Tesla Motors Inc (NASDAQ:TSLA)‘s CEO, Elon Musk wrote a blog post last Friday announcing the extension of infinite mile coverage to drive units of all Model S cars. Though this sudden increase of warranty gave some jitters to analysts and investors, not all of them seem to be worried, Rod Lache of Deutsche Bank being one of them, as Barron’s mentioned in a blog post.
According to Lache and the Deutsche Bank team, Tesla Motors Inc (NASDAQ:TSLA)’s decision of extending its warranty to drive units might be influenced by the recent reviews, which, though not too harsh with the Model S, pointed out issues in the car after regular use. Lache estimates that Tesla Motors Inc (NASDAQ:TSLA) will have to bear a one time $7.8 million cost as an extension of this warranty, accounting for 39,000 Model S produced till now at under $200 per modification. The important point that Lache mentioned was Tesla Motors Inc (NASDAQ:TSLA) making significant improvement in quality, such that the company’s warranty accrual per car are likely to decline throughout 2015. Lache said that he will buy Tesla Motors Inc (NASDAQ:TSLA)’s stocks if it drops due to the announcement.