Tesla Motors Inc (TSLA) Leads the Way For the Industry by Warranty Extension Move


According to the article by Chris Ciaccia from TheStreet, Tesla Motors Inc (NASDAQ:TSLA)’s recent modification of the warranty on the Model S drive unit to unlimited mileage and the battery pack for eight years will help the electric auto sector by making people rethink it.

Tesla Motors Inc (NASDAQ:TSLA)’s CEO Elon Musk wrote in a blog post on the company’s website: “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.”

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TheStret quotes Andrea James, Vice president at research firm Dougherty & Company, as saying that the decision has the potential to become Tesla Motors Inc (NASDAQ:TSLA)‘s “Hyundai moment in the U.S.”, reminding that when Hyundai entered the U.S. market, it made dramatic market share gains by boosting the warranty on its powertrain to 10 years and 100,000 miles. Edmunds analyst Jeremy Acevedo noted that electric vehicle makers need to do what they can to attract more people, and that it would not be surprising to see other makers from the sectors following Tesla Motors Inc (NASDAQ:TSLA)’s path.

Elon Musk justified the move by saying that if electric vehicles are more reliable than internal combustion engines, the company’s warranty policy should reflect it. He also said the decision would have a moderately negative effect on Tesla Motors Inc (NASDAQ:TSLA)’s short-term earnings, but that the long-term impact will be positive. Tesla Motors Inc (NASDAQ:TSLA)’s share price slipped by 0.8% to $ 260, in a day when the major market indices were up 1%.

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