Archived Copies of Warranty Week

Change Year: Date Order:

Worldwide Heavy Equipment Warranty Report:

In the global heavy equipment industry, warranty claims fell by -8% to $4.89 billion, and that total represented 1.04% of sales; accruals fell by -6% to $5.85 billion, and that total represented 1.24% of sales; and reserves fell by -4% to $10.4 billion.

Nine-Month U.S. Auto Warranty Expenses:

Ford's warranty claims were way up, while Tesla's claims and accrual rates both rose, as increases in warranty costs outpace increases in revenue. Ford and GM both discussed increasing warranty costs in their earnings calls, citing costlier parts and labor for warranty work.

GPU Warranty Expenses:

GPUs power artificial intelligence and cryptocurrency mining, and manifest the graphics on most consumer electronics. Nvidia and AMD, the two largest GPU manufacturers, both spend less than 1% of their product revenue on warranty expenses. Both have cracked down on warranty claims made by miners in recent years, since it's a commercial usage, and an energy-intensive process that goes well beyond normal use.

Climate Change's Impacts on Warranty:

Climate change means hotter summers and colder winters, and both mean heavier wear and tear on HVAC systems, and more frequent claims on home extended warranties. Furthermore, recent environmental legislation on gas-powered appliances in Colorado will have a big and likely costly impact on service contract providers.

VSC Veteran Enters Home Warranty Industry:

Modern claims processing software enables companies in one part of the extended warranty industry to enter another part, despite the differences between them. We spoke with PCMI, the developers of the PCRS platform, and EFG Companies, a warranty administrator and a PCRS user, about the latter's recent expansion from vehicle service contracts to home warranties.

Oregon Court Holds Commercial Service Contracts Are Regulated, But Not as Insurance:

Each of the 50 states regulate commercial service contracts differently. This article, by three expert attorneys, discusses a recent ruling from the Oregon Court of Appeals, which will have implications for sellers and issuers of commercial service contracts throughout the country.

Worldwide Aviation & Jet Engine Warranty Report:

Claims were up a bit for the aircraft and down for the engines, while accruals were up more dramatically for both groups. Warranty expenses of the jet engine suppliers continue to be higher than those of the airframe OEMs. Sales have been slow to rise post-2020, so the accrual rates were up for both groups.

Solar Panel Warranty Expenses:

Solar panel manufacturers are regularly offering 25- and even 50-year product warranties. Yet for many, claims are exceeding accruals, and these costs are a much higher proportion of product revenue than is typical or sustainable.

Mid-Year New Home Warranty Report:

Total warranty claims, accruals, and reserves hit new record highs during the last three quarters. New homes and housing developments are popping up all over the place, but the country's housing stock remains low. As more homes are built quickly, warranty work and good warranty accounting are more important than ever for the new home builders.

Building vs. Buying Warranty Administration Software:

Last month, PCMI hosted a webinar entitled "Buying vs. Building Warranty Software," with Alpha Warranty, one of their clients. Executives from the two companies discussed the warranty administrator's decision to purchase PCMI's Policy Claim Reporting Solutions (PCRS), rather than developing their own software.

Right to Repair: Breaking Down a Complex Issue:

As lawmakers nationwide consider Right to Repair regulations, the repair industry faces its own set of questions, from product liability to intellectual copyright protection.

Worldwide Auto Warranty Expenses:

In the past few years in the worldwide auto industry, we've seen some new EV manufacturers come onto the scene in the U.S. and China, and a major merger between competitors in Europe. In 2022, the industry paid a total of $43.1 B in claims, with a 2.1% claims rate, accrued $54.7 B, with a 2.7% accrual rate, held a total of $120.8 B in warranty reserves, and accrued an average of $670 per vehicle sold.

U.S. EV-Only Warranty Expense Rates:

The U.S.-based, EV-only OEMs are still mastering their warranty expenses and accounting practices. They should follow the example of market-leader Tesla, which has had amazingly consistent claims and accrual rates since 2018. But even Tesla reveals that it can take years for startups to get there, especially while experimenting with innovative new technology.

Chinese EV Warranty Expense Rates:

The Chinese electric vehicle market is growing rapidly, and four new companies have come onto the scene in just the last five years. All of them have accrual rates much higher than their claims rates, meaning they're erring on the side of caution, a wise approach to warranty expenses for new manufacturers.

Top Korean & Indian Automaker Warranty Expenses:

Kia had an especially expensive year of recalls, but Hyundai didn't emerge unscathed either. Meanwhile, Tata had a great year, and seems to have mastered its warranty accounting years after its acquisition of Jaguar Land Rover.

Top Japanese Automaker Warranty Expenses:

Toyota, Honda, and Nissan continue to have lower claims and accrual rates than is typical of the global auto industry. With the exception of Honda doubling its accruals, most warranty metrics remained consistent from 2021 to 2022, though the depreciation of the Japanese yen complicates these numbers a bit.

European Automaker Warranty Expenses:

VW still has the highest warranty expenses, even seven years after its diesel emissions problems started. Stellantis is still getting its legs after the merger, Mercedes-Benz is saving money after spinning-off Daimler Truck, and BMW is accruing more but spending less on claims.

Domestic & General Acquires After Inc.:

British warranty service provider Domestic & General announced at the beginning of June that it is acquiring After Inc., an expansion of its recent entrance to the U.S. extended warranty market. D&G's subscription-based warranty plans are the way of the future, and represent the next wave of evolution and innovation within the industry.

U.S. Auto OEM Update:

GM is recovering from the recall of its Chevy Bolt batteries, but it hasn't soured on electric vehicles. Tesla's sales and warranty expenses have soared in the past two years, and GM and Ford's transition to EVs is bolstered by the IRS's new tax credit.

Other U.S. Product Warranties:

A variety of unexpected items come with product warranties, including e-cigarettes, exercise bicycles, diamond rings, scuba diving gear, player pianos, golf clubs, and karaoke machines. Meanwhile, very few U.S.-based consumer electronics manufacturers are reporting warranty expenses anymore.

U.S. Power Equipment Warranty Report:

Power equipment manufacturers are transitioning to renewable energy, with GE leading the charge. Warranty expense rates have skyrocketed in this industry in recent years, mainly due to challenges with solar and wind power equipment.

Medical & Scientific Equipment Warranty Report:

Claims and accrual totals fell to record lows, but this is due to mergers, privatizations, and changes in accounting of some major players, rather than a decline in the industry. Meanwhile, reserve balances are rebounding, in part from large accruals made in anticipation of a recall.

U.S. Semiconductor Warranty Report:

The semiconductor industry set new records in accruals and reserves, bolstered by Nvidia Corp.'s high warranty expenses due to a part malfunction. Key players in the industry have emerged in the past five years, though many companies could not weather the Great Recession, which had a profound and lingering effect on this industry.

U.S. Computer Industry Warranty Report:

The big headline is that Apple abruptly stopped reporting its warranty expenses in the middle of last year with no explanation. Among the suppliers to the computer OEMs, warranty expenses for the semiconductors are growing, while telecom expenses are shrinking to their lowest recorded levels.

U.S. HVAC & Appliance Warranty Report:

The big story in the appliance and HVAC industries is several major mergers and acquisitions in recent years, which have increased the precision of our data but driven down industry totals. Meanwhile, warranty expense rates for the appliance industry are lower than ever, showing savings on warranty expenses per product sale.