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Shares of Tesla Motors, Inc. (TSLA - Analyst Report) surged 7% yesterday to close at $177.92, after reaching a new 52-week high of $180.47. The stock witnessed trading volumes of 15.6 million, significantly higher than the three-month average volume of 10.3 million.

The surge came on the back of a 25% increase in Tesla’s price target to $200 by an analyst of Deutsche Bank AG (DB - Analyst Report). The analyst expects the company to beat margin expectations in the third quarter, driven by strong demand and production volumes.

Tesla’s stock has skyrocketed 403.2% from $35.36 at the beginning of the year. The outstanding performance can be attributed to stable demand and strong safety ratings of Model S, along with sustained innovations by the company.

Tesla recently announced its plans to develop an autopilot system, which will allow the car to cover 90% of the miles driven on its own. Tesla is aiming to launch the car in 2016, although a completely self-driven car will take much longer to develop.

Apart from this, Tesla is also aiming to make its car more affordable to boost sales. The company is reportedly developing a comparatively cheaper car to make electric cars accessible to the masses. This should help protect the company from competition from General Motors (GM - Analyst Report), which is developing a low-cost electric car that provides better mileage than its Chevrolet Volt plug-in hybrid. While Tesla’s Model S covers 265 miles on a single charge, Volt provides a mere 38 miles before shifting to gas.

Tesla is also launching a new SUV – Model X – in 2014. The model scores high on style, with Falcon Wing doors, premium interior surfaces, panoramic glass and Tesla Touchscreen installed in the dashboard. It also boasts zero tail-pipe emission and offers a 60 or 85 kWh battery. The car will have an optional Dual Motor All-Wheel Drive, which will make it the fastest SUV, with acceleration from 0 to 60 mph in less than 5 seconds.

Meanwhile, Tesla has acquired a substantial market share for Model S through its impressive design and enhanced performance. In Aug 2013, the car won the top vehicle safety rating from the National Highway Traffic Safety Administration (NHTSA). Model S obtained a five-star rating overall and also for each of its subcategories from NHTSA. This is a coveted award for Tesla as only 1% of the cars tested receive the rating.

Tesla delivered 5,150 Model S cars in the second quarter of 2013, which surpassed its projection of 4,500 deliveries. The company expects to deliver over 5,000 Model S vehicles in the third quarter of 2013 and 21,000 vehicles globally in 2013.

Sales are expected to increase further once Model S becomes available worldwide. Tesla is gradually working toward this goal. The company recently opened an assembly and distribution center in Netherlands, which will allow the automaker to transport parts anywhere in Europe within 12 hours. Tesla also opened reservations for Model S in China last month.

Tesla expects Model S sales to cross 40,000 by 2014, assuming the demand in Asia and Europe to meet expectations. The car was launched in the U.S. in 2013 and is also available in Europe.

Tesla designs and manufactures electric vehicles and electric vehicle power train components for partners including Toyota Motor Corp. (TM - Analyst Report). The company currently carries a Zacks Rank #2 (Buy).

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