“In hindsight, this should have been our policy from the beginning of the Model S program,” Musk wrote in his blog post. “If we truly believe that electric motors are fundamentally more reliable than gasoline engines, with far fewer moving parts and no oily residue or combustion byproducts to gum up the works, then our warranty policy should reflect that.”
The move is somewhat similar to Tesla’s voluntary retroactive engineering of the vehicle’s battery shield in March of this year, when the company created extra titanium and aluminium armor for the battery and offered the upgrade for free to all Model S owners. Tesla had promised at the time that the extra armor would not raise the car’s sticker price.
This time around, the looser warranty terms may very well have an impact on Tesla’s bottom line. As Musk warned in his press release, “I must acknowledge that this will have a moderately negative effect on Tesla earnings in the short term, as our warranty reserves will necessarily have to increase above current levels. This is amplified by the fact that we are doing so retroactively, not just for new customers. However, 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.”