Elon Musk’s Tesla Crosses $1 Trillion Market Capital: Find Out Why? And How?
Tesla is now a $1 trillion company.
It is now worth as much as the combined market cap of the nine largest carmakers in the world such as Volkswagen and Toyota.
It surpassed $1 trillion in market value after receiving its biggest-ever order from rental car company Hertz.
It is to make 100,000 Tesla vehicles for Hertz by the end of 2022.
The order will primarily be Model 3 vehicles, which are Tesla’s cheapest.
Given that the Model 3’s price starts at about $44,000, the order is worth about $4.4 billion.
However, there is no official confirmation as to how much Hertz will pay for the order.
Coming Back On Top
The deal is a step ahead for Tesla’s ambitions to dominate the auto industry in sales over the next decade.
For Hertz, it is a defining moment which could further its goals to regain dominance from bankruptcy.
The pandemic had all but destroyed its business as travel demand fell.
It was saved by multiple investors Knighthead Capital Management, Certares Opportunities and Apollo Capital Management.
Tesla’s shares rose nearly 15% to $1,045.02, making it the world’s most valuable automaker.
It is now the fifth entrant to an elite club of trillion-dollar companies which comprise Apple, Amazon, Microsoft and Alphabet.
Another feat is how long it took Tesla to get here- just 11 years compared to Amazon’s 23 years.
The situation is a little strange since traditionally carmakers would not show off sales to rental car companies which are often made at discounts to unload slow-selling models.
But it means a lot more for Tesla since the Hertz order reflects growing adoption of electric vehicles beyond its niche perception.
Hertz interim Chief Executive Officer Mark Fields said that electric vehicles have now reached the mainstream and rising global demand and interest is just the beginning.
In major markets around the world, electric vehicles are seeing growing consumer demand.
The Model 3 was the best-selling vehicle of any kind in Europe last month.
In China, it is getting closer to resolving regulatory problems which pose a threat to its business there.
The Road Ahead
It now faces a daunting time ahead- having to keep up with exploding demand at a rate last seen only in the early 1900s when Henry Ford’s Model T hit the market.
It is already facing an order backlog for its vehicles and extended supply chain disruptions.
It also faces competition from Mercedes-Benz, General Motors, Ford and startups such as Lucid and China’s Xpeng.
What Customers Can Expect
Hertz customers can rent a Tesla from November and will have access to 3,000 Tesla supercharging stations throughout the United States and Europe.
Customers renting gasoline-powered cars would have to refuel it upon return or pay a fee.
But for those renting Teslas, they will not have to return them fully recharged for now.