Tesla (NASDAQ:TSLA) stock was slammed in October when Consumer Reports pulled its recommendation of the electric-car maker's Model S after it downgraded the sedan's reliability rating from "average" to "worse than average." But despite Consumer Reports' negative report on the vehicle's reliability, the company is as ambitious as ever in its quest to improve the service profile of its cars. Tesla said in its third-quarter earnings call that management has boosted its target for the endurance of its drive unit from around 200,000 miles to 1 million miles.
One million miles
"We are very happy with the quality of the drive unit," Tesla CEO Elon Musk said during the company's third-quarter earnings call. The comment contrasts sharply with Consumer Reports' recent report on Model S reliability, which notes, "Tesla has made a habit of replacing the car's electric motors."
Why is there such a large discrepancy in Consumer Reports' take and Tesla's? Musk suggested during the earnings call that the company's significant progress on motor quality wasn't made until within the last few months:
I mean, internally, our goal -- we changed the goal of the drive unit endurance from being approximately 200,000 miles to being one million miles. Just basically we want drive units that just never wear out. That's our goal. And I think we've made really good progress in that direction. So the drive units going out now and for the last several months have been excellent.
Tesla has also added more color to a reliability issue in an email to customers, saying, "In the last 12 months alone we've decreased reliability issues by half." If Tesla's note about its progress on reliability is true, and if it really is making progress toward building motors that last 1 million miles, the electric-car maker likely won't be rated with below-average reliability much longer.
While investors should take Tesla's ambitious goals with a grain of salt, it's worth noting that the company is putting its money where its mouth is by offering an impressive eight-year unlimited mile warranty on its motors and batteries.
It should be noted that Model S' below-average reliability rating could also be viewed as somewhat of an achievement when it's viewed in context. A handful of luxury models from other manufacturers make Consumer Reports' list of vehicles with below-average reliability. And there's also a category Consumer Reports dubs "much worse than average," which includes General Motors' Cadillac ATX and Cadillac Escalade, Daimler's flagship Mercedes-Benz S-Class sedan and its top-selling C-Class, and many more.
Other brands included on the list are Acura, Chevy, Chrysler, Dodge, Infinity and Jeep. For a new carmaker in such a capital-intensive industry, it's notable that Consumer Reports rates Model S' reliability ahead of as many models as it does.
But just because Tesla is a younger company and is already outranking key models from competing manufacturers on reliability doesn't mean investors should excuse Model S' "below average reliability." As a new technology with far fewer moving parts than its internal combustion engine counterparts, the company should be held to higher standards. After all, consumers will likely hold the company to higher standards, too.
Investors should keep a close eye on Tesla's updates on the service profile of its vehicles as the electric-car maker continues to grow sales.
Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.