While Elon Musk noted during the Q4 and FY 2022 earnings call that data from Tesla Insurance is helping the company minimize vehicle repair costs, the story seems different for Teslas that are covered by other insurance providers. As per a recent report, even low-mileage Teslas are already being written off by insurance companies.
Elon Musk described Tesla’s efforts to lower its vehicles’ cost of repair in the recent earnings call. “We’ve actually adjusted the design of the car and made changes in the software of the car to minimize the cost of repair… So it’s giving us this really good feedback before, again, reducing cost,” Musk said.
Outside Tesla Insurance’s coverage, the situation is different, at least according to a Reuters analysis. Data from Copart and IAA, which are among the largest salvage auction houses in the US, indicated that many “totaled” Model Y units listed for auction in December and January had fewer than 10,000 miles on their odometers. Considering that these vehicles were bought prior to Tesla’s price cuts earlier this month, the retail prices of the cars were about $60,000 to over $80,000.
Insurance companies usually consider a vehicle a total loss when the cost of repairing it is deemed too high. Interestingly enough, out of the 15 Giga Texas-made Model Y Long Range vehicles that were part of the publication’s analysis and declared as total losses from June to November, 14 had fewer than 10,000 miles on their odometers.
These include a Giga Texas-made 2022 Model Y Long Range, which was listed by IAA with front collision damage in early January. The vehicle had a retail price of $61,388 and an estimated repair cost of $50,388. Another Model Y, which was listed with side collision damage, had a retail price of $72,667 and an estimated repair cost of $43,814.
As per Reuters’ analysis, several prominent insurance companies such as State Farm, Geico, Progressive, and Farmers, are among the providers that have considered low-mileage damaged Teslas too expensive to repair.
Considering the estimates for the repair of damaged Teslas, it is no surprise that some insurance companies are opting to write off the damaged vehicles as total losses. It’s difficult to argue, however, that such a strategy is wasteful. At this point, it seems like the best-case scenario for Tesla is to ramp up the expansion of its insurance service. This way, its owners are not burdened by insurance providers that do not seem to fully understand their vehicles.
Elon Musk said as much during the fourth quarter and full-year 2022 earnings call last week, when he explained how Tesla Insurance is giving the company a good feedback loop on how to optimize the costs of its vehicles’ repair.
“It is also giving us a good feedback loop into minimizing the cost of repair of Teslas — for all Teslas worldwide — because we obviously want to minimize the cost of repairing a Tesla if it’s in a collision… And previously, we didn’t actually have good insight into that because the other insurance companies would cover the cost. And actually, the cost in some cases were unreasonably high,” Musk said.
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