The announcement of an order worth $4 billion for 100,000 electric cars yesterday drove the Tesla share price up 12.66% to take the company’s market capitalisation above $1 trillion. The electric vehicles company joins a select $1 trillion club that includes fellow U.S. tech giants Apple, Amazon, Google-owner Alphabet and Microsoft plus Saudi Aramco, the Saudi Arabia state-owned oil company that is listed in Riyadh. Facebook has been worth over $1 trillion but is currently valued at slightly below that threshold.
The order that sent the Tesla share price soaring came from American car rental giants Hertz and is the biggest ever for a fleet of electric vehicles. With a closing market capitalisation of $1.03 trillion yesterday, Tesla is the fifth largest U.S. company and the sixth largest in the world. The Tesla share price has now gained more than 40% since the beginning of the year and over 500% since July last year when it overtook Japan’s Toyota as the world’s most valuable carmaker.
The Tesla share price may have seen healthy gains yesterday even if the Hertz deal hadn’t been announced. There was another announcement that Tesla’s Model 3 topped European new cars sales charts in September – the first time an electric car has done so.
Tesla’s seemingly unstoppable ascent is also doing wonders for the personal fortune of co-founder and chief executive Elon Musk, whose 23% share prin the company is now worth around $230 billion. The company’s most recent quarterly results, released last week, also mean Musk has qualified for $8 billion worth of discounted share options as part of a bonus scheme agreed on with the company’s board.
The first consignment of the Tesla models Hertz is buying will be available to rent across the USA and in parts of Europe from early November. The car rental giants also announced it will invest in building its own charging infrastructure to complement that being created by Tesla.
Hertz making such a significant commitment to electric vehicles, and choosing Tesla for its core fleet, represents more than just the $4 billion the deal is worth. It is representative of the growing mainstream appetite for the switch to electric vehicles.
Tesla’s biggest problem is currently how to fulfil a backlog of orders amidst the supply chain problems the entire automotive industry is dealing with. However, the opening of new Tesla factories in Berlin and Austin in the near future should ease the bottleneck and is expected to take the company’s capacity to two million vehicles a year within 18 months.
Wedbush analysts Daniel Ives and John Katsingris commented:
“Tesla getting an order of this magnitude highlights the broader electric vehicle adoption under way as part of this oncoming green tidal wave now hitting the US. This Hertz deal is a major feather in the cap for Tesla and speaks to where demand is heading in the electric vehicle transformation hitting the auto sector globally.”
Hertz are scheduled to take receipt of all 100,000 cars by the end of 2022 and, said chief executive Mark Fields, are convinced the Tesla fleet will prove a competitive advantage. The deal means one in 5 of Hertz’s total fleet will soon be electric. The price Hertz is paying hasn’t been made public but 100,000 units of Tesla’s cheapest Model 3 sedan would cost $4.4 billion at their starting price of $44,000.
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