HOW TO PLAY IT
If usage-based car insurance is the future, Tesla could become the biggest beneficiary of the trend. According to Tesla owners I have surveyed as well as published reports, Tesla’s autopilot is arguably a better, safer driver than the average human. Consequently, insurance rates for Tesla owners—who are currently charged a premium—should go down the more owners engage autopilot. Moreover, because of their embedded cloud-based tracking, Teslas are harder to steal. Reducing the total cost of ownership is one of the main obstacles to Teslas becoming as common as Camrys. If insurers begin to give credit for consistent autopilot usage and Tesla owners save on premiums, then Tesla could become mainstream sooner. Given Tesla’s “Ford-topping” valuation, Goldman Sachs and UBS rate it a sell. Use their skepticism as a buying opportunity.
Ken Kam is the president of Marketocracy Capital Management.