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 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 <AAPL.O> 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 <GM.N> $57.7 billion.
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 January 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 long-term future.
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."
BETTER-THAN-EXPECTED EARNINGS
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.
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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 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.
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)
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