As any Tesla Roadster, Tesla Model S or Tesla Model X owner will tell you, the way in which Tesla Motors [NASDAQ:TSLA] approaches after sales service is very different from your traditional automaker.
For a start, Tesla owns and operates its own service centers. They’re not part of a third-party franchised network, meaning Tesla has complete control over customer experience, pricing structure and warranty repairs. Where possible, Tesla service staff go the extra mile too, often replacing more than is strictly required on a customer’s vehicle as part of a warranty claim to ensure that future problems are kept to an absolute minimum.
For Tesla, service duties have always been treated as a way to help customers continue to enjoy their car — presumably so they’ll buy another one when a newer, improved model is released. They have not been a way to bleed extra income from a customer, something that Tesla Motors CEO Elon Musk has accused traditional automakers and franchised dealerships of doing on more than one occasion. Consequently, Tesla has earned itself a reputation for offering various service products and extended warranties at cost price, making little or no money on service. It has even let customers transfer their extended warranties (extended service agreements) to new customers in exchange for a one-off $100 payment, a practice not usually carried out in the automotive world.
That is, until last week, when Tesla seemingly changed its after-sales policies on extended warranty, essentially preventing original owners from passing on the perks to the car’s new owner in the case of a private sale.
As you might expect, the whole thing has got some Tesla owners pretty pissed, but says Tesla in an email to Transport Evolved this afternoon, the apparent change in policy was nothing more than an erroneous posting on its website during some routine maintenance.
“A change to Tesla’s Extended Service Agreement was posted with an error. Tesla owners can indeed transfer the unused portion of their Extended Service Agreement with the sale of their Tesla,” A Tesla spokesperson told us via email moments ago. “Our practice of refunding the unused portion of the Extended Service Agreement also continues. In addition, Tesla owners can transfer the unused value of their Extended Service Agreement towards an Extended Service Agreement for a new Tesla Model S or Model X.”
That apparent change in policy, first noted by a forum member of Feburary 9, had already attracted more than 300 replies from Tesla owners on the Tesla Motors Club forum ranging from subdued disappointment to downright fury before we heard from Tesla. The discourse was also picked up by The Verge, who noted that at the same time, Tesla increased the price of its annual service contract from $1,900 for four years or $3,800 for 8 years up to $2,100 for 4 years or $4,000 for 8 years. While that’s not a massive price increase for a high-end luxury car and is well in line with inflation, it wasn’t a welcome addition alongside what appeared to be the removal of warranty transfer.
“I expect companies will change terms as time goes on, but the terms I agreed to when I purchased my 8-year Service & 4-year Extended Service plans can’t be changed willy-nilly just because a company wants to,” wrote one owner on the Tesla Motors Club forum, while another moaned that “In this case, [Tesla is] certainly not being like other car companies as no other car manufacturer I know has such draconian policies for an extended warranty (ESA).”
Before hearing from Tesla, we, along with many owners posting on the Tesla Motors Club Forum, postulated the apparent change in policy had something to do with Tesla’s Certified Pre owned (CPO) program.
A highly-popular program among existing Tesla owners and used Tesla owners alike, Tesla’s CPO program allows customers to buy a pre-loved Tesla from a large selection of Tesla Model S electric cars which have been exchanged by Tesla customers for a new model, or returned at least end.
Under the CPO program, Tesla provides a four-year, 50,000-mile limited warranty, as well as access to the same kind of lease deals and pre-owned financing available for new Tesla electric cars. Customers can also opt to purchase their own service plans to go with their new-to-them electric car.
It’s no surprise then that Tesla’s CPO program has been super-popular, bringing in some serious revenue for the California automaker for the past few years. Indeed, Tesla’s CPO program is so popular that there have been times when Tesla has found itself struggling to keep its inventory of CPO Model S cars high enough to give used customers a decent selection of cars to pick from.
Before hearing from Tesla, we assumed the rumored change was designed to increase the number of cars coming through the program, something which wouldn’t necessarily be a bad business move but which would certainly have made it harder for existing owners to sell their cars privately.
Had the rumor been true, it would increase the number of cars entering into the CPO program as well as ensure that fewer Tesla cars would being sold privately with unknown faults or problems.
That in turn would have increased Tesla’s revenue from CPO sales, as well as reduce the number of unexpected warranty claims. It would have also made some used-car salespeople and private owners looking to sell outside of Tesla’s ecosystem very unhappy.
As we’ve said already however, that’s not the case.
With the confusion now cleared up and Tesla confirming that its policy hasn’t changed, owners should be able to breathe a sigh of relief that their car’s extended warranty can be transferred to the new owner, exchanged for a refund, or transferred to a new Tesla.
Are you a Tesla customer? Are you happy to hear that this was all a misunderstanding? And would you consider buying a Tesla without an extended warranty?
Leave your thoughts in the Comments below.
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