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Tesla zooms past $1 trillion market cap on bet that the EV future is now

Stock MarketsOct 25, 2021 04:52PM ET
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2/2 © Reuters. FILE PHOTO: The desk of car rental company Hertz is seen at Nice International airport during the coronavirus disease (COVID-19) outbreak in Nice, France, May 27, 2020. REUTERS/Eric Gaillard 2/2

By Subrat Patnaik, Sanjana Shivdas and David Shepardson

(Reuters) -Tesla Inc surpassed $1 trillion in market value on Monday after landing its biggest-ever order from rental car company Hertz, a deal that reinforced the electric car leader's ambitions to top the entire auto industry in sales over the next decade.

Tesla (NASDAQ:TSLA) shares surged as much as 14.9% to $1,045.02, making it the world's most valuable automaker according to Reuters calculations based on its latest filing.

Even Tesla Chief Executive Elon Musk expressed surprise at the velocity of the surge. "Strange that moved valuation, as Tesla is very much a production ramp problem, not a demand problem," Musk tweeted in reply to a comment by Ross Gerber, co-founder of the investment fund Gerber Kawasaki and a Tesla shareholder.

"Wild $T1mes!" Musk wrote in a separate tweet.

Tesla is the first carmaker to join the elite club of trillion-dollar companies that includes Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) Inc.

Most automakers do not boast about sales to rental car companies, often made at discounts to unload slow-selling models. But for Tesla and its investors, Hertz's decision to order 100,000 Tesla vehicles by the end of 2022 showed electric vehicles are no longer a niche product, but will dominate the mass car market in the near future.

"Electric vehicles are now mainstream, and we've only just begun to see rising global demand and interest," Hertz interim Chief Executive Officer Mark Fields told Reuters.

Tesla Chief Executive Elon Musk has set an annual sales growth target of 50%, on average, eventually reaching 20 million vehicles a year. That would be more than twice the volume of current sales leaders Volkswagen AG (OTC:VWAGY) and Toyota Motor (NYSE:TM) Corp.

Consumer demand for electric vehicles is turning a corner in some major markets. The Tesla Model 3 was the best-selling vehicle of any kind in Europe last month, consulting firm JATO Dynamics reported Monday.

Tesla also appeared on Monday to be making progress resolving regulatory problems that threatened its business in China. The company said it had opened a new data and research center in Shanghai to comply with government requirements that data collected from vehicles in China stay in the country.

However, Tesla faced new U.S. regulatory pressure on Monday. The National Transportation Safety Board's new chief sent Musk a letter questioning why Tesla was rolling out its "Full Self Driving" software even though the company has not officially responded to the NTSB's questions about the automated driving system's safety.

"It (the Hertz order) puts an exclamation point under guidance for 50%+ growth in deliveries," Roth Capital analyst Craig Irwin said. "Another solid piece of evidence EVs are going mainstream."

Tesla now faces the daunting day-to-day challenge of becoming a high-volume automaker growing at a rate not seen since the early 1900s when demand exploded for Henry Ford's Model T.

Tesla is coping with an order backlog for its vehicles and extended supply chain disruptions. Tesla Chief Financial Officer Zachary Kirkhorn cautioned investors during a call last week that Tesla's near-term production goals will hinge on resolving those disruptions and ramping up two new, huge assembly and battery plants in Austin and Berlin.

"There is quite an execution journey ahead of us," Kirkhorn said.

Rivals are not sitting still. Daimler AG (DE:DAIGn)'s Mercedes-Benz brand, General Motors Co (NYSE:GM), Ford Motor (NYSE:F) Co, and startups such as Lucid and China's Xpeng (NYSE:XPEV) are all battling Tesla with new electric cars or trucks.

Investors and analysts, for now, are looking past the near-term challenges. Morgan Stanley (NYSE:MS) boosted 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 is led by a group of investors including Knighthead Capital Management, Certares Opportunities and Apollo Capital Management.

"We absolutely believe that this is going to be 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. ... Getting customers experience with electrified vehicles is an absolute priority for us."

Tesla's cheapest Model 3 sedan starts at about $44,000, making this order worth about $4.4 billion, if the entire order were 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 rising number of EVs for sale and consumer interest in electrified vehicles.

Hertz also said it was installing thousands of chargers throughout 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 closed up 12.7% at $1,024.86.

Tesla zooms past $1 trillion market cap on bet that the EV future is now
 

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Comments (13)
Wilks Campbell
Wilks Campbell Oct 26, 2021 12:23AM ET
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Financial data and the fact Tesla could not execute energy business and FSD already telling us loud that Tesla is just a better car company, still just a car company! Why people can so easily be fooled,!
Wilks Campbell
Wilks Campbell Oct 26, 2021 12:23AM ET
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Financial data and the fact Tesla could not execute energy business and FSD already telling us loud that Tesla is just a better car company, still just a car company! Why people can so easily be fooled,!
Rodney Dangerfield
Rodney Dangerfield Oct 25, 2021 7:16PM ET
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what they're not telling you is to be able to use electricity to charge your car it's going to cost you bitcoins... well as long as nothing happens to our electricity and internet lol
David Astro
David Astro Oct 25, 2021 5:01PM ET
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If 1 bitcoin is worth 60K, 1 share of Tesla at 1K seems like a bargain. We all know both with crash one day, but who is to say when that day will be, could be 15 years away.
Chris Johnson
Chris Johnson Oct 25, 2021 2:33PM ET
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Even if Tesla gives the cars to Hertz for free this deal is brilliant... Retail paid all of it like 25 times
Ron Love
Ron Love Oct 25, 2021 2:33PM ET
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Lmao! Retail pushed volume up to 62 million? 🤣🤣🤣
RF RF
RF RF Oct 25, 2021 1:59PM ET
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Great PR by Tesla. I am sure they are selling them at a huge discount.
Ron Love
Ron Love Oct 25, 2021 1:59PM ET
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I guess you don’t math very well. $4.2 billion deal for 100,000 Model 3 cars. MSRP is $42,000. Hertz paid retail price for all 100,000 cars.
Jai Haugen
Jai Haugen Oct 25, 2021 1:56PM ET
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anyone betting against TSLA right now is a fool. Cramer already threw his towel in
John Lakran
John Lakran Oct 25, 2021 12:31PM ET
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Another 100,000 cars they can lose money on but hey they will make a few bucks on the carbon tax credits
Ron Love
Ron Love Oct 25, 2021 12:31PM ET
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Profit on a Model 3 is $10,000 dude. 🤣
Ogah Adaji
Ogah Adaji Oct 25, 2021 12:22PM ET
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so so reseasonble decisive kind of a good market capitalization.
Frank Francone
Frank Francone Oct 25, 2021 12:08PM ET
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The total bubble. EPS 10. Price 1.000. Unbelievable
Ron Love
Ron Love Oct 25, 2021 12:08PM ET
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Forward P/E is 126 and PEG is 2. Not whatsoever unreasonable for a hyper-growth company.
Frank Francone
Frank Francone Oct 25, 2021 12:08PM ET
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Wow incredible. 126 PE for a car company. They will not create hyper growth in the future like they did in the past. Good luck
Ron Love
Ron Love Oct 25, 2021 12:08PM ET
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Frank Francone If you think Tesla is only a car company you are failing. And Tesla’s guidance is to grow on average 50% compounded yearly until 2030, so yes.
Peter ONeill
Peter ONeill Oct 25, 2021 12:08PM ET
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Ron Love  Based on 4 MASSIVE assumptions. China doesn't block trade in any trade war (as a large % of growth is seen as being too Chinese). 2) Companies such as Ford and VW not catching up and biting into market share dominance 3) Elon Musk not having a complete meltdown (again). 4) Tesla being able to maintain lead in EV technology
Ron Love
Ron Love Oct 25, 2021 12:08PM ET
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Peter ONeill VW and Fors? They get smoked by Tesla on profitability and production. Takes VW more than 30 hours to make an ID.3 and they profit $1,000. Takes Tesla less than 10 hours to make a Model 3 and they profit $10,000.
Enron Mask
Enron Mask Oct 25, 2021 10:16AM ET
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Is it only me seeing MADNESS here? It doesnt make any sense!
Jose Maderno
Jose Maderno Oct 25, 2021 9:00AM ET
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From Hertz site: "Hertz Global emerged from its Chapter 11 process on June 30, 2021" and: "The Company anticipates a re-IPO, which includes hosting an investor roadshow and relisting on a major exchange by year-end 2021."  Why do I sense meme trades in 2022 and another Chapter 11 in 2023?
Chris Johnson
Chris Johnson Oct 25, 2021 9:00AM ET
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Spot on... A perfect partner for Enron. Just give Hertz the cars and retail will pump the stock up like crazy
Kaveh Sun
Kaveh Sun Oct 25, 2021 8:57AM ET
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300 miles? Good luck taking them from southern Ca to Vegas or Az. You’re risking ur life by get stuck in the middle of the desert.
Bonney Lake
Bonney Lake Oct 25, 2021 8:57AM ET
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like the whole world has to drive from LA to Las Vegas, open your mind
Ron Love
Ron Love Oct 25, 2021 8:57AM ET
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Google: “Supercharger network”
 
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