* Green car maker to deliver 35,000 Model S vehicles in 2014
* Gross margins to rise to 28 pct in 2014 from about 25 pct
* To begin volume deliveries of Model X in spring of 2015
(Adds executive comments on upcoming battery factory)
By Nichola Groom
Feb 19 Tesla Motors Inc, led by
billionaire entrepreneur Elon Musk, posted better-than-expected
fourth-quarter results on Wednesday and said deliveries of its
luxury Model S electric sedan would surge more than 55 percent
Tesla also shed some light on its plans for building a
lithium-ion battery plant, or "giga factory," that will cut
battery costs and allow the company to launch a more affordable
electric car in 2017.
Tesla shares jumped 12.3 percent to $217.44 in extended
trading following the announcement. A day earlier, the stock
shot up 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.
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
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. About 24 percent of Tesla's shares
outstanding were held in short positions as of Jan. 31,
according to Nasdaq data.
"The more I think and write about it the more I like my
Tesla short," Kass wrote later that day.
In research notes ahead of Tesla's quarterly report,
analysts expressed concerns that investors underestimate how
much Tesla will have to spend to develop and launch its
third-generation electric car, which is crucial to the company's
The vehicle will be built on a separate production line at
Tesla's factory in California.
Battery costs have been a major stumbling block to
widespread electric car adoption in the United States, according
to analysts. The giga factory, which Tesla will build with at
least two other partners, will lower costs by shifting material,
cell, module and pack production to one spot.
Tesla would need to raise capital to pay for the plan. He
added Tesla would share more details about the plant next week.
"The factory is really there to support the volume of the
third generation car," Musk said during a conference call with
analysts. "We want to have the vehicle engineering and
tooling come to fruition the same time as the giga factory.
It is already part of one strategy, one combined effort."
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 delivered last year. It
will deliver about 6,400 of those cars in the first quarter.
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 there as in the
"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.
Tesla said operating expenses and capital spending will
increase significantly this year 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 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.
(Reporting by Nichola Groom in Los Angeles, Edwin Chan in San
Francisco and Deepa Seetharaman in Detroit.; Editing by Matthew
Lewis and Andre Grenon)