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3 Bold Bets for Tesla Motors in 2014

Looking back, 2013 was Tesla’s (NASDAQ: TSLA ) miracle year. Not only did the stock soar 350%, the Model S also blew away everyone’s expectations. Not only did sales surprise, but the Model S also accumulated an impressive list of accolades. With the stakes so high, will Tesla be able to impress in 2014? Here are three bold bets.

Tesla will achieve a gross profit margin of 29%
Wait — Ford only has a gross profit margin of 15.5%. How could this young auto manufacturer achieve a gross profit margin for its automotive business that is so much higher?

It starts with an impressive average selling price, or ASP. Tesla’s Model S deliveries may begin at $69,900, but thanks to two enhanced models and a number of optional add-ons, the average selling price for Tesla’s Model S is actually $109,600 (using non-GAAP revenue).

Next, a few other factors come into play to help Tesla achieve such an impressive gross profit margin. First, Tesla is only producing one model (the Model X isn’t expected to launch until the end of 2014, and in limited quantity). Second, rapidly expanding production will significantly boost Tesla’s scale.

Already, Tesla has achieved a gross margin of 21% for its automotive business in Q3 (based on non-GAAP revenue, excluding zero emission vehicle credits). That’s up substantially from the previous quarters — 14% and 5% in Q2 and Q1, respectively. And Tesla believes 25% and beyond is within reach: “While we expect to achieve our target of 25% non-GAAP automotive gross margin in Q4 (assuming no contribution from ZEV credits), further progress is likely
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