PALO ALTO -- Tesla Motors announced sweeping service changes Friday aimed at making owning a Model S easier and less worrisome, including covering the $40,000 replacement cost for new batteries that are damaged even through owner neglect.
"What I've told the Tesla service division is that their job is never to make a profit," Tesla CEO Elon Musk said in a conference call to reporters. "Probably some investors will be mad at me for saying that."
Tesla instead will focus on a worry-free experience for Tesla owners that includes waiving Tesla's mandatory service fee and replacing batteries during the eight-year warranty period that are damaged from anything short of malicious intent.
"It wouldn't apply, for example, if you take a blow torch to the battery pack or blow it up or use it for target practice," Musk said. "As long as you haven't intentionally tried to destroy it, then it's covered by warranty. ... If something goes wrong, it's Tesla's fault, it's not the customer's -- except in the case of a collision or opening the battery pack."
Damaged batteries, Musk said, will be replaced with the latest battery technology, meaning "something that's good or better."
After Musk's announcement, shares of Tesla stock were down 1.5 percent at the end of trading, closing at $51.20.
But Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book, cheered Tesla's service changes, which include giving owners a fully loaded Model S as a loaner vehicle that they can buy on the spot at a prorated discount and trade in their old Tesla.
"I thought I'd heard it all in this business, but I hadn't heard that one," Nerad said. "It's an interesting take."
Musk acknowledged shortcomings in Tesla's previous service program, which he called "OK but not great."
"I think we made a slight mistake in making our annual service fee mandatory," Musk said. "That was an error, which we're fixing. It's now optional."
Tesla's new approach to service, Musk said, is to provide "the service and warranty program you wish you could have from any carmaker."
So Tesla owners whose cars need service no longer have to drive to a service center.
Instead loaners -- a fully loaded Model S or a Tesla Roadster sports car -- will be delivered to owners wherever they are, and their original car will be returned wherever they want after being serviced, Musk said.
Owners then will have the option to buy the loaner at a price that knocks off $1 for every mile on the vehicle and 1 percent off for each month of the life of the car.
Nerad believes Tesla's new approach can attract customers -- especially ones scared away by the $40,000 cost to replace Tesla batteries on their own.
"They have to make it a terrific experience and thus build the brand," Nerad said. "Having a bunch of disgruntled consumers out there it wouldn't be good for their future, to say the least."
Contact Dan Nakaso at 408-271-3648. Follow him at Twitter.com/dannakaso.