Should Tesla Offer an Extended Service Agreement Subscription?

May 13, 2020   

With Full Self-Driving getting ready to roll out over the next year and the ability for a Tesla to hit over a million miles on the same motor, is now the time for Tesla to introduce an Extended Service Agreement subscription?

As we reported yesterday, Musk revealed that Tesla is planning to introduce a subscription for Full-Self Driving Capability. Our prediction is that the pricing will range from $149-$299/month. More interestingly, there also seems to be code that indicates Tesla is planning a pay-as-you-go model as well. With all of the increased utility provided by Full Self-Driving, we think it could make sense to introduce an Extended Service Agreement subscription alongside it.

Tesla currently offers an Extended Service Agreement for Model S and Model X that can be added within the first 180 days of the vehicle’s purchase (it can be added during the entirety of the initial warranty period for an additional fee). It’s sold in increments of two years/25,000 miles or 4 years/50,000 miles. There is no Extended Service Agreement available for Model 3; however, it has less complexity involved due to a simpler interior and less features that are prone to failure, such as motorized doors.

For peace of mind an Extended Service Agreement subscription could help push Tesla owners forward into Tesla’s other monetized services. They’ll inevitably begin putting more miles on their vehicles as Full Self-Driving becomes available. Previously, Tesla had revealed plans to bundle insurance, warranty and presumably even Full Self-Driving into one subscription. In fact, this may be necessary for true level 5 autonomy as Tesla would effectively become responsible for the vehicle when it’s operating without a driver.

This would be unprecedented in the automotive industry, but it may be possible for Tesla to offer an Extended Service Agreement that goes beyond the industry norms due to the lifespan of its batteries/motors. There is inherently less complexity involved than with an internal combustion engine.

There are other variables in play as well, such as whether Tesla would automatically assume responsibility for vehicles operating on its upcoming Tesla Taxi Network. It seems like a possibility as Tesla is still working out all of the details.

It is clear to us that Tesla owners plan to keep their vehicles for a long time, and adding an option for an Extended Service Agreement subscription could help facilitate that. We analyzed the numbers and believe that Tesla could offer it for $99$199/month, depending on the model and the age of the vehicle. 

Would you purchase an Extended Service Agreement subscription? If so let us know in the comments which Tesla model you own, and how long you plan on keeping it. (We know a lot of owners will say “forever.”)

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