurance firms reached out to by Reuters either would not comment or failed to respond immediately to requests.
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Tesla started its own insurance affiliate in August 2019, guaranteeing rates up to 30% lower than competitors.
During Wednesday’s earnings call, Chief Financial Officer Zachary Kirkhorn said Tesla Insurance at year-end was earning premiums at an annual rate of $300 million and growing at a quarterly rate of 20 percent – “faster than the growth in our vehicle business.”
All the Model Ys in the Reuters analysis were 2022 or 2023 models, and were produced at either the Austin, Texas, plant or the Fremont plant in Northern California. Of the 15 Model Y Long Range vehicles produced in Austin from June through November and sent to auction after being wrecked in crashes, all but one had less than 10,000 miles on the odometer.
An Austin-built 2022 Model Y Long Range that got into a front collision and listed by IAA early this month had a retail price of $61,388 and an estimated repair cost of $50,388. The vehicle’s owner was not listed. A second Austin-built Model Y, which got into a side collision and listed by IAA, had a retail price of $72,667 and an estimated repair cost of $43,814.
Representatives from IAA and Copart were not immediately accessible for comment.
