According to a recent valuation by CEO Elon Musk, the company is headed in that direction.
If a recent valuation of the Tesla car insurance offshoot of the electric vehicle company is to be believed, it could eventually become one of the largest auto insurers in the United States.
Musk dropped several hints of this nature during a recent quarterly earnings call.
Musk discussed the Tesla car insurance unit in terms of comprising a substantial portion of the company’s auto business.
“Obviously, insurance is substantial. So, insurance could very well be, I don’t know, 30%, 40% of the value of the car business, frankly,” said Musk.
Though thirty percent may not seem as though it is a substantial figure, a recent CleanTechnica report attempted to shed clearer light on this amount. Its tallies indicate that Tesla’s value was greater than just about every S&P 500 company as of July 2020. The clean technology news source underscored that the electric vehicle company’s market cap is currently $391.95 billion.
Therefore, if the Tesla Insurance unit is worth about 30 percent of the company’s present market cap – the lower end of the range cited by Musk – it would easy step into the top spot, pushing State Farm – the current insurer in the lead of the auto policy market – into second place. State farm’s market cap is currently $42 billion.
During the call, Musk went on to describe Tesla car insurance’s solid position within the market.
According to Musk, the company is well prepared to be competitive within the insurance market. He stated that the company is equipped with a “much better feedback loop” as opposed to relying on statistics, as is the typical case among conventional insurers.
“And obviously, somebody does not have to choose our insurance. But I think a lot of people will. It’s going to cost less and be better, so why wouldn’t you?” he added.
As a result of Tesla car insurance, the electric automaker as a whole receives substantial insight into the costs associated with repairing its own vehicles. It is that feedback loop to which Musk was referring and that provides its insurance unit with an advantage over conventional insurers. With that additional information, the company can continually adjust not only its processes but also its vehicle designs in order to make their repairs more affordable. Over time, this has the potential to provide its customers with savings.