Analysis Reveals Tesla Spends More On Warranty Costs than Daimler or General Motors

[William Maley]

Despite the hoopla and endless praise for Tesla and their vehicles, there are a number of owners who aren't happy with the company. Go on to any Tesla forum and you're bound to fin endless posts from owners of the Model X listing issues from poor paint quality to doors not closing. The Model S is no stranger to problems with batteries failing and the infotainment system freezing.

 

This is a big issue for Tesla as they have been burning cash for the past two years, with a good amount of this cash coming going to repairs and warranty costs. CEO Elon Musk has promised investors to slow down the burn and curtail costs retaining to repairs. With Tesla announcing their results later today, we'll see if that promise was kept.

 

But how much is Tesla spending when it comes to repairs? Reuters did some analysis on Tesla's recent annual report by looking at the total vehicles sold and total spending from warranty repairs and accruals - money set aside for future warranty work. Their analysis showed Tesla spent $1,043 per vehicle on repairs and set aside $2,036 per vehicle for future warranty work. The good news is these numbers are 17 and 34 percent lower than 2014. But compared to the likes of General Motors, Ford, and Daimler, Tesla's numbers are quite high.

• General Motors: $400 per vehicle on repairs, $332 for future work
• Ford: $429 per vehicle on repairs, $308 for future work
• Daimler: $970 per vehicle on repairs, $1,294 for future work
  

It should be noted that Tesla only sold 50,000 vehicles last year, while GM, Ford, and Diamler sold millions. Nevertheless, spending just over $150 million of the total $700 million burnt for repair work isn't a good sign.

 

Telsa in a statement to Reuters said it has reduced the cost of repair claims in the first year along with the amount it reserves for future repairs.

 

Source: Reuters

View full article

[Drew Dowdell]

Electrical Engineers cost more per hour than SAE Certified Automotive Technicians...

[balthazar]

Pretty sure salaries are not being reflected in warranty/repair costs, DD. Otherwise, GM, Ford et al, would be MUCH MUCH higher with their employee count.

[Drew Dowdell]

Pretty sure salaries are not being reflected in warranty/repair costs, DD. Otherwise, GM, Ford et al, would be MUCH MUCH higher with their employee count.

 

warranty work Hours get billed back to warranty cost centers at HQ.  

 

A GM tech being paid for non-warranty work is being paid by the dealership who charges the customer and takes a markup.

 

A GM tech being paid for warranty work is being paid by the dealership who bills a specific number of work hours back to GM.

 

Legacy Dealerships don't make much profit on warranty work.

[smk4565]

Tesla still has 400,000 orders for the Model 3.  People are thirsty for a Tesla, the demand is off the charts high for them.  The company however at some point has to turn those sales into a profit.  They can't survive forever without making a profit.

[regfootball]

moment of truth is coming nigh for Tesla.  If they were smart, they would either fix the Model X's complexity (ditch the doors) or add a model 3 crossover.

 

You can't build cars with subpar quality for too long before it comes back to hurt you.

 

if they go belly up, i would not want a furrin company to swoop in and buy the scraps at pennies on the dollar.  If anything, some Chinese company would buy it up and turn it into just a design center, and fund them so they could make the cars in China.  A better scenario is Ford or GM buys them, strips the meat off the bone, and throws away the scraps.

[El Kabong]

Well, that may well explain THIS story:

"Having only recently begun production on its first CUV, the Model X, and with the launch of its first 'mainstream' model, the Model 3, just around the corner, it's an incredibly important time for Tesla. While it's never good for a company to lose several import executives, now is an even worse time for Tesla to be losing them. And yet two manufacturing executives, including the global head of production, just announced they're leaving."

More at the link:

http://www.roadandtrack.com/car-culture/news/a29069/tesla-just-lost-two-important-manufacturing-executives/

[daves87rs]

I expected it to be a little up there....but wow, that is pretty bad. 

 

Considering the price point, you would expect more.....

[regfootball]

Well, that may well explain THIS story:

"Having only recently begun production on its first CUV, the Model X, and with the launch of its first 'mainstream' model, the Model 3, just around the corner, it's an incredibly important time for Tesla. While it's never good for a company to lose several import executives, now is an even worse time for Tesla to be losing them. And yet two manufacturing executives, including the global head of production, just announced they're leaving."

More at the link:

http://www.roadandtr...ing-executives/

saw that, wonder if that's an indicator of the whole thing blowing apart at the seams

[El Kabong]

I'm guessing so. There have been warning signs all over the place.

[FordCosworth]

http://www.warrantyweek.com/archive/ww20150716.html

[El Kabong]

Here's Musk admitting that production is still well over a year away for the Model 3. They also mention (again) the losses of key manufacturing execs, wildly ambitious budgeting, and crippling quality issues:

http://www.roadandtrack.com/new-cars/future-cars/news/a29083/tesla-model-3-production-date-delayed-elon-musk/

Edited May 5, 2016 by El Kabong

[Suaviloquent]

Well if they go belly-up, they go belly-up.

 

But hopefully they built enough momentum to keep GM, Nissan and others committed to electric.

[El Kabong]

The free market is the ultimate factor that should determine such things.

As with much that I write, there seems to be this impression that I have a hate-on for Tesla and Musk. Not so-I applaud the leaps in electric car tech that he helped facilitate. But from the beginning, his hubris and financing models were suspect.

[Drew Dowdell]

The free market is the ultimate factor that should determine such things.

 

Tesla stock is up $10 in after hours trading.  Ford fell after announcing big profits. So much for the market... eh?

 

Musk has the bucks, he can put more money in if he needs to. 

[G. David Felt]

wow, price is crazy high like what I would see from MB and BMW.

[Suaviloquent]

Random thing - ...I was watching Tesla stock when it was hovering at like $30-35 per share. This was after the IPO, but before their infamous DOE loan repayment.

 

They were doing crazy things even back then in 2010. But I thought for a moment. They want to pay off their DOE loans quickly, I thought. So predictably, they had their IPO, but something in their prospectus must have really riled potential investors at the time. I was ornering people (and I was to say the least, not nearly sophisticated with the finances, being really just a kid) to buy Tesla stock. Everyone I could, buy it now, I think they're gonna do something to shock potential investors.

 

Now the stock was priced at $17 per share in the initial offering. They raised a rather mundane but not insignificant $228 million dollars. 

 

But the way they paid off their loans in one lump sum, and then how they rocked the world with the Model S....their share price started to skyrocket. It was a firmly held belief at the time that the company had a winning product, and I think there may have been some overly high optimism, largely because no one had a recent example of how the consolidation in the industry, between the OEMs, the integration with suppliers has made it so difficult to become a mainstream, blue-chip automaker.

 

I think Tesla as a name is too valuable. I can easily imagine if Tesla goes belly up there's going to be plenty of scavengers wanting an excellent deal. Though I wonder what kind of leverage anyone has on Tesla.

 

The company has already made the majority of its IP public. It has nothing to lose by toughing it out. It's largest equity holder is the highest executive, and he continues to take the heat from not only the industry, but every time there are more offerings of ownership, he takes a big hit, and then put his own money on the line to repurchase shares at absurd prices.

[El Kabong]

The free market is the ultimate factor that should determine such things.

 

Tesla stock is up $10 in after hours trading.  Ford fell after announcing big profits. So much for the market... eh?

 

Musk has the bucks, he can put more money in if he needs to.

Bre-X stock was once an investor darling as well. Google how THAT ended up. As Mark Twain once wrote, history doesn't repeat itself-but it rhymes.