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I would agree with you in part, but understand that GM is using the 10 year battery warranty to offset any reluctance on the part of buyers or critics. It also prevents any competitor or oil company from attempting to sabotage the Volt by discrediting the battery.
Truly, this is the very purpose of a warranty.
Also, a warranty can be a type of investment for a company. For example; If GM felt that the batteries may only last 8-9 years, then a risk analysis assessment may determine that only 12% of cars are still on the road after 7 years, and only 18% of those owners will even know that the warranty is still valid. So hypothetically we now have a risk assessment of 2.16%. In addition, of the claims submitted only 68% are battery related and actually covered under the warranty. Now we're down to 1.4688%. By then, it is assumed that millions of cars from many automakers will have driven the price of electrical storage devices down by a strong percentage making replacements relatively inexpensive by comparison to the current price. Now if the market and sales assessments show that GM could secure 24% of the hybrid market within 42 months of introducing the Volt with a ten year warranty but only 9% of the hybrid market with a five year warranty, then the risk assessment reverses showing that the total potential profit is approx 800% higher with the longer warranty than the shorter one, while the total potential loss if the volt is a flop is only slightly affected by the cost of warranty replacements.
Simply put, the ten year warranty gives GM the potential for significant gain with little risk.
If GM is building the cost of the ten year warranty into the price of the Volt, that likely is only a fraction of the cost of the battery today. Remember, the battery supplier is giving GM a warranty too.
This warranty, especially when applied to new technology, is vital to the success of the Volt. GM would be foolish to do anything different.
Truly, this is the very purpose of a warranty.
Also, a warranty can be a type of investment for a company. For example; If GM felt that the batteries may only last 8-9 years, then a risk analysis assessment may determine that only 12% of cars are still on the road after 7 years, and only 18% of those owners will even know that the warranty is still valid. So hypothetically we now have a risk assessment of 2.16%. In addition, of the claims submitted only 68% are battery related and actually covered under the warranty. Now we're down to 1.4688%. By then, it is assumed that millions of cars from many automakers will have driven the price of electrical storage devices down by a strong percentage making replacements relatively inexpensive by comparison to the current price. Now if the market and sales assessments show that GM could secure 24% of the hybrid market within 42 months of introducing the Volt with a ten year warranty but only 9% of the hybrid market with a five year warranty, then the risk assessment reverses showing that the total potential profit is approx 800% higher with the longer warranty than the shorter one, while the total potential loss if the volt is a flop is only slightly affected by the cost of warranty replacements.
Simply put, the ten year warranty gives GM the potential for significant gain with little risk.
If GM is building the cost of the ten year warranty into the price of the Volt, that likely is only a fraction of the cost of the battery today. Remember, the battery supplier is giving GM a warranty too.
This warranty, especially when applied to new technology, is vital to the success of the Volt. GM would be foolish to do anything different.
