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Release of warrantee reserves

Discussion in 'TSLA Investor Discussions' started by Chickenlittle, Sep 1, 2014.

  1. Chickenlittle

    Chickenlittle Active Member

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    Thinking unexpected benefit to company of upgrade in cars. Not only does tesla sell new 400 mile range battery but gets to
    1. Recycle old pack and
    2. Release reserve on old battery pack warrantee. Maybe significant amount as the old packs are aging now

    not a large number of roadsters out there but when upgrade of model s packs available could be significant benefit to company
     
  2. bonnie

    bonnie Oil is for sissies.

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    I don't think there are that many Roadsters with replacement battery deals in place (very very few with warranties at this point, CPO or extended only). I'm one of the few that bought a replacement battery up front, but if I take the replacement before 2018, it's not a good deal for me under terms of the deal. And if I wait until Feb 2021, I get $1000 back for each year between 2018 & 2021. So I'm in no hurry to take a replacement. In fact, as long as my current battery maintains a decent range (which it is), I'd actively push back on taking a replacement. The longer I wait, the better it is for me.
     
  3. Chickenlittle

    Chickenlittle Active Member

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    I believe the battery warrantee was 7 years
     
  4. cpa

    cpa Member

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    From an accounting perspective, warranty reserves are an estimate. Only Tesla's accounting department knows the exact formula and calculation for this estimate. They probably have some sort of algorithm that weighs costs and probabilities to arrive at the reserve for warranty repairs/replacements. As Tesla obtains real-life experience with warranty replacements and repairs, they can refine this algorithm. This amount is a rolling figure, likely adjusted monthly based upon sales and actual warranty claims. It might be refined more precisely at the end of each quarter or certainly at the end of their fiscal year when their financial statements are audited.

    That said, your suggestion above will likely have no positive effect on their balance sheet and income statement. The new battery packs need warranty reserves too. In fact if this 400-mile range battery is more expensive than the 265-mile battery, the reserve in theory could be higher. This is especially true if the new pack came with the 8-year, unlimited mileage warranty. Tesla would have to calculate the net present value of the reserve all over again from an 8-year time frame, rather than the shorter time frame from the original sale. I would submit that the recycling of the old pack would just serve to reduce the sales price of the larger new battery pack, and it would have no impact on the calculation for warranty reserve.
     
  5. bonnie

    bonnie Oil is for sissies.

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    For Roadsters? No. I could have purchased an extended warranty at 3 years, with or without battery coverage. I'm flying warranty-free at this point. (But I do have that battery replacement option in place.)

    - - - Updated - - -

    From the CPO program for the Roadster:

    Screen Shot 2014-09-01 at 12.05.29 PM.png
     
  6. brian45011

    brian45011 Member

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    "For our Roadster customers, we provided a three year or 36,000 mile New Vehicle Limited Warranty with every Tesla Roadster, which we extended to four years or 50,000 miles for the purchasers of our 2008 Tesla Roadster."

    In the fourth quarter of 2013, in the entry "net change for pre-existing warranties" Tesla reduced the accumulated warranty reserves by $10,124,00. Presumably most of the reduction related to a reassessment of expected future Roadster expense. At the end of 2013, the warranty expense related to Model S battery protection was unresolved. Warranty reserves were increased in the first quarter of 2014 by a "net change" charge of $8,120,000.
     
  7. austinEV

    austinEV Active Member

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    I have noticed a thread throughout TMC that is going strong across several threads, that seems wrong to me. Why does everyone take it as an obvious fact that TM could take used cells from battery packs and reuse them in new vehicles? That seems absurd. The batteries have some amount of degradation. Maybe it will be minimal, maybe it will be a lot. But as a new car buyer, I think it would be clear that I was getting all new cells, not someone else's trade in.

    If I take an ICE into get the transmission looked at, and they conclude it has a manufacturing defect covered under warranty and I get a new one, does that car company *recycle* the transmission into a new car? What if it had 30k miles on it? That seems absurd, but everyone commonly comments that TM would obviously do the same on Model S'. I can accept the theory that an 85kWh used pack could be reused as a 60kWh software capped pack, since the degradation could be expressely absorbed in the capacity that is capped off anyway. But any other reuse theories seem like folly. So used packs could be repurposed for grid storage, or factory grid storage or something, and I hope they will. But why the chatter about putting them back into cars?
     
  8. djp

    djp Roadster 2.0 VIN939

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    My assumption is they'll treat the old batteries as highly concentrated ore, melt them down and extract the raw materials to build new batteries. Elon has mentioned this before on a conference call.
     
  9. Chickenlittle

    Chickenlittle Active Member

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    Why do you assume this? When you send in aluminum cans for recycling do they just refill with soda? Recycling is not just repackaging and selling
     
  10. austinEV

    austinEV Active Member

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    I am not talking about recycling. That is fine and makes sense. I am talking about how on TMC many people are speaking very clearly of reusing whole cells in new cars. In your first post, you said "Tesla gets to recycle the old pack". The scrap value of cells is pretty low, since they are aluminum casing, carbon, and a little bit of lithium. The scrap value is pretty low. So I was assuming you were talking about reusing whole cells into new packs. If not, I will take my concerns elsewhere.
     
  11. kalikgod

    kalikgod Member

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    I think any vehicle packs that get traded in for any sort of "upgraded pack", would have the cells harvested for use in a stationary storage application. The performance demands are much lower in stationary storage, but the cost per performance is much more sensitive. Automotive depreciation will have already ran its course on these cells.

    It is possible that Tesla would reuse the form factor (Model S battery) to reduce the amount of rework needed for the stationary product.
     
  12. gym7rjm

    gym7rjm Member

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    I haven't really seen these posts that you are referring to, or I ignored them. To my understanding the general consensus is that Tesla could recycle whole packs into stationary storage, or cells into raw materials. Unless they say something different, new S owners will always get new battery packs.

    I think someone mentioned that it could be a nice option for S60 owners to buy used 85 kWh packs. If Tesla will realize more profit from selling "factory certified" used packs back to owners than putting them into stationary storage, then it seems like a good deal to me, no? Owner gets an upgraded car for a fraction of the cost of buying a new battery or new car; Tesla gets more profit on the pack and still has the option to recycle into stationary storage further down the road.
     
  13. markwj

    markwj Moderator, Asia Pacific

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    I agree. They can't do that.

    But, they can recycle them and use them in old vehicles.

    If your battery pack fails at 20,000 miles, they don't have to replace it with a brand new one, but surely are able to use refurbished with equivalent capacity?
     
  14. austinEV

    austinEV Active Member

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    Is that a thing? Going back to my transmission example, if your BMW tranny went out at 20k miles, and they put in a refurbished one with 20k miles are you happy? I just don't see it. Again, I am a big fan of reusing cells down the value chain, by going into grid storage or something, but I don't get the re-use scenario.
     
  15. markwj

    markwj Moderator, Asia Pacific

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    I think it is.

    When my roadster battery pack had a problem after 6 months, I got a warranty replacement _equivalent_ pack, not a new one.
     

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