High warranty costs for Tesla over quality problems image

As Tesla is facing many complaints over quality issues, the company’s warranty costs are way higher that acceptable.

Lately, there have been countless complaints from owners over various issues with their Model S and Model X cars, with media also reporting many quality glitches. This type of news has peaked with a recently published story by Consumer Reports of a Model X customer whose newly bought electric SUV had faulty falcon doors, the driver’s door did not open, the front window would not go down properly and the Autopilot did not always work as intended. As Tesla is trying to be profitable this year, costs with quality issues will prove quite important and the automaker has to really improve in this area in order to hit its targets. According to a Reuters analysis of company data, Tesla spends on repairs more than twice compared to General Motors or Ford.

Tesla spent last year 1,043 dollars per car for fixes and set aside 2,036 dollars in warranty accruals to cover future repairs on the vehicles it sold in 2015. It was actually an improvement, as the electric maker trimmed warranty expenses by 17 percent from a year earlier and cut warranty accruals by 34 percent. It is way more than the 400 dollars per car spent by GM last year for every vehicle it sold, when it set aside 332 dollars for accruals, while Ford spent 429 dollars per vehicle and set aside 308 dollars. Daimler spent 970 dollars and 1,294 dollars for future work.

And with such a demand for the Model 3, Tesla is facing serious challenges with quality control and warranty costs. Furthermore, the company aims to produce 500,000 vehicles by 2020, compared with the 50,000 units output of last year.

Via Reuters