Tesla surpasses $ 1 trillion market cap, betting the future of electric cars is now
Oct 25 (Reuters) – Tesla Inc (TSLA.O) surpassed $ 1 trillion in market on Monday after receiving its largest contract from rental car company Hertz, a deal that reaffirmed the electric car leader’s ambitions to the entire auto industry in the world will surpass sales in the next decade.
Tesla shares rose as much as 14.9% to $ 1,045.02, making it the Most Valuable Automaker in the World according to Reuters calculations based on its latest filing.
Tesla is the first automaker to join the elite club of trillion dollar companies that includes Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O), and Alphabet Inc ( GoogL.O) belong. .
Most automakers don’t brag about sales to rental car companies, which are often discounted to unload slow-selling models. But for Tesla and its investors, Hertz’s decision to order 100,000 Tesla vehicles by the end of 2022 showed that electric vehicles are no longer a niche product, but will dominate the mass car market in the near future.
“Electric vehicles are mainstream now, and we’ve only just begun to see increasing global demand and interest,” Hertz interim CEO Mark Fields told Reuters.
Tesla CEO Elon Musk has set an annual sales growth target of 50% on average to 20 million vehicles per year. That would be more than double the volume of the current sales directors Volkswagen AG and Toyota Motor Corp (7203.T).
Consumer demand for electric vehicles is reversing in some major markets. The Tesla Model 3 was the best-selling vehicle of all types in Europe last month, the consulting firm JATO Dynamics reported on Monday. Continue reading
Tesla also appeared to be making progress on Monday in resolving regulatory issues threatening its business in China. The company said it opened a new data and research center in Shanghai to meet government requirements that data collected from vehicles in China remain in the country. Continue reading
However, Tesla faced new US regulatory pressure on Monday. The new chief of the National Transportation Safety Board sent Musk a letter asking why Tesla launched its “Full Self Driving” software even though the company has not officially responded to the NTSB’s questions about the safety of the automated driving system.
“It (the Hertz order) puts an exclamation mark below guidance for shipments to grow by more than 50%,” said Craig Irwin, an analyst at Roth Capital. “Another solid proof that EVs are going mainstream.”
Tesla now faces the daunting daily challenge of becoming a high-volume automaker growing at a rate not seen since the early 1900s when demand for Henry Ford’s Model T exploded.
Tesla is dealing with an order backlog for its vehicles and extended supply chain disruptions. Tesla CFO Zachary Kirkhorn warned investors in a phone call last week that Tesla’s near-term production goals will depend on fixing these malfunctions and ramping up two new giant assembly and battery plants in Austin and Berlin. Continue reading
“We have quite a journey of execution ahead of us,” said Kirkhorn.
Rivals don’t sit still. The Mercedes-Benz brands of Daimler AG (DAIGn.DE), General Motors Co (GM.N), Ford Motor Co (FN) and startups like Lucid (LCID.O) and China’s Xpeng (9868.HK) are all fighting against Tesla with new electric cars or trucks.
Investors and analysts are initially looking past the short-term challenges. Morgan Stanley has raised its Tesla price target 33% to $ 1,200 as the brokerage firm expects the electric car maker to top 8 million deliveries in 2030.
The Hertz deal also underscored the power of the Tesla brand as the rental car company comes out of bankruptcy and seeks to revive its once dominant brand. Hertz’s rescue is led by a group of investors including Knighthead Capital Management, Certares Opportunities and Apollo Capital Management.
“We firmly believe that this will be a competitive advantage for us,” said Hertz’s interim boss, Mark Fields, of the Tesla order, which should be delivered by the end of 2022.
“We want to be a leader in mobility. … Experiencing customers with electrified vehicles is an absolute priority for us.”
Tesla’s cheapest Model 3 sedan starts at about $ 44,000, making that order worth about $ 4.4 billion if the entire order is for the mass-market sedan.
Fields didn’t want to say how much Hertz paid for the order. Tesla was not immediately available for comment.
With the current order, Hertz said electric vehicles will make up more than 20% of its global fleet. Fields cited the increasing number of electric vehicles for sale and consumer interest in electrified vehicles.
Hertz also said it installed thousands of chargers across its network. Customers who rent a Tesla Model 3 have access to 3,000 Tesla charging stations in the US and Europe.
Tesla shares rose 11.9% to $ 1,018.35 in late afternoon trading.
Reporting by Subrat Patnaik and Sanjana Shivdas in Bengaluru and David Shepardson in Washington; Additional reporting from Eva Mathews, Aniruddha Ghosh, and Kannaki Deka; Editing by Shounak Dasgupta, Lisa Shumaker and Richard Chang
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