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Tesla Soars After Losing Less Than Forecast, Mercedes Deal

Elon Musk, chief executive officer of Space Exploration Technologies Corp. (SpaceX) and Tesla Motors Inc., speaks at the National Press Club in Washington. Photographer: Andrew Harrer/Bloomberg
Elon Musk, chief executive officer of Space Exploration Technologies Corp. (SpaceX) and Tesla Motors Inc., speaks at the National Press Club in Washington. Photographer: Andrew Harrer/Bloomberg

Tesla Motors Inc., a U.S. electric-car maker, soared 13 percent, the most in seven months, after it lost less in the third quarter than analysts estimated and said it has a new tentative agreement to supply batteries and motors for an electric Mercedes-Benz model.

The company named for inventor Nikola Tesla said yesterday its third-quarter net loss widened to $65.1 million from $34.9 million a year ago. Excluding some items, the loss was 55 cents a share, Tesla said in a statement on its website. The average of nine analysts’ estimates compiled by Bloomberg was for a per-share loss of 60 cents.

“Even though they’re losing money, the fact that their batteries are attractive to other automakers gives them some revenue and some credibility,” said Alan Baum, an industry consultant at Baum & Associates in West Bloomfield, Michigan. “They are catching a few breaks in the sense that people want to do business with them.”

Tesla is sold out of next year’s production of its new Model S sedan and should earn a profit in 2013, Elon Musk, the company’s chief executive officer and biggest shareholder, said in an Oct. 28 Bloomberg Television interview. The electric sedan will eventually retail for as little as $50,000, about half the price of its current Roadster sports car.

Tesla rose to $32.46 at the close in New York. The increase was the biggest since March 31, and the closing price was the highest since Dec. 22, 2010. Tesla shares have gained 22 percent this year.

Revenue Forecast

The automaker, based in Palo Alto, California, said in a letter to shareholders that it had a “letter of intent” from Daimler AG for “a full powertrain in the Mercedes line.” Details of the program may be announced “around the end of the year,” Musk said yesterday on a conference call.

The new deal could add $100 million to Tesla’s revenue over the next few years if it’s similar to powertrain business with Toyota Motor Corp., JPMorgan analyst Himanshu Patel, who has an “overweight” rating on Tesla, said in a note today.

“Components is a higher margin business and would boost overall gross margin,” Patel said.

The company’s third-quarter revenue totaled $57.7 million, higher than the $46.4 million average of eight estimates. The company raised its 2011 revenue forecast to a range of $195 million to $200 million from $180 million to $190 million, crediting sales of Roadsters and motors and battery packs to Daimler and Toyota.

Tesla Investors

Tesla said it’s on target to begin delivering Model S sedans next year. Sales of Roadsters, which cost more than $100,000 each, jumped 22 percent to 184 units in the quarter. Revenue from the model, which travels more than 200 miles per charge, was “just over $28 million,” the company said, up 56 percent from a year ago.

Tesla counts Daimler, Toyota and Panasonic Corp. as investors. The Model S is an important part of Tesla’s plans to break into profitability. Shipments of the car will begin in July 2012, Musk said.

“Over 90 percent of the factory tooling is in place” to build the car at Tesla’s plant in Fremont, California, he said on the earnings call with analysts. “We could ship before July if we had lower standards.”

The design of the next model to be added to the company’s lineup, the Model X utility vehicle, will be revealed late this year and go on sale in 2013, Musk said.

New U.S. Stores

The company also said it’s adding three U.S. stores to sell and service Model S sedans. The new locations are Bellevue, Washington, near Seattle, Chicago, and Newport Beach, California, Tesla said in a statement today.

Capital expenditures in 2011 will be “at the lower end” of the company’s guidance of $220 million to $245 million, Tesla said. Preparations for its California plant and development costs for the Model S will prevent the company from being profitable until at least 2013, Musk said.

Along with car sales, revenue will come from supplying electric motors and battery packs for Toyota’s rechargeable RAV4 sport-utility vehicle that goes on sale next year. In the third quarter, sales to Toyota and Daimler totaled $29 million, the company said.

The tentative deal with Daimler comes after Tesla had supplied batteries and motors to the Stuttgart, Germany-based company for electric Smart minicars and Mercedes A-Class hatchbacks.

Tesla said it also has “multiple” agreements to sell so-called zero-emission vehicle credits in California that it will generate from delivering Model S sedans. The state requires large automakers doing business there to sell some autos that emit no tailpipe exhaust or to buy credits from those that do.

The company didn’t provide financial details of the credit sales.

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