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Tesla And Insurers Adopt Different Approaches To Dealing With Costly Repairs

Tesla And Insurers Adopt Different Approaches To Dealing With Costly Repairs
Tesla Inc's electric vehicles are expensive to repair, so the automaker and insurers are approaching the issue in diametrically opposed ways.
Elon Musk, Tesla's CEO, has stated that the company is making design and software changes to its vehicles in order to reduce repair costs and insurance premiums.
Meanwhile, insurance companies are writing off low-mileage Tesla Model Ys that have been in accidents and sending them to salvage auctions after determining that many are too expensive to repair.
Musk stated during Tesla's fourth-quarter earnings call on Wednesday that premiums from third-party insurance companies were "in some cases 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 stated that "we want to minimize the cost of repairing a Tesla if it is in a collision," citing changes to vehicle design and software as examples.
"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."
There were no comments on the issue from Tesla.
So far, Tesla's reputation for costly vehicle repairs does not appear to have dampened demand, which Musk claims is far outpacing the company's ability to produce.
According to a Reuters analysis, data on crashed low-mileage Teslas appearing at auction paints a bit distinct - and previously unreported - picture.
According to online data from Copart and IAA, the two largest salvage auction houses in the United States, the vast majority of the more than 120 Model Ys that were totaled after collisions and then listed at auction in December and early January had fewer than 10,000 miles on the odometer.
The retail prices of those vehicles ranged from around $60,000 to over $80,000.
Copart and IAA auction listings indicate whether the vehicles were involved in front, rear, or side collisions, and each vehicle typically includes after-crash photos. However, the listings do not provide specifics on the type of damage sustained.
When the estimated cost of repair is deemed too high, insurance companies typically "total" a vehicle, that is, choose to scrap it and reimburse the owner.
In some cases, Copart listings included the names of insurance companies that had purchased crashed vehicles and then auctioned them off. State Farm, Geico, Progressive, and Farmers are among those companies. Geico is a subsidiary of Berkshire Hathaway Inc., which is owned by Warren Buffet.
There were no comments available from insurance companies.  
In August 2019, Tesla launched its own insurance subsidiary, promising rates up to 30% lower than competitors.
During the company's earnings call on Wednesday, Chief Financial Officer Zachary Kirkhorn stated that Tesla Insurance generated $300 million in premiums last year and was growing at a quarterly rate of 20% - "faster than the growth in our vehicle business."
The Model Ys in the Reuters analysis were all 2022 or 2023 models built at either the Fremont, California, or Austin, Texas, plants.
All but one of the 15 Model Y Long Range vehicles built in Austin from June to November and auctioned off after being totaled in crashes had fewer than 10,000 miles on the odometer.
The retail price of an Austin-built 2022 Model Y Long Range involved in a front collision and listed by IAA in early January was $61,388 with an estimated repair cost of $50,388. The owner of the vehicle was not identified.
The retail price of a second Austin-built Model Y involved in a side collision and listed by IAA was $72,667, with an estimated repair cost of $43,814.
Copart and IAA representatives were not immediately available for comment.

Christopher J. Mitchell

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