Tesla, insurers take different paths to deal with expensive repairs
By Paul Lienert
Jan 26 (Reuters) -Tesla Inc's TSLA.O electric vehicles are expensive to repair - so much so that the automaker and insurers are addressing the issue in sharply different ways.
Chief Executive Elon Musk says Tesla is making design and software changes to its vehicles to lower 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 deeming many too expensive to repair.
During Tesla's fourth-quarter earnings call on Wednesday, Musk said premiums from third-party insurance companies "in some cases were unreasonably high" and that the EV maker's insurance arm was putting pressure on those carriers by offering lower rates to Tesla owners.
Musk also said "we want to minimize the cost of repairing a Tesla if it's in a collision," citing 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 did not respond to a request for further comment.
So far, Tesla's reputation for expensive vehicle repairs does not seem to have dampened demand, which Musk says is running well ahead of the company's ability to produce.
The data on crashed low-mileage Teslas showing up at auction presents a slightly different - and previously unreported - picture, according to a Reuters analysis.
Of more than 120 Model Ys that were totaled after collisions, then listed at auction in December and early January, the vast majority had fewer than 10,000 miles on the odometer, according to online data from Copart and IAA, the two largest salvage auction houses in the United States.
The retail prices of those cars ranged from about $60,000 to more 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 each vehicle. But the listings do not disclose specific details on the type of damage suffered.
Insurance companies typically "total" a vehicle - that is, choose 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 companies that had bought back crashed vehicles, then listed them at auction. Those companies include State Farm, Geico, Progressive PGR.N and Farmers. Geico is part of Warren Buffet's Berkshire Hathaway Inc BRKa.N.
Insurance companies contacted by Reuters either declined to comment or did not respond immediately to requests.
Tesla launched its own insurance affiliate in August 2019, promising rates up to 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 growth in our vehicle business."
All the Model Ys in the Reuters analysis 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 built in 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 were not immediately available for comment.
Reporting by Paul Lienert in Detroit
Editing by Matthew Lewis
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.