by Mike Gulett –
One of the advantages of being an established car manufacturer like General Motors, Ford or Mercedes-Benz (and many others) is that they know how to build in lowering the cost of repair and thus reduced insurance premiums into their initial design. Upstarts like Tesla are still learning this.
Reuters reports recently that “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.”
Tesla CEO Elon Musk said during the recent Tesla earnings conference call,
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. Most accidents are actually small — a broken fender or scratched side of the car.
It is remarkable to me that Elon Musk is just now learning this basic premise of car manufacturing.
Reuters goes on the report that out of the more than 120 Tesla Model Ys that were reported totaled and listed for auction in December 2022 and January 2023 most had fewer than 10,000 miles. The new retail prices of these Teslas ranged from about $60,000 to more than $80,000.
It is not normal for an insurance company to total a car with such low miles unless it is completely wrecked. This is due to the cost of the repair being so high that the cars were not worth the expense of repair.
Apparently the cost of insurance for a Tesla is much higher than other cars so Tesla started their own insurance company in 2019 for Tesla customers to try and compensate for this. But is starting an insurance company the best solution? Or should Tesla designers take the cost of repair into the initial design from the get go?
Below is another quote about repair costs from Musk that does not make sense to me. The manufacturer should know the cost of repair without being an insurance company. And the insurance companies want the repair costs to be as low as possible, right?
[Tesla insurance] 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,” CEO Elon Musk said during a recent earnings call, according to Teslarati. “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.
A design engineering team can focus on low manufacturing cost like say the Tesla method of stamping large body panels from one piece of metal or they could also consider the cost of repair when that body panel is damaged in an accident. In the accident scenario that one large body panel might be a very expensive option for repair. This will cause the insurance premiums to be higher because insurance companies must make money too.
Did Musk start an insurance division because the high insurance cost for a Tesla car was discouraging potential Tesla buyers or does he think this is really a good business idea?
Let us know what you think in the Comments.
The only person that can see through the EV hype at the moment is Mr Toyota. I congratulate him for having a bit more common sense than the other manufacturers.
John,
Unfortunately it was recently announced that Mr Toyoda is retiring.
I wondered about accident repairs when I heard Musk was trying to make his cars with as few body panels as possible. I assumed there were small pieces for repair, so if you get a dent the size of a medium pizza in the right rear fender why should you have to replace the whole side of the car?