PWR Holdings Ltd (ASX: PWH) says it is in discussions with Elon Musk’s electric car and battery manufacturer Tesla, but has yet to sign a formal contract.

PWR designs and produces custom cooling solutions for international motorsports teams, including Formula 1, NASCAR, V8 Supercars and the World Rally Championship. The company listed on the ASX in November 2015 at an offer price of $1.50, and has already seen its share price double to $3.00 and trade as high as $3.10, before coming back to earth and trading around $2.45 currently.

Earlier today, the Australian Financial Review (AFR) reported that the company was working closely with Tesla on prototypes to keep home energy storage batteries colder to improve their performance. The AFR also reports that the company is working with three vehicle manufacturers in Europe and the US to make special cooling systems for battery-powered cars.

PWR’s managing director Kees Weel has told the AFR that 90% of the cars in this weekend’s Formula One Grand Prix in Melbourne were using the company’s hi-tech radiators and cooling systems. He also told the AFR that the main objective the company was working on with Tesla and the car manufacturers was to ensure the batteries don’t overheat.

Around 64% of revenues for this financial year (FY16) are expected to come from motorsports customers, with another 31% from the automotive aftermarket, which includes custom or limited edition high-performance supercars, as well as custom industrial applications such as mining and military vehicles.

Another 5% is expected to come from the Emerging Technologies sector, which includes battery-power cars as well as industrial and residential energy storage.

Last year PWR acquired US fabrication firm C&R as it looks to aggressively target the US market, where hot rods and muscle cars are hugely popular and custom cooling systems could be a big growth driver for the company. The company estimates this market at around US$200 million, but sealing a deal with Tesla – or any other major European car manufacturer would be a huge deal for PWR.

Foolish takeaway

Currently trading on a prospective P/E ratio of around 24x FY16, PWR is still growing strongly, and the move into new markets could become the biggest driver of revenues for the company. Definitely one share to add to the watchlist.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.