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Cash has been a serious problem for Tesla Motors (NASDAQ:TSLA), the designer and manufacturer of the popular Model S electric car. The company recently raised about $200 million from its second offering, which will help increase production of its Model S cars, from which the company is expected to make 90% of its annual revenue. The company has also committed to the Department of Energy (DOE) to repay its loan, earlier than the scheduled time.

Last week, Tesla received a $10 million grant from the State of California to help it move forward with the development of its Model X crossover electric vehicle. The grant, plus its own $50 million, will enable Tesla to add 500 workers for the project. This will help Tesla keep up with its promise of starting deliveries of the car in 2014.

The grant from California was expected by the market after California Governor Jerry Brown showed up at Tesla's 10th February show, during which CEO Elon Musk introduced the prototype of the Model X to the audience. The governor used the platform to show how regulators are working to make the U.S. greener than ever.

The market was a bit surprised to know that the company is concerned about the production of the Model X, rather than being solely focused on the production and delivery of the Model S, which is already expected to be late. One of our earlier articles on Tesla went into details of how the company is expected to backtrack from of its promise of delivering 5,000 Model S cars this year. The company admitted this recently when Musk announced that Tesla will only be able to produce 2,700-3,250 Model S cars this year.

The $10 million that Tesla got from the State of California was a reimbursement for the machinery purchased by the company to refurbish the plant at Fremont. This loan is expected to be under tight scrutiny by political forces, as Musk has already been called a "loser" by GOP candidate Mitt Romney. Romney thinks that Tesla is yet another "green" company like Solyndra and Fisker, which consumed billions of dollars of taxpayers' money and turned out to be absolute failures. That is why we are stressing the election results as an important catalyst for the stock.

Being a car viewed by the market as a direct competitor to Porsche's 911 AG Sports Car or Audi's Q7 SUV, the Model X, with its falcon-wing doors, has gained the attention of many potential buyers. The car's reservation started on Feb. 11 this year; pre-orders are currently above 2,000 and are expected to reach around 3,200 by the end of the year. These are phenomenal numbers, given that production of the car has not started yet -- that the prototype alone has attracted so many pre-orders. One can only imagine how these numbers will change once the car hits the roads and receives favorable reviews from its users.

Bears say that the Model X and its derivatives will crush sales of the Model S. It is a fact that after the prototype of the Model X was revealed in California, some buyers of the Model S switched from the Model S to the Model X. However, Tesla authorities claim that the Model S saw a boost of 30% following the big event. Currently, the down payment is $5,000 for getting a standard Model X reserved and $40,000 for getting a Model X signature reserved.

Conclusion

Musk remains determined to change the landscape of the automotive industry in the U.S. Through Tesla's Model S, he has almost single-handedly revamped the image of electric cars to make them a symbol of style. He has demonstrated that electric cars are much more than tiny cars with big price tags.

Tesla has been punished in the past for its lack of promise-keeping ability. It will be interesting to see how the company goes about meeting its target of starting production in 2014. The sell-side expects the company's revenues to multiply 14 times in the next four years. Sometime next year, the company also expects to make its first dollar in profits. With the slow production of the Model S already priced in the stock and financing problems largely solved, the stock is expected to rise in future.

Source: Buy Tesla As Model X Gets Government Support