For consumers, costlier insurance makes electric cars tough to choose, but they will have relief this year as Tesla and GM plans to go big in a new car insurance business.
Tesla plans to extend its company-backed insurance to 45 states by the end of the year from the current 5 states. GM hopes to hit $6 billion in annual insurance revenue by the end of the decade.
Insurance is shaping the finance side of the business of automakers and can help in driving innovation and making adoption easier since data created by the cars is captured for delivering lower insurance prices and automakers hope to cement customer loyalty.
Wedbush analyst Dan Ives said, “Tesla could insure 300,000 cars by 2025. This is a 2024-25 initiative, but they are laying the foundation”
According to CFRA Research analyst Garrett Nelson, “EVs are expensive to insure because their off-the-line speed makes traditional insurers wary. And partly because relatively few mechanics know how to fix them, they can be expensive to repair after an accident.”
Nelson said, “Tesla is more comfortable with its vehicles. And they’ve created a trend. GM and others are looking at the same thing.”
At Tesla, the insurance for EVs is now available in California, Florida, Illinois, Texas, and Ohio. Tesla hopes to make its insurance coverage available to 80% of U.S. consumers by the end of this year.
Chief Financial Officer of Tesla Zach Kirkhorn said, “The cars send company so much information about how they are being driven – letting the company send guidance back to drivers – that the real-time feedback results in quite a bit lower accident rates.”
CEO of Tesla Elon Musk said, “If they drive safe, their insurance cost is less, so they drive safer. It encourages Tesla Insurance with informatics and real-time feedback encourages safer driving and rewards it monetarily. It’s great.”