GM raises the stakes with 'lifetime warranty' on new cars

As carmakers desperately scramble to reverse falling sales, General Motors has a new marketing ploy.

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Last Updated: 06 Nov 2012

These are tough times for carmakers, particularly now they don't have government scrappage schemes to prop up their sales: this week it emerged that UK car sales were down 13% in July, the first year-on-year drop for over 12 months. So you can't blame General Motors for going large: in a bid to claw back market share in Europe, it's apparently going to offer a lifetime warranty on new Vauxhall and Opel cars (although 'lifetime' is strictly speaking a bit of an exaggeration). In a market which appears to be over-supplied and in decline, the manufacturers have got to try something to stand out from the crowd...

Ok, so this 'lifetime warranty' actually only covers the first 100,000 miles - so if you commute from, say, Edinburgh to London every day, it's actually more like a six-month warranty. And it obviously doesn't cover accident damage - just problems under the bonnet. Still, GM reckons that the average UK driver does about 8,200 miles a year, which would make it a 12-year warranty; even if you think that sounds a bit low, it should last most people 8-10 years. And perhaps the more significant point, as GM points out, is that 95% of new car buyers never actually clock up 100,000 miles (fleet cars, for instance, tend to get replaced every three years or so).

GM suggests this is a 'strong statement of confidence' in its cars. But more significantly, it's almost certainly a longer warranty than any of its rivals are currently offering (previously Kia led the way, after introducing its seven-year warranty a couple of years ago). So it could be a way for GM to reverse the drop in new business it's suffered in Europe - particularly in Germany - since the end of the scrappage schemes, and the damage to its reputation from the ill-fated attempts to get state funding for Opel.

In truth, though, the carmakers' problems run deeper than that. If electric cars do become more popular (and GM seems to think they will) the economics of the industry will change completely, because the cost of replacing the battery is going to dictate the lifetime value of the car - which means the dealerships are going to have an even harder time. Hence the need for grand gestures like this - even if they do run the risk of cannibalising sales further down the line.


In today's bulletin:
RBS back in the black - by the skin of its teeth
Cadbury boosts Kraft - but is the reverse true?
GM raises the stakes with 'lifetime warranty' on new cars
Editor's blog: The difficulties of mega-philanthropy
One-in, One-out: Government promises no more red tape

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