Tesla: “In the Future We Could Offer a Single Price for the Car, Maintenance, and Insurance”

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In Brief
  • During a recent earnings report, Tesla executives suggested they are considering offering the car, maintenance, and insurance as a bundle, a method they’re already testing in Asia.
  • With self-driving cars expected to greatly reduce the chances of accidents, insurance companies will need to adjust insurance costs to account for the lower risk.

Three-In-One

Tesla’s latest earnings report is out, and all in all, things are looking up for the company. It reported better earnings for 2016’s fourth fiscal quarter (Q4), with a 73 percent increase from the same quarter in 2015.

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Tesla also reported record-high car orders for both the Model S and Model X. Part of this success may have to do with a new way of selling electric cars that Tesla has been quietly trying out in Asia. Jon McNeill, president of sales and services at Tesla, said during the fourth-quarter earnings call that they want to bundle insurance and maintenance into future pricing for their cars.

“It takes into account not only the Autopilot safety features but also the maintenance cost of the car,” he said according to Business Insider. “It’s our vision in the future we could offer a single price for the car, maintenance, and insurance.”

A Vision of the Future?

According to Tesla’s Q4 earnings report, all vehicles in production “have the hardware necessary for full self-driving.” Advances like this, together with Tesla’s latest improvements in its Autopilot software, are securing the future of self-driving vehicles, and now, the company is also changing the car insurance landscape. According to a report from Bank of America and Merrill Lynch, as self-driving cars get better and decrease the number of accidents on the roads, insurance premiums are expected to drop.

Tesla’s bundle pricing is meant to adapt to that future, and it adds another unique selling point for the company, whose car sales don’t follow the usual heavy-on-maintenance pricing models of other car manufacturers. “If we find that the insurance providers are not matching the insurance proportionate to the risk of the car then if we need to we will in-source it,” CEO Elon Musk said during the earnings call. “But I think we’ll find that insurance providers do adjust the insurance cost proportionate to the risk of a Tesla.”

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