Deutsche Bank Believes Warranty Costs Are Likely To Decline For Tesla Motors


In a report published Monday, Deutsche Bank analyst Rod Lache reiterated a Buy rating and $310.00 price target on Tesla Motors (NASDAQ: TSLA).

In the report, Deutsche Bank noted, “Tesla announced that they are expanding the warranty on the 85 kWh version of their Model S to 8-years and unlimited miles from 4 years or 50,000 miles. This change is likely in response to widely reported reviews from Edmunds and Consumer Reports, which identified a number of powertrain issues during long term tests of the Model S.

"The Edmunds test vehicle reportedly had 4 powertrain replacements over the course of 30,000 miles (based on comments on the Tesla Owners Blog, it appears that the Edmunds experience was not unique; several powertrains were replaced under warranty due to ‘milling' or knocking sounds that developed over time). While Edmunds still described the Model S as an exceptionally good vehicle, reports such as these clearly influence consumers, and Tesla appears to be responding with damage control (an 8 year unlimited mile warranty should satisfy most buyers that the vehicle will be covered throughout their ownership).”

Tesla Motors closed on Friday at $262.01.

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