Tesla Motors Inc is expanding the warranty for its electric Model S sedan by offering unlimited distance for the drive unit and battery pack to eight years to ease reliability concerns, a move that is set to crimp profit.
“[The] drive-unit warranty has been increased to match that of the battery pack... There is also no limit on the number of owners during the warranty period,” Tesla chief executive officer and co-founder Elon Musk said on Friday on the company’s Web site.
The changes in coverage for the Model S, which affect both new and existing customers, would have a “moderately negative effect” on earnings in the short term, said Musk, who is also Tesla’s biggest shareholder. The company is making the change to reinforce its belief that electric motors are more reliable than gasoline engines, he said.
The announcement comes after Tesla’s flagship vehicle, ranked as the best-reviewed car of the year by Consumer Reports magazine in February, exhibited flaws following continued use, the magazine recently reported. Last month, auto data and pricing company Edmunds also reported glitches with its Model S after more than a year of heavy driving. The entire vehicle, including drivetrain, previously had a warranty for four years or 80,450 kilometers.
“This obviously addresses concerns owners and potential owners may have had after those reports,” Baum & Associates auto analyst Alan Baum said. “The bigger issue is have they resolved the manufacturing issues that led to these problems?”
Tesla’s so-called infinite warranty might also help boost Model S resale values, Kelley Blue Book senior industry analyst Karl Brauer said.
“Eight-year, unlimited coverage on the warranty is going to help when someone sells the car after three or four years,” Brauer said. Musk has “made it as painless as possible to deal with unexpected service issues.”
Consumer Reports and Edmunds both said problems they had experienced with the Model S, priced from US$71,000 in the US, were repaired by Tesla and covered under warranty at no additional cost.
The company said on July 31 that its warranty reserve at the end of the second quarter was US$84.4 million, up from US$36.9 million a year earlier, reflecting the expansion of vehicle sales.
Tesla has a target of delivering at least 35,000 cars this year, up about 60 percent from last year. Production is accelerating at its plant in Fremont, California, to a pace of 50,000 units by the end of the year, and is to double to a rate of 100,000 units by late 2015, Musk said last month.
“In hindsight, this should have been our policy from the beginning of the Model S program,” Musk said. “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.”
ADVANCED: Previously, Taiwanese chip companies were restricted from building overseas fabs with technology less than two generations behind domestic factories Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, would no longer be restricted from investing in next-generation 2-nanometer chip production in the US, the Ministry of Economic Affairs said yesterday. However, the ministry added that the world’s biggest contract chipmaker would not be making any reckless decisions, given the weight of its up to US$30 billion investment. To safeguard Taiwan’s chip technology advantages, the government has barred local chipmakers from making chips using more advanced technologies at their overseas factories, in China particularly. Chipmakers were previously only allowed to produce chips using less advanced technologies, specifically
BRAVE NEW WORLD: Nvidia believes that AI would fuel a new industrial revolution and would ‘do whatever we can’ to guide US AI policy, CEO Jensen Huang said Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) on Tuesday said he is ready to meet US president-elect Donald Trump and offer his help to the incoming administration. “I’d be delighted to go see him and congratulate him, and do whatever we can to make this administration succeed,” Huang said in an interview with Bloomberg Television, adding that he has not been invited to visit Trump’s home base at Mar-a-Lago in Florida yet. As head of the world’s most valuable chipmaker, Huang has an opportunity to help steer the administration’s artificial intelligence (AI) policy at a moment of rapid change.
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) quarterly sales topped estimates, reinforcing investor hopes that the torrid pace of artificial intelligence (AI) hardware spending would extend into this year. The go-to chipmaker for Nvidia Corp and Apple Inc reported a 39 percent rise in December-quarter revenue to NT$868.5 billion (US$26.35 billion), based on calculations from monthly disclosures. That compared with an average estimate of NT$854.7 billion. The strong showing from Taiwan’s largest company bolsters expectations that big tech companies from Alphabet Inc to Microsoft Corp would continue to build and upgrade datacenters at a rapid clip to propel AI development. Growth accelerated for
RSS