I came across this article on automakers' warranty costs and reserves: U.S. Asian Auto Warranty Report, 16 July 2015
Tesla seems to have the lowest warranty costs but reserves the highest amount per car by far. Is Tesla being overly conservative or is it just because the Model S is a more expensive car?
Tesla seems to have the lowest warranty costs but reserves the highest amount per car by far. Is Tesla being overly conservative or is it just because the Model S is a more expensive car?
Excerpts said:Tesla, meanwhile, presents its own puzzle. Its claims rate was below one percent in 2013. And while it rose to 1.25% in 2014, it was still the lowest of these four companies, as it has been for four solid years in a row. Yet its accrual rate per vehicle sold is astronomical -- the highest in the world, at least for passenger cars. How can a company with such low claims costs per dollar earned have such incredibly high accrual costs per unit sold?
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And then there's Tesla. As is clear in Figure 10, Tesla's electric cars are really in a different product category when it comes to warranty costs. First of all, the company is setting aside between $2,700 and $3,800 when a vehicle is sold, suggesting that it expects to incur at least that much cost over the life of its warranty. Second of all, that's between 3-1/2 and 11 times as much as the others accrue per unit when they sell a combustion-engine-powered vehicle.
That's an astonishing difference. It's almost as if we're comparing cars and trucks here. It's like we're noting that Paccar Inc. or Navistar International are setting aside thousands of dollars for every truck they sell, and comparing that to the $350 or $500 that Ford and GM are accruing per car they sell.