The Tesla Model S drive unit warranty has been increased to match that of the battery pack. That means the 85 kWh Model S, our most popular model by far, now has an 8 year, infinite mile warranty on both the battery pack and drive unit. There is also no limit on the number of owners during the warranty period.
Moreover, the warranty extension will apply retroactively to all Model S vehicles ever produced. In hindsight, this should have been our policy from the beginning of the Model S program. 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.
To investors in Tesla, 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.
Model S drivers can drive from Stockholm to Cote d’Azur for free
Photo courtesy of Tesla
Tesla marked the continued rapid expansion of its fast-charging network last week by opening its 50th Supercharging location in Europe. The unveiling of the new site in Narbonne, France, is another step towards an extensive Supercharger network in Tesla’s major European markets, including the UK, Scandinavia, the DACH region, Benelux, and France.
Tesla’s Supercharger network in Europe has expanded quickly since the first installation in Norway in August 2013. Supercharger routes now enable free electric travel between major cities and the most popular highways from Scandinavia to the French Riviera. Routes covered include Oslo-Stockholm-Copenhagen, Hamburg to Geneva and Berlin to Frankfurt. In France, the “Route du Soleil” runs from Paris to the Cote d’Azur and new locations in the north are coming soon to allow travel to Amsterdam. In the UK, new Supercharger sites open in London and Birmingham this week.
Tesla recently energised its 168th Supercharger worldwide, making it both the largest and the fastest-growing fast-charging network in the world. In July, the European Supercharger network alone delivered more than 600 MWh of energy to Model S vehicles. That energy accounts for a collective 2.2 million miles driven, the equivalent distance of driving to the moon and back four and a half times. In this same month, Superchargers in Europe have saved more than 380,000 litres of petrol and offset up to 1,100 tons of carbon dioxide.
For more details on the continued global expansion of the Supercharger network, visit http://www.teslamotors.com/supercharger & http://www.teslamotors.com/findus.
Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.
Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.
When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.
At Tesla, however, we felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales and marketing power to overwhelm Tesla. We couldn’t have been more wrong. The unfortunate reality is the opposite: electric car programs (or programs for any vehicle that doesn’t burn hydrocarbons) at the major manufacturers are small to non-existent, constituting an average of far less than 1% of their total vehicle sales.
At best, the large automakers are producing electric cars with limited range in limited volume. Some produce no zero emission cars at all.
Given that annual new vehicle production is approaching 100 million per year and the global fleet is approximately 2 billion cars, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis. By the same token, it means the market is enormous. Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.
We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.
Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.
Consumers once shopped predominantly at their local stores; but first mail order catalogs and today the Internet have created new ways to shop for and purchase a wide range of goods and services. Similarly, consumers once arranged for taxis by hailing one from a street corner or by calling a dispatcher; yet today, smartphones and new software applications are shaking up the transportation industry, creating new business opportunities and new services for consumers.
In buying cars, however, these new ways to shop may not be available to consumers. For decades, local laws in many states have required consumers to purchase their cars solely from local, independent auto dealers. Removing these regulatory impediments may be essential to allow consumers access to new ways of shopping that have become available in many other industries.
This very question has been raised across the country, as a still-young car manufacturer, Tesla, pursues a direct-to-consumer sales strategy that does not rely on local, independent dealers.
In this case and others, many state and local regulators have eliminated the direct purchasing option for consumers, by taking steps to protect existing middlemen from new competition. We believe this is bad policy for a number of reasons.
American consumers and businesses benefit from a dynamic and diverse economy where new technologies and business models can and have disrupted stable and stagnant industries, often by responding to unmet or under-served consumer needs. When that occurs in an industry long subject to extensive regulation, existing businesses—like automobile dealers—often respond by urging legislators or regulators to restrict or even bar the new firms that threaten to shake up their market.
Out of 15 million cars sold in the U.S. in 2013, Tesla accounted for a little over 22,000. This hardly presents a serious competitive threat to established dealers. What it could represent is a real change to the way cars are sold that might allow Tesla to expand in the future and prove attractive to other manufacturers, whether established or new ones that have yet to emerge, and consumers. Efforts to litigate, legislate, and regulate to eliminate Tesla’s perceived threat have forced it to battle jurisdiction-by-jurisdiction for the simple right to sell its automobiles directly to consumers.
When the automobile industry was in its infancy, auto manufacturers recruited independent, locally owned dealers to reach consumers in localities across the country. State laws progressively embraced wide-ranging protections for these dealers due to a perceived imbalance of power between the typically small local dealers and major national manufacturers. Dealers persuaded lawmakers that they needed protections from abusive practices by manufacturers. Federal laws, too, developed to protect auto dealers from abuse.
These protections expanded until in many states they included outright bans on the sale of new cars by anyone other than a dealer—specifically, an auto manufacturer. Instead of “protecting,” these state laws became “protectionist,” perpetuating one way of selling cars—the independent car dealer. Such blanket bans are an anomaly in the broader economy, where most manufacturers compete to respond to consumer needs by choosing from among direct sales to consumers, reliance on independent dealers, or some combination of the two.
Dealers contend that it is important for regulators to prevent abuses of local dealers. This rationale appears unsupported, however, with respect to blanket prohibitions of direct sales by manufacturers. And, in any event, it has no relevance to companies like Tesla. It has never had any independent dealers and reportedly does not want them.
FTC staff have commented on similar efforts to bar new rivals and new business models in industries as varied as wine sales, taxis, and health care. We have consistently urged legislators and regulators to consider the potential harmful consequences this can have for competition and consumers. How manufacturers choose to supply their products and services to consumers is just as much a function of competition as what they sell—and competition ultimately provides the best protections for consumers and the best chances for new businesses to develop and succeed. Our point has not been that new methods of sale are necessarily superior to the traditional methods—just that the determination should be made through the competitive process.
Change is a critical dimension of that competitive process. Manufacturers in a variety of industries now reach consumers directly through websites, providing extensive information that was once only available from dealers or by phone or mail inquiry. And consumers routinely turn to the Internet as a convenient way to comparison shop and buy products and services.
Such change can sometimes be difficult for established competitors that are used to operating in a particular way, but consumers can benefit from change that also challenges longstanding competitors. Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated. We hope lawmakers will recognize efforts by auto dealers and others to bar new sources of competition for what they are—expressions of a lack of confidence in the competitive process that can only make consumers worse off.
Andy is the Director of the Office of Policy Planning, Debbie is the Director of the Bureau of Competition, and Marty is the Director of the Bureau of Economics. The views expressed are their own, and do not necessarily reflect the opinion of the Commission or of any individual Commissioner.
