Tesla Motors' (TSLA) revenue jumped substantially in the third quarter due to strong demand for its Roadster model, higher powertrain component sales and increased payments for development work on Toyota's (TM) RAV4 EV.

But Tesla's costs also increased substantially year over year, primarily due to higher research and development expenses. Though we believe R&D costs will continue to increase rapidly over the long term, we expect Tesla will cut them to more sustainable levels after completing work on Model S and a new car plant.

We currently have a price estimate of near $41 for Tesla'a stock, which is about 20% above its market price.

See our full analysis for Tesla's stock here

R&D costs to peak in 2012

Tesla's R&D expenses more than doubled in the third quarter from a year earlier, as the company made significant progress toward launching its Model S next year. The R&D expenses included expenses related to Model S beta prototype build, development of the Tesla factory, significant engineering, design and testing work being undertaken at the supplier end to support Model S readiness.

Moreover, Tesla has also begun design and engineering activities related to Model X crossover prototyping, which added to R&D expenses. Even though annualized 2011 R&D expenses are more than double its levels in 2010, R&D expenses as a percentage of revenue have decreased from 80% in 2010 to around 70% in 2011 due to a larger rate of increase in revenue.

We expect that R&D expenses will continue to increase through next year as efforts to launch Model S gather pace through higher expenses of engineering and testing the Model S as well as preparation of the Tesla factory for production. Thereafter, we expect that R&D levels will decline from 2012 levels, even though advanced engineering work on Model X will continue, as Tesla will be able to use Tesla factory and leverage the Model S platform to prototype and develop the upcoming Model X. Also we expect that Tesla's expenditure on providing engineering support to its suppliers will reduce.

You can drag the trend lines in the modifiable charts above to see the impact of these trends on Tesla's stock value.