Tesla Inc crossed $1 trillion in market value on Monday after unloading its biggest order from rental car company Hertz, a deal that will see electric cars top the entire auto industry in sales over the next decade. Strengthened the ambitions of the leader.
Tesla shares rose 14.9% to $1,045.02, according to Reuters calculations based on the latest filing, making it the world’s most valuable automaker.
Tesla is the first carmaker to join the elite club of trillion-dollar companies that includes Apple Inc, Amazon.com Inc, Microsoft Corp and Alphabet Inc.
Most automakers don’t boast about sales to rental car companies, often at a discount to offload models with slower sales. 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 largely dominate the car market in the near future.
“Electric vehicles are now mainstream, and we are only starting to see global demand and interest,” Hertz interim chief executive Mark Fields told Reuters.
Tesla Chief Executive Elon Musk has set an average annual sales growth target of 50%, eventually reaching 20 million vehicles a year. This will be more than twice the volume of current sales leaders Volkswagen AG and Toyota Motor Corp.
Consumer demand for electric vehicles is turning a corner in some key markets. The Tesla Model 3 was the best-selling vehicle of any kind in Europe last month, consulting firm Jato Dynamics reported on Monday.
Tesla on Monday was also making progress in resolving regulatory problems threatening its business in China. The company said it opened a new data and research center in Shanghai to comply with government requirements that data collected from vehicles in China remain in the country.
However, Tesla faced new US regulatory pressure on Monday. The new head of the National Transportation Safety Board sent a letter to Musk asking why Tesla was rolling out its “full self-driving” software, even though the company has officially talked about the safety of the NTSB’s automated driving system. Haven’t. But the questions have not been answered.
“This (hertz order) puts an exclamation point under guidance for a 50%+ increase in deliveries. Another solid piece of evidence is EVs are going mainstream,” said analyst Craig Irwin at Roth Capital.
Tesla now faces the daunting day-to-day challenge of becoming a high-volume automaker that hasn’t been seen since the early 1900s when demand exploded for Henry Ford’s Model T.
Tesla is facing an order backlog for its vehicles and extended supply chain disruptions. Tesla’s Chief Financial Officer Zachary Kirkhorn cautioned investors during a call last week that Tesla’s near-term production targets hinge on resolving those disruptions and ramping up two new, sprawling assembly and battery plants in Austin and Berlin. Is. What will happen.
“We have a long execution journey ahead of us,” Kirkhorn said.
Opponents are not sitting quietly. Daimler AG’s Mercedes-Benz brand, General Motors Co., Ford Motor Co., and startups like Lucid and China’s Xping are all battling Tesla with new electric cars or trucks.
Investors and analysts are currently grappling with the challenges of the near future. Morgan Stanley raised its Tesla price target by 33% to $1,200 as the brokerage expects the electric carmaker to surpass 8 million deliveries in 2030.
The Hertz deal also underscored the power of the Tesla brand, as the rental car company emerges from bankruptcy and aims to revive its once-dominant brand. Hertz’s rescue has been led by a group of investors including Knighthead Capital Management, Cert Opportunities and Apollo Capital Management.
“We absolutely believe this is going to be a competitive advantage for us,” interim Hertz CEO Mark Fields said of the Tesla order, due to be delivered by the end of 2022.
“We want to be a leader in mobility. … Achieving the customer experience with electrified vehicles is an absolute priority for us.”
Tesla’s most affordable Model 3 sedan starts at about $44,000, with orders totaling about $4.4 billion if the entire order is for its mass-market sedan.
Fields declined to say how much Hertz was paying for the order. Tesla was not immediately available for comment.
With the current order, Hertz said EVs will make up more than 20% of its global fleet. Fields cited the increasing number of EVs for sales and consumer interest in electrified vehicles.
Hertz also said it is installing thousands of chargers in its network. Customers who rent a Tesla Model 3 will have access to 3,000 Tesla Supercharging stations throughout the United States and Europe.
Tesla shares were up 11.9% at $1,018.35 in afternoon trading.