Tesla electric vehicles are expensive to repair — a lot in order that the automaker and insurers are addressing the difficulty in sharply alternative ways.
Chief Executive Elon Musk says Tesla is making design and software changes to its vehicles to lower repair costs and insurance premiums.
Insurance automotiveriers, meanwhile, are writing off low-mileage Tesla Model Ys which have been in crashes, and sending them to salvage auctions after deeming many too expensive 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 automotiveriers by offering lower rates to Tesla owners.
Musk also said “we wish to attenuate the price of repairing a Tesla if it’s in a collision,” citing changes to vehicle design and software.
“It’s remarkable how small changes within the design of the bumper (and) providing spare parts needed for collision repair have an infinite effect on the repair cost,” he said. “Most accidents are literally small — a broken fender or scratched side of the automotive.”
Tesla didn’t reply to a request for further comment.
Thus far, Tesla’s popularity for expensive vehicle repairs doesn’t appear to have dampened demand, which Musk says is running well ahead of the corporate’s ability to supply.
Salvage jobs
The info on crashed low-mileage Teslas showing up at auction presents a rather different – and previously unreported – picture, based on a Reuters evaluation.
Of greater than 120 Model Ys that were totaled after collisions, then listed at auction in December and early January, the overwhelming majority had fewer than 10,000 miles on the odometer, based on online data from Copart and IAA, the 2 largest salvage auction houses in the USA.
The retail prices of those automotives ranged from about $60,000 to greater than $80,000.
Copart and IAA auction listings note whether the vehicles were involved in front, rear or side collisions, and typically include after-crash photos of every vehicle. However the listings don’t disclose specific details on the style of damage suffered.
Insurance firms typically “total” a vehicle – that’s, decide to scrap it and reimburse the owner – when the estimated cost of repair is deemed too high.
Copart listings in some cases included the names of insurance firms that had bought back crashed vehicles, then listed them at auction. Those corporations include State Farm, Geico, Progressive and Farmers. Geico is an element of Warren Buffet’s Berkshire Hathaway Inc.
Insurance firms contacted by Reuters either declined to comment or didn’t respond immediately to requests.
Low mileage, high repair cost
Tesla launched its own insurance affiliate in August 2019, promising rates as much as 30% lower than competitors.
During Wednesday’s earnings call, Chief Financial Officer Zachary Kirkhorn said Tesla Insurance at year-end was generating premiums at an annual rate of $300 million and growing at a quarterly clip of 20% – “faster than the expansion in our vehicle business.”
All of the Model Ys within the Reuters evaluation were 2022 or 2023 models, and were built at either the Fremont plant in Northern California or the Austin, Texas, plant.
Of the 15 Model Y Long Range vehicles inbuilt Austin from June through November and sent to auction after being totaled in crashes, all but one had fewer than 10,000 miles on the odometer.
An Austin-built 2022 Model Y Long Range involved in a front collision and listed by IAA in early January had a retail price of $61,388 and estimated repair cost of $50,388. The vehicle’s owner was not listed.
A second Austin-built Model Y, involved in a side collision and listed by IAA, had a retail price of $72,667 and estimated repair cost of $43,814.
Representatives from Copart and IAA weren’t immediately available for comment.