Oct. 25 (Reuters) – Tesla Inc (TSLA.O) surpassed $ 1 trillion in market value on Monday after landing its biggest ever order from car rental company Hertz, a deal that bolstered ambitions from the electric car leader to dominate the entire automotive industry in sales over the next decade.
Tesla shares jumped 14.9% to $ 1,045.02, making it the world’s most valuable automaker according to Reuters calculations based on its latest record.
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).
Most automakers don’t brag about sales to rental car companies, which are often done at discounted prices to offload slow-selling models. But for Tesla and its investors, Hertz’s decision to order 100,000 Tesla vehicles by the end of 2022 has shown that electric vehicles are no longer a niche product, but will dominate the mass car market for the foreseeable future. .
“Electric vehicles are now commonplace, and we are just starting to see an increase in demand and interest globally,” Hertz acting chief executive Mark Fields told Reuters.
Tesla CEO Elon Musk has set a target of annual sales growth of 50% on average, eventually reaching 20 million vehicles per year. This would be more than double the volume of current sales leaders Volkswagen AG and Toyota Motor Corp (7203.T).
Consumer demand for electric vehicles is turning a corner in some major markets. The Tesla Model 3 was the best-selling vehicle in Europe last month, consulting firm JATO Dynamics reported on Monday. Read more
Tesla also appeared to make progress on Monday in resolving regulatory issues that threatened its business in China. The company said it has opened a new data and research center in Shanghai to comply with government requirements that data collected from vehicles in China remains in the country. Read more
However, Tesla faced new US regulatory pressure on Monday. The new head of the National Transportation Safety Board sent Musk a letter asking why Tesla is rolling out its “Full Self Driving” software, even though the company has not officially responded to NTSB questions about the safety of the automated driving system.
“This (the Hertz command) puts an exclamation point under the forecast of over 50% growth in shipments,” said Craig Irwin, analyst at Roth Capital. “Another strong proof that electric vehicles are becoming more widespread.”
Tesla now faces the daily challenge of becoming a high-volume automaker that has seen unprecedented growth since the early 1900s, when demand exploded for Henry Ford’s Model T.
Tesla faces an order backlog for its vehicles and prolonged supply chain disruptions. Tesla CFO Zachary Kirkhorn warned investors on a call last week that Tesla’s short-term production targets will depend on resolving these disruptions and the ramping up of two new and massive factories. assembly and batteries in Austin and Berlin. Read more
“There is a whole course of execution ahead of us,” Kirkhorn said.
Rivals do not stand still. The Mercedes-Benz brand of Daimler AG (DAIGn.DE), General Motors Co (GM.N), Ford Motor Co (FN) and startups such as Lucid (LCID.O) and Chinese Xpeng (9868.HK) are are all fighting Tesla with new electric cars or trucks.
Investors and analysts, for now, are looking beyond short-term challenges. Morgan Stanley raised its Tesla price target by 33% to $ 1,200, with the brokerage expecting the automaker to exceed 8 million deliveries in 2030.
The Hertz deal also underscored the power of the Tesla brand, as the car rental company comes out of bankruptcy and aims to revive its once dominant brand. The Hertz rescue is led by a group of investors including Knighthead Capital Management, Certares Opportunities and Apollo Capital Management.
“We absolutely believe this is going to be a competitive advantage for us,” Hertz interim CEO Mark Fields said of Tesla’s order, which is expected to be delivered by the end of 2022.
“We want to be a leader in mobility.… Bringing the customer experience to life with electrified vehicles is a top priority for us.”
Tesla’s cheapest Model 3 sedan starts at around $ 44,000, so that order is worth around $ 4.4 billion, if the entire order was for its mainstream 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 electric vehicles will make up more than 20% of its global fleet. Fields cited the growing number of electric vehicles for sale and consumer interest in electrified vehicles.
Hertz also said it is installing thousands of chargers on its network. Customers who rent a Tesla Model 3 will have access to 3,000 Tesla supercharging stations in the United States and Europe.
Tesla shares rose 11.9% to $ 1,018.35 by late afternoon.
Reporting by Subrat Patnaik and Sanjana Shivdas in Bengaluru and David Shepardson in Washington; Additional reporting by Eva Mathews, Aniruddha Ghosh and Kannaki Deka; Editing by Shounak Dasgupta, Lisa Shumaker and Richard Chang
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