Aside from the actual price, consumers are expected to shoulder a number of additional costs when purchasing a new vehicle. This includes monthly bills that have to be paid for insurance and maintenance.
Like the bulk of the car owners, Elon Musk has taken issue with it and promptly outlined a plan to do away with insurance and maintenance fees once and for all.
One-Time, Reduced Car Insurance
The proposal, which was revealed in a meeting with investors last Feb. 22, involves paying a one-time insurance and maintenance fee that will cover a Tesla EV throughout the course of its life span.
In this business model, Tesla will first pay the insurance and that the cost will just get lumped with a car's purchase price.
The concept is not the same as saying Tesla will add all the monthly insurance and maintenance bills for a car's lifetime and let the customer pay for it upfront. The reason is that Tesla will be negotiating a reduced cost, one that matches the development of its EV and Autopilot driver assist technology.
Less Accident Risk
The idea is that, as Autopilot gets developed and become more sophisticated, the risk of accident decreases.
"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," Musk told investors. "But I think we'll find that insurance providers do adjust the insurance cost proportionate to the risk of a Tesla."
Note how Musk indicated that Tesla could even dive into the insurance business if it found that insurance companies will not accommodate the pricing that Tesla wants according to its estimate of the risk.
Custom Tesla EV Insurance Cost
If successful, however, the cost reduction we are talking about here could be significant as the risk when driving a Tesla EV is indeed radically lower than that posed by conventional cars. Based on an NHTSA report, for example, one fatality occurs every 90 million miles driven in the United States. In contrast, Tesla cars have already logged 200 million miles and so far there was only one death reported.
Musk proposal is not being put forward without any backing whatsoever. The business model has been implemented in Hong Kong and Australia already and it seems to be working. So far, Musk has not confirmed any figure yet or the schedule of its rollout in the United States. But if the scheme gets implemented, buyers should expect to pay a little more than the existing price points for Tesla EVs such as the upcoming Model 3, with its $35,000 price tag.
