Published on March 1st, 2017 | by Steve Hanley0
Tesla Is Bundling Insurance & Maintenance Costs Into Price Of Cars In Asian Markets
March 1st, 2017 by Steve Hanley
Originally published on Gas2.
Always three jumps ahead of the competition, Tesla has begun including the cost of insurance and maintenance into the price of its cars in Asian markets. During the conference call with analysts last week, one caller asked if Tesla is considering creating its own insurance company because traditional insurers are not offering Tesla drivers steep enough discounts. Recently NHTSA announced that Teslas with Autopilot functionality are involved in 40% fewer crashes. The caller suggested the companies are only offering discounts of between 5% and 10% to Tesla drivers despite the lower collision rate.
Yes and no, replied Tesla vice president of Global Investor Relations Jeff Evanson.“We’re actually currently doing that. We’ve been doing it quietly, but in Asia in particular where we started this, now the majority of Tesla cars are sold with an insurance product that is customized to Tesla, that takes into account not only the Autopilot safety features but also the maintenance costs of the car. It’s our vision in the future that we’ll be able to offer a single price for the car, maintenance and insurance in a really compelling offering for the consumer. And we’re currently doing that today.”
Making the buying experience as seamless and comfortable as possible is one of Tesla’s primary goals. Later, Elon expanded on Evanson’s remarks.“This is not to the exclusion of insurance providers if we find that insurance providers are not matching the insurance proportionate to the risk of the car. If we need to we’ll in-source it, but I think we’ll find that our insurance partners do adjust rates proportionate to the risk of a Tesla.”
So the answer is that Tesla will work with established insurance companies as long as it thinks its customer are being treated fairly. Some industry observers have suggested that automobile insurance may go the way of the dodo once self driving technology becomes the norm. Lawrence Walker of the Rocky Mountain Institute estimates insurance premiums could fall by 90% over time, driving many companies out of the auto insurance business.
Adding in maintenance cost to the price of the car is another innovative strategy. Most traditional dealers rely on income from their service departments to generate the majority of their profits. If Tesla disrupts the service business the same way it has the sales business, it could have a devastating effect on dealers. Including the cost of maintenance in the price of the car means it can be included in the loan or lease price. The result will be just a tiny increase in the monthly payment.
Most car owners would rather have a root canal without Novacaine than go to a dealer for service because they fear having to pay a big bill when it is over. Knowing service is paid for in advance will give Tesla owners peace of mind seldom found with other brands. Musk also told the audience at the Q4 earnings call that 80% of service issues are minor and can be fixed with just a simple adjustment or a software upgrade.
As it looks forward to more Teslas on the road once the Model 3 goes on sale, it is instituting a mobile service program in which a Tesla service technician will come to the owner’s home or place of business to make needed repairs. Not only will that reduce the wait time for an appointment at Tesla Service Centers, it will build greater brand equity. Imagine how jealous your neighbors will be when they see your Tesla being serviced in your driveway by a factory trained professional.
We have come to expect such innovations from Tesla. The wonder is not that Tesla always seems to be leading the pack so much as it that the legacy automakers don’t seem to fully appreciate the size of the tsunami that is about to hit them.
Source and photo credit: Tesla.
Reprinted with permission.
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