Tesla Model S drive units have been receiving warranty replacements at a significant rate, so CEO Elon Musk issued a very generous warranty update.
Tesla is bent on proving electric motors are more reliable. Wholesale replacements of the drive unit after a year or two doesn’t back that up.
To deal with it, today he issued a blog post. Rather than re-writing it all, it’s brief enough that we’ll just let the company speak for itself:
August 15, 2014
Infinite Mile Warranty
By Elon Musk, CEO
The Tesla Model S drive unit warranty has been increased to match that of the battery pack. That means the 85 kWh Model S, our most popular model by far, now has an 8 year, infinite mile warranty on both the battery pack and drive unit. There is also no limit on the number of owners during the warranty period.
Moreover, the warranty extension will apply retroactively to all Model S vehicles ever produced. In hindsight, this should have been our policy from the beginning of the Model S program. If we truly believe that electric motors are fundamentally more reliable than gasoline engines, with far fewer moving parts and no oily residue or combustion byproducts to gum up the works, then our warranty policy should reflect that.
To investors in Tesla, I must acknowledge that this will have a moderately negative effect on Tesla earnings in the short term, as our warranty reserves will necessarily have to increase above current levels. This is amplified by the fact that we are doing so retroactively, not just for new customers.
However, by doing the right thing for Tesla vehicle owners at this early stage of our company, I am confident that it will work out well in the long term.
This move follows other liberal policies to remove objections to Tesla’s electric cars, including a hybrid lease/purchase buy-back provision, free Supercharging for life for models optioned to accept it, and already white-glove service treatment.
Musk has also said he expects his service departments to act at zero profit as an indicator of a job well done and its sales process is no-haggle, no pressure.
In his post above, Musk does acknowledge to investors this could have a “moderately negative effect on Tesla earnings in the short term.” Has the company that also gave its patents away this time gone too far?
Or, is Musk’s counterintuitive strategy of giving something away that traditional automakers would not going to keep making Tesla more successful like it has so far?