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Elon Musk’s Tesla insurance plans could ultimately prove Warren Buffett wrong

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During Tesla’s first-quarter earnings call, Elon Musk mentioned that the electric car maker is coming up with an insurance service for its vehicles. Musk noted that Tesla’s insurance plan would be unique in a way that it will leverage customer data collected from its fleet of vehicles. This will, according to the CEO, create a program that is “much more compelling than anything else” in the market.

Such statements sound very optimistic, and in true Elon Musk fashion, the CEO raised the bar for the upcoming service higher, adding that Tesla’s insurance program could see a launch as early as next month. These targets were unsurprisingly met with much skepticism. Tesla’s avid critics dismissed the plan and Musk’s comments as another “funding secured” moment, and even experienced investors expressed their doubts about the program’s potential success.

Doubts from the Oracle

Arguably the most notable critic of Tesla’s insurance plan is financial titan Warren Buffett, CEO of Berkshire Hathaway. Speaking at the Berkshire Hathaway annual meeting on Saturday, Buffett noted that Elon Musk’s insurance aspirations would likely fail. “It’s not an easy business. The success of the auto companies getting into the insurance business is probably as likely as the success of the insurance companies getting into the auto business,” he said.

The financial titan explained further, stating that veteran automaker General Motors had unsuccessfully attempted a similar program in the past under its Motors Insurance Company. Though Buffett, fondly known in the investment world as the “Oracle from Omaha,” admitted that the trove of data that Tesla gathers from its fleet, he argued that the electric car maker would likely not make money in its insurance endeavors.

“And I would bet against any company in the auto business (getting into insurance) being any kind of an unusual success. The idea of using telematics in terms of studying people — it is important to have data on how people drive, how hard they brake, how much they swerve, all kinds of things. So I don’t doubt the value of the data. But I don’t think the auto companies will have any advantage to that. I don’t think they’ll make money in the insurance business,” Buffett explained.

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A case for Tesla’s insurance plans

Buffett holds a lot of authority in the insurance industry, with Berkshire having Geico and General Reinsurance among its numerous subsidiaries. Yet, despite these concerns, Elon Musk’s plan for Tesla’s own insurance program could actually work. Contrary to speculations from the company’s critics suggesting that Musk is merely shooting from the hip, Tesla is actually working with experienced insurance firms to develop its own program. Among these is Markel Corporation (ironically dubbed at times as a “mini-Berkshire” stock). During the firm’s quarterly conference call last week, co-CEO Richard Whitt stated that one of Markel’s subsidiaries, State National, will provide the fronting for Tesla’s insurance.

“Often the people that have these innovative ideas have a hard time navigating the regulatory environment and being able to execute quite honestly on their innovative ideas. That’s where State National can come to the table and help them. In the case of the partnership with Tesla, State National is providing just that. They’re supporting innovative solutions that Tesla has [created] with risk-taking partners. And I don’t want to say any more than that, because obviously Tesla and the risk-taking partner have many things they probably want to say about the arrangement,” Whitt said.

Another advantage that Tesla might have with its upcoming program is that Elon Musk’s primary goal is likely not to “make money in the insurance business” in the near-term. Instead of chasing profits immediately after its rollout, Tesla’s insurance could simply be rolled out as a means to streamline the ownership experience of the company’s electric cars further. Together with several inherent advantages of the company’s vehicles, such as the absence of fuel purchases, affordable Supercharging rates, and unique driving dynamics offered by their all-electric powertrain, having a customized, worry-free insurance service could be yet another factor that can make Teslas attractive to car buyers.

A lot of the details surrounding Tesla’s insurance plans are yet to be announced, and it remains to be seen if the company could ultimately pull off an endeavor that could prove the world’s third-richest person wrong. Ultimately, just as it was far too early to discount SpaceX after the initial failures of the Falcon 1 rocket, it might simply be far too early to dismiss Elon Musk’s plans for Tesla’s own insurance program.

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Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

Elon Musk

Tesla investors will be shocked by Jim Cramer’s latest assessment

Jim Cramer is now speaking positively about Tesla, especially in terms of its Robotaxi performance and its perception as a company.

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Credit: CNBC Television/YouTube

Tesla investors will be shocked by analyst Jim Cramer’s latest assessment of the company.

When it comes to Tesla analysts, many of them are consistent. The bulls usually stay the bulls, and the bears usually stay the bears. The notable analysts on each side are Dan Ives and Adam Jonas for the bulls, and Gordon Johnson for the bears.

Jim Cramer is one analyst who does not necessarily fit this mold. Cramer, who hosts CNBC’s Mad Money, has switched his opinion on Tesla stock (NASDAQ: TSLA) many times.

He has been bullish, like he was when he said the stock was a “sleeping giant” two years ago, and he has been bearish, like he was when he said there was “nothing magnificent” about the company just a few months ago.

Now, he is back to being a bull.

Cramer’s comments were related to two key points: how NVIDIA CEO Jensen Huang describes Tesla after working closely with the Company through their transactions, and how it is not a car company, as well as the recent launch of the Robotaxi fleet.

Jensen Huang’s Tesla Narrative

Cramer says that the narrative on quarterly and annual deliveries is overblown, and those who continue to worry about Tesla’s performance on that metric are misled.

“It’s not a car company,” he said.

He went on to say that people like Huang speak highly of Tesla, and that should be enough to deter any true skepticism:

“I believe what Musk says cause Musk is working with Jensen and Jensen’s telling me what’s happening on the other side is pretty amazing.”

Tesla self-driving development gets huge compliment from NVIDIA CEO

Robotaxi Launch

Many media outlets are being extremely negative regarding the early rollout of Tesla’s Robotaxi platform in Austin, Texas.

There have been a handful of small issues, but nothing significant. Cramer says that humans make mistakes in vehicles too, yet, when Tesla’s test phase of the Robotaxi does it, it’s front page news and needs to be magnified.

He said:

“Look, I mean, drivers make mistakes all the time. Why should we hold Tesla to a standard where there can be no mistakes?”

It’s refreshing to hear Cramer speak logically about the Robotaxi fleet, as Tesla has taken every measure to ensure there are no mishaps. There are safety monitors in the passenger seat, and the area of travel is limited, confined to a small number of people.

Tesla is still improving and hopes to remove teleoperators and safety monitors slowly, as CEO Elon Musk said more freedom could be granted within one or two months.

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Investor's Corner

Tesla gets $475 price target from Benchmark amid initial Robotaxi rollout

Tesla’s limited rollout of its Robotaxi service in Austin is already catching the eye of Wall Street.

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Credit: Tesla

Venture capital firm Benchmark recently reiterated its “Buy” rating and raised its price target on Tesla stock (NASDAQ: TSLA) from $350 to $475 per share, citing the company’s initial Robotaxi service deployment as a sign of future growth potential.

Benchmark analyst Mickey Legg praised the Robotaxi service pilot’s “controlled and safety-first approach,” adding that it could help Tesla earn the trust of regulators and the general public.

Confidence in camera-based autonomy

Legg reiterated Benchmark’s belief in Tesla’s vision-only approach to autonomous driving. “We are a believer in Tesla’s camera-focused approach that is not only cost effective but also scalable,” he noted. 

The analyst contrasted Tesla’s simple setup with the more expensive hardware stacks used by competitors like Waymo, which use various sophisticated sensors that hike up costs, as noted in an Investing.com report. Compared to Tesla’s Model Y Robotaxis, Waymo’s self-driving cars are significantly more expensive.

He also pointed to upcoming Texas regulations set to take effect in September, suggesting they could help create a regulatory framework favorable to autonomous services in other cities.

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“New regulations for autonomous vehicles are set to go into place on Sept. 1 in TX that we believe will further help win trust and pave the way for expansion to additional cities,” the analyst wrote.

https://twitter.com/herbertong/status/1938287117441855616?s=10

Tesla as a robotics powerhouse

Beyond robotaxis, Legg sees Tesla evolving beyond its roots as an electric vehicle maker. He noted that Tesla’s humanoid robot, Optimus, could be a long-term growth driver alongside new vehicle programs and other future initiatives.

“In our view, the company is undergoing an evolution from a trailblazing vehicle OEM to a high-tech automation and robotics company with unmatched domestic manufacturing scale,” he wrote.

Benchmark noted that Tesla stock had rebounded over 50% from its April lows, driven in part by easing tariff concerns and growing momentum around autonomy. With its initial Robotaxi rollout now underway, the firm has returned to its previous $475 per share target and reaffirmed TSLA as a Benchmark Top Pick for 2025.

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Tesla blacklisted by Swedish pension fund AP7 as it sells entire stake

A Swedish pension fund is offloading its Tesla holdings for good.

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tesla
(Credit: Tesla)

Tesla shares have been blacklisted by the Swedish pension fund AP7, who said earlier today that it has “verified violations of labor rights in the United States” by the automaker.

The fund ended up selling its entire stake, which was worth around $1.36 billion when it liquidated its holdings in late May. Reuters first reported on AP7’s move.

Other pension and retirement funds have relinquished some of their Tesla holdings due to CEO Elon Musk’s involvement in politics, among other reasons, and although the company’s stock has been a great contributor to growth for many funds over the past decade, these managers are not willing to see past the CEO’s right to free speech.

However, AP7 says the move is related not to Musk’s involvement in government nor his political stances. Instead, the fund said it verified several labor rights violations in the U.S.:

“AP7 has decided to blacklist Tesla due to verified violations of labor rights in the United States. Despite several years of dialogue with Tesla, including shareholder proposals in collaboration with other investors, the company has not taken sufficient measures to address the issues.”

Tesla made up about 1 percent of the AP7 Equity Fund, according to a spokesperson. This equated to roughly 13 billion crowns, but the fund’s total assets were about 1,181 billion crowns at the end of May when the Tesla stake was sold off.

Tesla has had its share of labor lawsuits over the past few years, just as any large company deals with at some point or another. There have been claims of restrictions against labor union supporters, including one that Tesla was favored by judges, as they did not want pro-union clothing in the factory. Tesla argued that loose-fitting clothing presented a safety hazard, and the courts agreed.

tesla employee

(Photo: Tesla)

There have also been claims of racism at the Fremont Factory by a former elevator contractor named Owen Diaz. He was awarded a substantial sum of $137m. However, U.S. District Judge William Orrick ruled the $137 million award was excessive, reducing it to $15 million. Diaz rejected this sum.

Another jury awarded Diaz $3.2 million. Diaz’s legal team said this payout was inadequate. He and Tesla ultimately settled for an undisclosed amount.

AP7 did not list any of the current labor violations that it cited as its reason for

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