Tesla surpasses $1 trillion valuation

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Tesla
Tesla

Tesla surpassed a market value of $1 trillion on Monday, making it the fifth such firm to reach the milestone.

Shares in the electric carmaker climbed 12.6% after it struck a deal to sell 100,000 vehicles to the car rental firm Hertz.

Tesla has been the world’s most valuable carmaker for some time, but brands like Ford and GM make more cars.

Previously only Apple, Microsoft, Amazon and Google-owner Alphabet have reached a $1tn valuation.

For years, Tesla struggled to ramp up production of its cars, leading some investors to speculate it would fail.

But last year the company, led by billionaire Elon Musk, upped its game and became profitable for the first time, prompting its shares to take off.

The deal with Hertz is the biggest-ever rental car order for electric vehicles and seen as a further vote of confidence.

Hertz will pay $4.2bn for 100,000 Model 3s over the next 14 months, which amounts to about a fifth of its fleet. The rental firm will also build a network of charging stations.

Teslas have a range of about 200 miles per charge, but there is a dearth of charging infrastructure in the US – something the Biden administration hopes to change.

“Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest,” said Hertz interim boss Mark Fields.

Tesla has just won major bragging rights.

Only a handful of American publicly traded companies have managed to achieve $1 trillion or more in market capitalisation and they are all technology companies.

Think big names like Apple, Microsoft, Alphabet and Facebook. Amazon joined this elite club in January last year, 23 years after becoming a public company.

In comparison, it took the electric carmaker headed by Elon Musk just 11 years.

What makes Tesla’s achievement all the more remarkable is that it is the first carmaker to hit this milestone.

Tesla is now worth as much as the combined market cap of the nine largest carmakers around the world, including automotive giants like Volkswagen and Toyota.

Yet Tesla makes up less than 1% of global car sales.

Elon Musk and company are being rewarded for anticipating the future direction of the industry.

While Tesla may be a car company, Wall Street treats it – and values it – like a tech company.

Tesla produced around 500,000 cars in 2020 – far lower than the likes of Volkswagen (9.3 million), Toyota (7.2 million) and the Renault-Nissan-Mitsubishi Alliance (6.8 million).

However, Mr Musk has set an annual sales growth target of 50% and eventually hopes to reach 20 million vehicles a year.

On Monday, it emerged that Tesla had withdrawn its latest update of Autopilot, the “full self-driving” car software, after drivers complained of problems.

Some drivers reported intermittent issues such as safety alerts sounding, despite no danger being present.

The firm has not said when the driver assistance software will be re-released.

In August, the US National Highway Traffic Safety Administration opened a formal safety probe into Autopilot system, which is in 765,000 US vehicles.

The investigation comes following a series of 11 crashes involving Tesla models and emergency vehicles since 2018.