Tesla has said that its fourth quarter loss narrowed sharply from last year, as revenue surged amid growing sales of its Model S sedan.

Tesla said that Q4 GAAP net loss was USD16.26m versus USD89.9m a year earlier. For the year to December 31, 2013, net loss (GAAP) was put at USD74m against USD396m in 2012.

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For the quarter, non-GAAP revenue was USD761m, up 26% from Q3. GAAP revenue for Q4 was USD615 million, up 43% from Q3. Tesla said it produced more cars than originally expected in the quarter, aided by manufacturing, design and quality improvements, but also “strong efforts from our supply chain”.

Tesla also said that both Toyota and Daimler powertrain programmes “remain on plan” and contributed USD13m of revenue in the quarter.

Tesla maintains that average pricing on Model S remained strong in the fourth quarter due to a richer mix of 85 kWh cars and a high option take rate.

“Last quarter, we had record deliveries of 6,892 vehicles and exceeded our target automotive gross margin of 25%, achieving 25.2% on a non-GAAP basis and 25.8% on a GAAP basis,” said CEO Elon Musk. “This capped a year in which we delivered 22,477 vehicles, resulting in almost $2.5 billion in sales on a non-GAAP basis and over $2 billion in sales on a GAAP basis.”

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The Palo Alto, California-based company reported better-than-expected numbers and said it expects to sell more than 35,000 Model S electric sedans in 2014, a 55% increase over last year.

Shares surged by 12.6% to US$218 in extended trade following the announcement. A day earlier, the stock shot to an all-time high after media reported that Musk met with Apple Inc’s head of mergers and acquisitions in 2013.

Tesla said that production is expected to increase from 600 cars/week presently to about 1,000 cars/week by end of the year. However, battery cell supply will continue to constrain production in the first half of the year, but “will improve significantly in the second half of 2014”.

First quarter production is expected to be about 7,400 vehicles, which is significantly higher than the prior quarter production of 6,587 cars. However, as the number of cars in transit to Europe and Asia must grow substantially to support those markets, Tesla said it plans to deliver approximately 6,400 vehicles in Q1.

Tesla also said that very shortly, it will be ready to share more information about the “Tesla Gigafactory”. This, it said, will allow the company to achieve a “major reduction in the cost of our battery packs and accelerate the pace of battery innovation”.