Since they give you a new airbag, $700 is quite the deal. I guess they can recycle your airbag, but that sounds sketchy to put used airbags, that could easily have cosmetic damage from the previous owner, into new cars.
Say what one will about Tesla, but I've never felt they gouge on parts pricing. A wheel + airbag + dispatching a mobile technician (or even in-house at the service center) isn't cheap. $700 seems very reasonable for all that IMO.