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Tesla Leases Chrysler Plant in California

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Tesla Motors, Inc. (TSLA - Free Report) has leased a parts distribution facility near Tracy, California, according to media reports. The automaker intends to expand its operations in the state with the facility, which was earlier a parts-distribution center of Chrysler’s Mopar unit.

Tesla is hiring engineers and technicians for the 32 vacancies in the facility. Tesla has already received building permits to modify the 431,000-square-foot industrial facility located in Lathrop, which is close to Tracy. Lathrop is an hour from Tesla’s headquarters in Palo Alto and the company’s assembly plant in Fremont.

Tesla’s investments in California are part of the company’s ongoing infrastructure expansion strategy. Over the last 2 months, Tesla has leased about 625,000 square feet of Californian real estate. These investments will help the automaker supply more electric vehicles at affordable prices.

Recently, Tesla eliminated California from the list of potential locations for its Gigafactory, according to sources. The reason behind the decision is not known. However, higher manufacturing costs in the region, specifically real estate prices, and political interference are the probable grounds of rejection.

Tesla’s sales in California accounted for more than one-third of the company’s total global sales last year. Moreover, the pollution-control policies in the state help the automaker generate substantial revenues.

Tesla is set to report its first-quarter 2014 results ended Mar 31, 2014 on May 7 after market close. Last quarter, it posted adjusted income (including stock-based compensation expense) of 13 cents per share.

Currently, the Zacks Consensus Estimate for Tesla’s first quarter is pegged at loss of 10 cents. The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 60.00%.

Tesla will benefit from the impressive product portfolio and a rapidly developing supercharger network. Improved production capacity and rapid international expansion are also boosting sales. However, high research and development (R&D) and selling, general and administrative (SG&A) expenses are likely to mar the profit margin of the company.

Tesla currently carries a Zacks Rank #4 (Sell).

Some better-ranked automobile stocks worth considering are CNH Industrial N.V. (CNHI), PACCAR Inc. (PCAR) and Fox Factory Holding Corp (FOXF). CNH sports a Zacks Rank #1 (Strong Buy) while PACCAR and Fox Factory carry a Zacks Rank #2 (Buy).

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