Elon Musk’s insurance plans could make a difference for the Tesla brand

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During Tesla’s first quarter earnings call, Elon Musk noted that the company would offer a “compelling insurance product” for its vehicles. Musk even provided an estimated timeframe for the service’s launch, indicating that Tesla’s insurance would roll out within a month.

While the idea of ​​an in-house insurance program may seem like an unnecessary distraction for the electric car maker at this point, service could very well become a critical factor in Tesla’s pursuit of sustained profitability. So says Eddie Yoon, director of Cambridge Group, a company specializing in growth strategy. According to Yoon, a comprehensive and properly published insurance program could help make Tesla one of the most influential brands in the industry.

In an article on Harvard business reviewYoon notes that companies that grow into multi-billion dollar mega-brands typically experience several critical success factors. The first of these is to choose the correct first adjacency to enter. Since it is difficult to break into an untested market, successful companies typically opt for an adjacency that has a similar go-to-market model, or at least one where a strong partner could be leveraged. Tesla appears to be doing the latter by partnering with Markel to provide insurance to its customers.

The first adjacency must also have an attractive economy that could be measured, among other things, by how it could improve the core business of the company. This is relevant for Tesla, as the company’s vehicles are generally cheaper to operate than an internal combustion car. If Tesla can lower the price of insuring its vehicles through its own service, the company could make the idea of ​​owning an electric car more attractive and convenient for a wider range of customers.

Coupled with Tesla’s continued optimizations in the production of its vehicles, a strong and reasonable insurance program could result in increased sales of electric cars for the company. This, of course, gives Tesla a better chance of becoming profitable in the long run.

If Tesla is successful in rolling out its auto insurance service, the company could potentially expand the program to other areas of its business. Tesla is currently aiming to ramp up its energy business, with Elon Musk calling 2019 the “Year of the Solar Roof and Electric Wall”. Musk has also hinted at a “Tesla smart home” in the past. Perhaps these products could pave the way for a Tesla home insurance program in the future? Such a possibility is not exaggerated.

These ideas and initiatives may seem drastic in light of Tesla’s business today, but Yoon noted that other mega-brands are adopting similar strategies. Gerber Baby Food, for example, generated $ 900 million in life insurance premiums in 2017. This equates to about 75% of its core baby food business during the year. With that in mind, it seems Elon Musk’s idea for Tesla’s insurance department is not at all exaggerated.

Elon Musk’s insurance plans could make a difference for the Tesla brand







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