* Green car maker says to deliver 35,000 Model S vehicles in 2014
* Sees gross margins rising to 28 pct this year from about 25 pct
* To begin volume deliveries of Model X in spring of 2015 (Adds hedge fund investor comment, margin outlook, China and Gigafactory details, updates after-hours stock price)
Feb 19 (Reuters) - Tesla Motors Inc, led by billionaire entrepreneur Elon Musk, posted better-than-expected fourth-quarter results on Wednesday and said deliveries of its Model S electric sedan would surge more than 55 percent this year.
Tesla shares jumped 11.8 percent to $216.41 in extended trade following the announcement. A day earlier, the stock shot to an all-time high after the San Francisco Chronicle reported that Musk met with Apple Inc's head of mergers and acquisitions in 2013..
Still, there is a heated debate among auto industry experts and investors over whether Tesla's sky-high valuation is justified. The company has a market capitalization of nearly $25 billion, slightly less than half of General Motors Co's $57.7 billion market cap.
On Tuesday morning, hedge fund investor Doug Kass, who runs Seabreeze Partners Management, said he had taken a small short position in Tesla at $205.
"The more I think and write about it the more I like my Tesla short," he wrote later that day.
About 24 percent of Tesla's shares outstanding were held in short positions as of Jan. 31, according to Nasdaq data.
The Palo Alto, California-based company, which was founded in 2003, earned $46 million or 33 cents per share, excluding one-time items, during the fourth quarter. The average analyst estimate called for a per-share profit of 21 cents, according to Thomson Reuters I/B/E/S.
Including items, its fourth-quarter net loss narrowed to $16.2 million or 13 cents a share from $90 million or 79 cents a share a year ago.
The Model S is priced at $70,000 and up. Tesla expects to deliver more than 35,000 Model S vehicles in 2014, an increase of more than 55 percent from the 22,477 it delivered last year. In the first quarter, it will deliver about 6,400 of those cars.
Model S deliveries to China will begin this spring. Tesla said it will make "substantial investments" in China this year, and that the Model S will be the same price in China as in the United States.
"We are taking a risk with this strategy, because it is counter to prevailing auto industry practices," Tesla said.
The company expects its automotive gross margin to rise to about 28 percent in the fourth quarter of this year. In the fourth quarter of last year, adjusted automotive gross margin was 25.2 percent.
Wedbush analyst Craig Irwin said the company's average selling prices were about 10 percent higher than expected during the quarter, adding that investors were pleased with the company's outlook for 2014 deliveries and profit margins.
Operating expenses and capital spending will increase significantly this year, Tesla said, as it expands production capacity for both the Model S and Model X crossover vehicle, invests in stores and Supercharger infrastructure and finishes development of the Model X. It is also starting early design work on its third-generation vehicle.
Tesla said it expects to have Model X prototypes on the road by the end of the year and will begin deliveries to customers in the spring of next year.
Tesla also said it will share more information about its so-called Gigafactory "shortly." The facility is expected to help decrease the cost of battery packs by integrating material, cell, module and pack production into one location. (Reporting by Nichola Groom in Los Angeles, Edwin Chan in San Francisco and Deepa Seetharaman in Detroit; editing by Matthew Lewis)