With All Eyes On Affordability, Tesla Motors Inc (NASDAQ:TSLA) Quietly Raises Costs

Tesla Motors Inc (NASDAQ:TSLA)

Tesla Motors Inc just made some quiet updates to its policies after which the prices on its after-sale service options have gone up. In another more significant change, Tesla buyers can no longer transfer extended warranty and prepaid service plans when they re-sell their car, says a report from the Verge.

Tesla makes big changes to warranty and service plans

If we talk about the impact on Tesla buyers, then the biggest change by far is the ban the firm has imposed. Tesla is allowing the owners of such plans to cancel them, and claim a pro-rated reimbursement when the car is sold. However, they are not allowed to transfer warranty or service plans when selling the car. Until now, it has been possible for owners to transfer the warranty and service plans to new owner at a cost of $100.

Tesla has made changes to service plan pricing as well. The firm recommends that owners of the Model S and Model X get their cars serviced each year or after running for 12,500 miles. The firm previously offered customers the option of pre-purchasing the annual service. They could either opt for 4 years at $1,900 or $3,800 for 8 years.

Now, after price change these services cost $2100 for 4 years and $4000 for 8 years. The increase is small, just $200, but they have still gone up. Also, the yearly maintenance no longer includes free wheel alignments.

These changes are negative for the buyers, and can have an impact on the future resale value of Tesla’s cars. This is so, because the buyers will not be able to include a multiyear factory warranty, when selling the cars after 4 years or 50,000 miles.

‘Affordable’ Model 3

Tesla Motors Inc is close to introducing the Model 3, which is touted as the most affordable electric car from the EV firm. The launch of this car is a good news for people, who wish to have a luxury electric car, but have a limited budget. The deliveries of the car are scheduled to begin in the second half of 2016.

Tesla Motors Inc in its Q4 earnings call confirmed that the Model 3 will be available for $35,000, and the firm will start accepting pre-orders for the car starting March 31. The Model 3 will be an addition to the firms current line-up – Model S sedan available at a retail price of $75,000 before incentives and the Model X SUV, which starts at $80,000 before incentives.

A luxury car brand introducing an affordable vehicle is not a new concept, but since there is too much hype surrounding Tesla’s newest addition, therefore, it will probably put a lot of pressure on the other high-end brands, and force them to beef up their entry-level offerings.

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.


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