Tomahawk, WI 08/29/2014 (Basicsmedia) – Tesla Motors Inc. (NASDAQ:TSLA) move to increase warranty for its electric Model S sedan has caught the attention of Pacific Crest that expects overall costs to affect the company’s gross margins by up to 30 basis points. In an interview on CNBC, Brad Erickson an analyst at Pacific Crest warned investors that Tesla will continue to act in this manner as it is still a startup trying to gain market share in the auto industry.
A couple of weeks ago, Tesla Motors Inc. (NASDAQ:TSLA) announced it will be offering unlimited mileage for its cars drive unit and battery pack, for up to 8-years. The move is expected to affect the company’s profit margins as it will be applicable to both existing and future customers.
“We take the opportunity to remind investors that despite its market-cap, Tesla is still a startup and occasionally Startups have to do things like this in order to reassure their customers around products,” said Mr.Erickson.
Pacific crest expects the increased warranty levels to have a $0.10 negative impact on third quarter earnings and a further $0.03 negative impact in the fourth quarter earnings.
Tesla Motors Inc. (NASDAQ:TSLA) has been investing heavily on the hardware part of its cars in contrast to the software part where many people believe could be a game changer in the near future according to CNBC’s Melissa Lee.
“When you look at the hundreds of millions of lines of codes up to that point now that are going into the cars you know just conceptually the value really is shifting to software. […] Tesla Motors Inc. (NASDAQ:TSLA) is leveraging this ability to exploit effectively, the convergence of data and kind of activity in being able to do things like update that software over the air,” said Mr. Erickson.
The move to increase warranty may in away also increase the resale levels of Tesla Motors Inc. (NASDAQ:TSLA)’s Model S according analysts in Wall Street.