Electric car maker Tesla Motors, Inc. (NASDAQ:TSLA) has expanded its deal with automaker Daimler AG to manufacture a full powertrain for a new, all-electric Mercedes-Benz (MB).
The deal comes as Tesla is already making powertrain systems for Toyota RAV4 EV and expects to deliver the systems in the second quarter.
Under the expanded partnership with Daimler, Tesla would develop motor, gearbox, inverter and all related software for the new powertrain. Until now, Tesla has been supplying battery packs and chargers to Daimler, who is an investor in Tesla along with Japan's Toyota.
The Daimler deal acts as a significant catalyst to the stock, which has increased 36 percent in the last one year and rose 2 percent in the Wednesday after hours trade.
"The fact that both Daimler and Toyota are using the Tesla drivetrains validates the TSLA IP advantages," Jefferies analyst Jesse Pichel wrote in a note to clients.
Tesla, which expects to be profitable in 2013, announced it would recognize development revenue from the new MB deal as soon as in the second quarter and stated that this agreement is larger than all prior MB component deals combined. Though there is some investor skepticism that drivetrains will cannibalize Tesla sales, the company maintains that EV penetration rates are small and is focused on growing the market.
Tesla, which expects to begin Model S deliveries by July of this year, has unveiled Model X crossover last Thursday. The product got tremendous response and media attention as the company got more than 500 reservation requests, representing almost $40 million in potential sales, just an after a day of its launching.
The company also provided a strong outlook for 2012 when revenue is expected to triple from 2011 sales of $204 million. Tesla expects 2012 revenue of $550 million to $600 million based on expectations that it would deliver 5,000 Model S cars. Wall Street expects revenue of $521.46 million, according to analysts polled by Thomson Reuters.Shares of Tesla were down 8 cents in the Thursday late morning trading session to trade at $33.52 on Nasdaq.