Tesla Motors Inc (TSLA) Could Have Been More Conservative With its Warranty Reserves: Herb Greenberg


Tesla Motors Inc (NASDAQ:TSLA) recently came out with a blog authored by its CEO, Elon Musk. In the blog Musk revealed that the company is going to extend its infinite mile eight year warranty to the drive unit of the Model S. Though Musk acknowledged that this would have an effect on the company’s earnings, Herb Greenberg, CNBC’s contributing editor isn’t satisfied. He discussed  how the extension of the warranty will impact Tesla Motors Inc (NASDAQ:TSLA) earnings along with Phil LeBeau on CNBC recently.

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Greenberg feels that Tesla Motors Inc (NASDAQ:TSLA) is very aggressive with its finances, while it could have been a lot more conservative with the warranty reserves. He pointed out that in his post on cnbc.com he had mentioned that under-reserving for their warranties would impact Tesla Motors Inc (NASDAQ:TSLA)’s earnings in the future and that is exactly what is going to happen now.

“[…] Even with a company like this, you have to pay attention to what goes into their earnings, especially when Tesla Motors Inc (NASDAQ:TSLA) is out there saying, “hey, we are profitable” as they were saying a year ago, which got the stock boost in the first place. If they were more conservative with the warranty reserves, perhaps they wouldn’t have been as profitable,” Greenberg said.

LeBeau also mentioned that when Tesla Motors Inc (NASDAQ:TSLA) comes out with its upcoming vehicles and depending upon how they fare, one can convincingly say whether Tesla Motors Inc (NASDAQ:TSLA) was good with its finances or not.

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