Tesla Announces New Service Plan, Poises Itself For New Revolution

Image via Flickr/ jurvetson

The rise of the digital age over the past 30 years has been nothing short of a technological revolution. We’ve seen the world change in ways our grandparents never could have dreamed as cell phones, the World Wide Web and home computers were introduced to the mass populace. But now, as we’ve begun to take smartphones, cloud computing and social networking for granted as commonplace, we are on the verge of a new revolution, and—just as Apple forged a path in the early 80s—Tesla is holding the reins.

Despite rising fuel prices and rampant pollution, it’s hard to imagine a world without gasoline engines. But the same could have been said 30 years ago about desktop computers or 20 years ago about smartphones. Yet here we are, and the technologies are a fact of life. And while Tesla didn’t invent the electric car, it certainly is the innovator in the industry. No other manufacturer provides the full package of mechanical, electrical and software engineering that results in an electric vehicle with a 200-plus mile range.

Of course few people can afford a Tesla—the low-end model costs in excess of $60,000. But how many people could afford an Apple Lisa when it was introduced in 1983? That doesn’t mean we aren’t on the precipice of change. In fact, Warren Buffett believes combustion engines will be obsolete by 2030. All it takes is an affordable model. And Tesla is certainly positioned to offer one.

The company already announced changes to improve its service and warranty programs. Tesla owners whose cars need repair will now have access to a fleet of Model S loaner vehicles. The loaners will be top of the line and fully-equipped. Plus, they’ll be available for purchase for a reduced price—a 1-percent reduction per month of age and $1 per mile.  Tesla CEO Elon Musk believes offering the loaners for sale will help keep the fleet fresh. Plus, when customers return their old vehicles to Tesla, they can be resold, thereby improving the affordability of the cars. Tesla Roadsters will also be available for loans.

In addition to the new loaner fleet, Tesla is introducing a $600 annual service plan option, as well as an unconditional warranty on its Model S battery—even in the case of user error.

If something goes wrong, it’s Tesla’s fault, not the customer’s,” Musk said on a conference call.

The new service plans will also apply to the new Model X, Tesla’s SUV scheduled to enter production in 2014, but may not apply to the model Tesla introduces after that, which is planned to be a more affordable vehicle.

As Tesla offers more affordable vehicles, it places itself closer to the position Apple found itself circa 2005. After all, the iPhone wasn’t the first smartphone. In 2005, Palm had 35 percent of the smartphone market. The company no longer exists. And of course the iPhone’s popularity forged a path for competitors. Today, Android owns about half the smartphone market. Should Tesla create an electric vehicle that is affordable, others will surely follow, and Buffet’s prediction could be right on the mark. After all, if given the option between a gas guzzler or a similarly-priced electric vehicle that costs nothing to drive, which would you choose?

The comparisons between Tesla and Apple don’t stop with product revolution. Apple made headlines when the company broke $500 a share. And Tesla’s stock is certainly on the rise, up more than 9 percent since Friday’s announcement, reaching $56—a new 52-week high. In fact, Longboard Asset Management recently predicted the stock will reach $100 a share within 18 months and exceed $200 a share within five years. The firm believes Tesla will hold 80 percent of the new market that it creates, just as Apple held 80 percent of the smartphone market share in 2007.

“Tesla will dominate their consumer market, like Google does with search,” Longboard Asset CEO Cole Wilcox said. See Longboard Asset Managements thesis on Tesla: