Tesla EVs, Even Mildly Damaged, Are Being Written Off by Insurance Companies

There were 120 Tesla Model Y electric vehicles listed in two large salvage auction houses recently, and the “vast majority” had under 10,000 miles on them, according to a report from the Reuters news service.The insurance companies that covered these vehicles decided that even with so few miles on them, these Teslas aren’t worth the $50,000 or so they sometimes cost to repair.The cost to fix a car has gone up as the ease has decreased over the years, which has prompted a discussion over so-called Right to Repair laws, which would give owners more rights to fix the things they buy.

Right-to-repair laws are starting to get some traction, giving customers more rights to fix the products they buy. But just because you can fix something doesn’t mean that it will be easy or affordable. Repairing your own car has become less and less common over the years, but at least local mechanics can come to the rescue . . . usually. When it comes to Tesla electric vehicles, though, some insurance companies are reportedly deciding that even low-mileage vehicles aren’t worth the hassle.

Owners of certain automotive brands know that expensive repair bills come with the territory. But that doesn’t mean insurance companies want to play that game, and some of them are increasingly deciding to write off low-mileage Tesla electric vehicles because they are too expensive to fix, according to a new report from Reuters.

Reuters looked at recent salvage auction listings and found that the “vast majority” of the 120 Model Y vehicles listed had less than 10,000 miles on them. While these EVs originally cost between around $60,000 and $80,000, high repair costs will keep them off the road in the future, despite their low odometer readings. A $61,000 2022 Model Y Long Range EV, for example, was in a front collision and would have cost more than $50,000 to fix had the insurer approved the repair. Reuters was not able to determine the types of incidents that caused the damage in these cases but did note that multiple well-known insurance brands, including State Farm, Geico, and Progressive, all decided the fix wasn’t in.

Insurance Bill up to 30 Percent Higher

It’s not like people aren’t paying to protect their Teslas. In late 2022, Nerdwallet reported that the average Tesla owner with a good driving history and good credit could expect to pay about $2040 a year for a Model Y and as much as $3044 for a Model X. The average cost to insure a Model 3 is almost 30 percent higher than the national average for car insurance, Nerdwallet said.

Exactly how much more it costs to repair the average Tesla after an incident compared to other vehicles, both electric and ICE models, is difficult to gauge, but Tesla has long been aware that insurance costs for its EVs are out of line with the average cost for the industry. Tesla started offering its own insurance policies for customers in late 2019, promising that it would lower costs for Tesla drivers. Customers could certainly benefit from lower costs. As a story from The Drive in 2021 showed, a Tesla service center quoted one Model 3 owner $16,000 to fix a battery pack coolant leak after it was damaged by road debris. An independent mechanic was able to fix the issue for $700, and The Drive argued the story proved that the Right to Repair is an important issue for EVs.

Tesla Model 3.

Chris Doane|Car and Driver

For its part, Tesla’s insurance side business is now helping the automaker lower future repair costs, according to company executives. “[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.”

Tesla is using its insurance arm to make changes in how it designs its vehicles, Musk said on the call, according to Reuters. “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.”