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Tesla unveils service program to spur Model S sales

Elon Musk, the chief executive of Tesla Motor, speaks at the South by Southwest Interactive festival in Austin, Texas, March 9, 2013. REUTER
Elon Musk, the chief executive of Tesla Motor, speaks at the South by Southwest Interactive festival in Austin, Texas, March 9, 2013. REUTER

By Deepa Seetharaman

DETROIT (Reuters) - Tesla Motors Inc , the 10-year-old U.S. automaker led by billionaire Elon Musk, unveiled a service program on Friday meant to quell fears about buying and maintaining an electric car and boost sales of the Model S sedan in the long run.

The program includes a warranty on the battery pack that covers damage caused by poor maintenance. Tesla will replace the battery for free with one of equal or better capacity.

The warranty "wouldn't apply if you take a blowtorch to the battery pack or blow it up or use it for target practice," Chief Executive Musk said during a conference call.

"As long as you haven't intentionally tried to destroy it, then it's covered by warranty," he said.

The program is part of Tesla's effort to address some of the issues that have hurt electric car sales, including their high cost and battery life.

The Model S, Tesla's second model after the Roadster, is Tesla's effort to reach a broader group of buyers. The car starts around $70,000 before a $7,500 tax credit.

Tesla will make another announcement in coming weeks to address "range anxiety," or the fear of being stranded without power, Musk told reporters during the call.

Tesla's program also includes a "valet service" for vehicles in need of repair. The cars will be picked up and replaced with a top-of-the-line loaner vehicle until the fixes are made.

Customers also have the option of buying the loaner at a discount So far, 100 loaner vehicles have been built by Tesla.

Tesla is also no longer requiring owners to pay $600 a year for service, similar to German luxury automakers that offer free vehicle service for the first few years.

The service program "will be really powerful for the long-term value of the company," Musk said. This service program will be offered on the company's next car, the Model X.

Musk said Tesla may not be able to offer similar service for an upcoming third-generation vehicle that would cost around $30,000 to $35,000, but he did not rule it out.

(Reporting by Deepa Seetharaman; Editing by Richard Chang)

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