Thursday, June 17, 2021
News Tesla May Avoid Buyback By Using Lemon Laundering

Tesla May Avoid Buyback By Using Lemon Laundering

Lemon laundering is a practice by which an automaker avoids labelling a vehicle a lemon, and some believe Tesla is doing it

  • Goodwill repairs made by Tesla could be a way for the automaker to avoid lemon laws, lawyers say.


Lawyers and consumer protection organizations are worried Tesla may be using the practice of lemon laundering to hide defective vehicles from the public.

InsideEVs spoke with different sources including Bernard Brown, an expert in consumer law about Tesla labelling warranty repairs goodwill so they don’t go into the books against revenue.

To sum it up, when an automaker labels a warranty repair as goodwill, the expense doesn’t go into the cost of revenue and therefore doesn’t impact profit. Goodwill is usually labeled as an asset in the financial statements while the cost of warranty repairs are an expense.

As for the term lemon laundering, it’s essentially a way to hide the fact that a vehicle is a lemon. Again according to InsideEVs, many automakers such as GM and Chrysler were caught doing it in the past, but now Tesla may be using the same strategy.

Lemon laws apply when a vehicle doesn’t perform to the standards set in a given state or country. Usually, there’s a number of repairs that need to happen to a vehicle before it can be deemed a lemon. Once that happens, the automaker is usually forced to buy the vehicle back from the client.

By not booking warranty repairs where they need to go, it’s difficult to determine if a given vehicle is a lemon or not.

The financial statement manipulation is the basis for numerous short selling strategies on Tesla stock, although these strategies have not panned out in recent months.

Tesla has had numerous quality problems on its vehicles since launch, and it continues to this day with the Tesla Model 3. We invite you to check out the full article on InsideEVs. It’s in-depth and gives you options if you believe you may be a victim of lemon laundering.

Trending Now

Upcoming Porsche Cayenne Variant Sets New ‘Ring Record

New Cayenne smashes RSQ8's previous best Hot SUV will finally be revealed soon The next quick Cayenne has just come back from the Nurburgring...

2022 Honda Civic Priced From $24,465 In Canada

This is the 11th generation of Canada’s best-selling car. These prices are for the sedan. The hatchback will be revealed next week. The all-new...

All-New 2022 Audi A3 Priced From $33,900

Once more, only the sedan comes to America. The new S3 retails for $44,900. The new A3 is larger and more premium. As is...

Dodge And F9 Team Up For The “Superpower” Promotional Campaign

The ninth installment of “The Fast & Furious” franchise opens in theatres on June 25th. The 60-second spot is loaded with horsepower and...

GM Temporarily Drops Start-Stop From Its Full-Size Trucks

This decision was forced by the ongoing global chip shortage. Trucks without the technology will be discounted by $50. This bit of news comes...
Charles Jolicoeur
Charles Jolicoeur
Charles Jolicoeur was studying to be a CPA when he decided to drop everything and launch a car website in 2012. Don't ask. The journey has been an interesting one, but today he has co-founded and manages 8 websites including EcoloAuto.com and MotorIllustrated.com as General Manager of NetMedia360. He also sits on the board of the Automotive Journalists Association of Canada. Send me an email

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.