Tesla Motors Inc's founder said his company could be profitable if it continued to make pricey sports cars, but is instead forgoing income to build a car aimed at mass-market commuters.

Tesla raised $226 million in its initial public offering Monday night, and is set to start trading on the Nasdaq later on Tuesday morning.

A lot of people were puzzled about why we were going public without profits, CEO Elon Musk, dressed in jeans and an unbuttoned shirt, told reporters outside the Nasdaq building in Times Square, near several Tesla Roadsters.

The reason we are not profitable today is because we are in the midst of expanding with the Model S, Musk added.

Model S is a luxury electric sedan it plans to launch in 2012 and to sell starting from $57,400.

Tesla is the first initial public offering by an American automaker since Ford's debut in 1956. The IPO comes amid heightened interest in electric cars and as major automakers gear up to launch various types of battery-powered vehicles, including plug-in hybrids.

Analysts say that the cars may be sleek, but the shares could be clunkers. The Palo Alto, California-based company is losing money and does not expect to be profitable for at least two years.

The company will go through a fair chunk of 2011 without any products for sale, thanks to tooling changes at a supplier. Production will resume only in 2012 when the mass-market Model S comes online.

Tesla's Roadster is priced at $109,000, while the Model S sedan is set to be $57,400.

But investors are focusing on the opportunity instead of the risks.

Musk told investors recently that his seven-year-old startup is closer to a technology company than a stodgy car maker. He called his car a freaking technology velociraptor, ready to revolutionize the way Americans buy and drive cars.

Demand for the shares was strong. Tesla on Monday sold 13.3 million shares for $17 each, after originally planning to sell 11.1 million shares for $14 to $16 each.

Underwriters on the IPO are led by Goldman Sachs & Co, Morgan Stanley, JPMorgan and Deutsche Bank Securities.

(Reporting by Jonathan Spicer in New York, Poornima Gupta in San Francisco, additional reporting by New York newsroom, editing by Matthew Lewis)