Earlier this year, electric-car maker Tesla Motors (NASDAQ: TSLA) announced a significant upgrade to its flagship Model S, introducing a version with a larger 100 kilowatt-hour battery, more driving range, and a ridiculously fast zero-to-60 time of 2.5 seconds. The new P100D Model S officially became the world's fastest-accelerating car currently in production.
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Model S. Image source: The Motley Fool.
But apparently, the P100D Model S hasn't been operating at full performance. "[T]here will be a P100D Ludicrous Easter egg soon that uncorks the full performance," Tesla CEO Elon Musk said in a tweet on Friday
Why it matters
An upgrade to Tesla's flagship Model S continues the company's history of aggressively updating the vehicle. Some investors may assume that improvements to the priciest versions of Tesla's vehicles don't have any impact on the company's business, but there are several good reasons why these updates likely have a positive impact on results.
First, while the P100D's $134,500 starting price -- well ahead of the $66,000 base price that the Model S starts at -- may limit the vehicle's market potential, the pricey version plays a key role in the company's marketing. For instance, drag-race videos of the August-launched P100D have already spread across YouTube, and the vehicle's acceleration continues to inspire media coverage across auto websites and magazines.
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Model S (left) and Model X (right). Image source: The Motley Fool.
Tesla's P100D version of its Model X SUV, which has a zero-to-60 time of 2.9 seconds, similarly serves as a marketing machine for the company. Top Gear, for example, recently showed off a Model X by driving 200 miles around New York before beating a Dodge Challenger Hellcat in a drag race.
Viral internet videos, media coverage, and word-of-mouth marketing are particularly important for Tesla because the company continues to refrain from advertising spend.
Second, the profit margin on Tesla's flagship P100D Model S is likely far higher than the profit margins on lower-priced versions of the vehicle. A fully loaded P100D, for example, now runs at $161,700, putting the vehicle in supercar pricing territory. And the flagship Model S's profit margin has undoubtedly increased over the years because Tesla has boosted prices alongside performance increases and the introduction of larger battery options.
Not the first Tesla update to deliver performance
Model S touch display. Image source: The Motley Fool.
If Tesla's "Ludicrous Easter egg" for P100D is delivered with a software update, the company's usual medium for beaming improvements to its fleet, this wouldn't be the first time Tesla has improved acceleration with a simple over-the-air update. In 2015, for instance, Tesla rolled out an over-the-air update for the P85D versions of its Model S (the flagship version of Model S at the time) that improved the vehicle's already-quick 3.2-second zero-to-60 time by 0.1 seconds. The boost was achieved by an update to the inverter algorithm, the company said.
Tesla has relied heavily on software updates as a means for delivering a surprise factor to its customers. Beyond software updates for acceleration, Tesla regularly updates its vehicles' touch screen interfaces, and has even announced surprise over-the-air options for customers to upgrade (for a fee) to secretly delivered larger battery packs.
While it's not clear yet what Musk means by an easter egg for enabling the "full performance" of its P100D models, Musk is presumably referencing improved acceleration. We'll find out exactly what he means soon.
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Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.