Key Sentence:
- Tesla surpassed a $1 trillion market value on Monday, making it the fifth company of its kind to hit the runway.
- Shares of the electric car maker rose 12.6 percent after closing a deal to sell 100,000 cars to car rental company Hertz.
Tesla has been the world’s most valuable automaker for a while. But brands like Ford and GM are making more cars. Previously, only Apple, Microsoft, Amazon, and Alphabet, owner of Google, reached a $1 trillion valuation. Tesla struggled for years to increase the production of its cars, leading some investors to speculate that it would fail.
But last year, under the leadership of billionaire Elon Musk, the company stepped up. Its game and became profitable for the first time, which resulted in its stock going public. After his share price increase, Musk’s 23 percent stake in the company is worth an estimated $230 billion.
The deal with Hertz is the largest rental car contract for an electric vehicle to date and is considered an additional vote of confidence.
Hertz will pay $4.2 billion for 100,000 3 models over the next 14 months, Tesla Tops $1 Trillion which is roughly one-fifth of its fleet. The owner will also set up a network of charging stations. Tesla has a range of about 200 miles per charge, but the US lacks the charging infrastructure. Something the Biden government is looking to change.
“Electric vehicles are already widespread, and we’re just seeing growing global demand and growing interest,” said Hertz interim head Mark Fields. Only a handful of Tesla Tops $1 Trillion publicly traded American companies make it to a market cap of $1 trillion or more, and they’re all tech companies.
Think big names like Apple, Microsoft, Alphabet, and Facebook. Amazon joined this elite club last January, 23 years after going public. For comparison: the electric car manufacturer led by Elon Musk only took 11 years. What makes Tesla’s achievement even more remarkable is that it will be the first automaker to reach this stage.
Tesla now costs the combined market capitalization of the world’s nine largest automakers. Including auto giants such as Volkswagen and Toyota. However, Tesla accounts for less than 1% of global car sales. Elon Musk and the company are credited with predicting the future direction of the industry.
While Tesla may be an auto company, Wall Street treats it – and values it – as a technology company. Tesla produced about 500,000 cars in 2020 – far fewer than Volkswagen, which had 9.3 million. Toyota 7.2 million vehicles, and the Renault-Nissan-Mitsubishi Alliance, which made 6.8 million.
However, Musk targets annual sales growth of 50% and hopes to reach 20 million vehicles a year eventually. On Monday, it was revealed that Tesla had pulled its latest update to Autopilot. The software for “fully self-driving” cars after drivers complained of problems.
Some drivers report recurring problems, such as an audible safety signal when there is no danger. The company has not announced when the driver assistance software will return to the market.