Tesla Motors' Big Surprise

This wasn't a surprise: Tesla Motors (NAS: TSLA) lost a bunch of money in the second quarter -- despite a big increase in revenues.

The Silicon Valley electric-car start-up posted a loss of $0.53 a share on revenues of $58.2 million for the quarter. Both of those numbers exceeded consensus Wall Street estimates, but the trends weren't a surprise: Demand is strong (by Tesla standards, at least) for the company's current car, the Roadster, while development of the upcoming Model S sedan is burning big bucks.

The big surprise was elsewhere -- a hint of a huge new deal with mighty Toyota (NYS: TM) .

Tesla's big surprise
Tesla has parts-and-technology deals in place with Mercedes maker Daimler and battery supplier Panasonic (NYS: PC) , but its deals with Toyota are the ones that have attracted the most attention from investors. Thanks to the Japanese giant, Tesla has a factory, a contract to help develop the electric version of Toyota's RAV4 SUV, and a very visible patron in Toyota CEO Akio Toyoda, who famously test-drove a Roadster last year with Tesla co-founder and CEO Elon Musk.

That RAV4 contract delivered $19 million to Tesla's bottom line during the quarter, and it's expected to bring about $100 million after the deal was expanded in July. But on Wednesday, Musk hinted that much more may be on the way: During a call for analysts, Musk said the company was discussing a deal with Toyota that would be "an order of magnitude" larger than the July contract.

That means billion-with-a-B, the company confirmed after the call. It's not yet a done deal, and we can only guess at the details, but that kind of contract would transform Tesla from a long-shot start-up carmaker to a serious, credible industry supplier.

Maybe even a profitable one. That would be a nice surprise for shareholders.

A smarter route to profitability?
Musk has talked brashly of "disrupting" the global auto business, but I've long thought that the company's best path to sustainable profitability would be as a supplier, not a carmaker. The barriers to entry as an auto manufacturer are immense in today's low-margin, globalized car market, but Tesla's experience with electric power trains makes it a valuable potential partner for big automakers looking to up their electric game.

Technologically, Tesla's kind of a one-trick pony, but it's a good trick. The Roadster was the first, and is so far the only, all-electric car that meets global quality expectations with a range comparable to conventional gas-powered autos. To some extent that range advantage is due to the Roadster's expensive battery pack (and corresponding six-figure price point), but the Tesla systems that manage those batteries are good enough to have attracted Toyota's attention, and Toyota is no green-car slouch.

Intriguing possibilities going forward
Tesla was never likely to make it as "just" a carmaker. Plain and simple, the company isn't likely to ever have the scale or resources to compete profitably with the likes of Ford (NYS: F) or General Motors (NYS: GM) , much less the German luxury-car makers that dominate the segment Tesla's hoping to enter with the Model S. A niche producer of a few thousand expensive cars a year for the world's gadget geeks? Maybe. But that's not a route to the kind of profitability Tesla shareholders are expecting.

But now we can at least credibly imagine Tesla as the outsourced center of Toyota's electric-car expertise. Could that lead to profitable tie-ups with other automakers? Or maybe even a buyout offer? Tesla's market cap is still under $3 billion -- even an offer with a fat premium wouldn't strain any of the big automakers too badly.

These are just possibilities right now, of course. But they're worth close watching, because this company seems to have a way of getting more interesting every quarter.

At the time thisarticle was published Mass-market electric cars are still a long way off, and meanwhile the impact of higher energy prices is worrisome. But here's the good news: It's not too late to profit. In the new special report"3 Stocks for $100 Oil," expert Motley Fool analysts name three outstanding companies that should benefit handsomely from rising oil prices. The report is available free of charge for Fool readers -- and here's your chance to getinstant access.Fool contributor John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of Ford.Motley Fool newsletter serviceshave recommended buying shares of Ford and General Motors. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.