Tesla crosses US$1 trillion market value after Hertz orders 100k cars

NEW YORK • Tesla has surpassed US$1 trillion (S$1.35 trillion) in market value after landing its biggest order from Hertz, a deal that reinforced the electric car leader's ambitions to top the entire auto industry in sales over the next decade.

It is now the fifth-largest publicly traded company in the United States - bigger than Facebook.

The milestone, which it hit briefly last Friday, was solidified on Monday after car rental company Hertz Global Holdings said it had placed an order for 100,000 Tesla vehicles. Tesla's shares closed up 13 per cent, the most since March, giving it a market value of US$1.03 trillion.

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," he tweeted in reply to a comment by Mr Ross Gerber, co-founder of investment fund Gerber Kawasaki and a Tesla shareholder.

Tesla is the first carmaker to join the elite club of trillion-dollar companies that include Apple, Amazon.com, Microsoft and Google parent Alphabet. Facebook, which first hit the US$1 trillion marker in June, has had its valuation sink to around US$927 billion.

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 shows that electric vehicles (EVs) 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 Mark Fields told Reuters.

Mr Musk has set an annual sales growth target of 50 per cent, on average, eventually reaching 20 million vehicles a year. That would be more than twice the volume of current sales leaders Volkswagen and Toyota Motor.

Consumer demand for EVs 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 on Monday.

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

However, Tesla faced new US regulatory pressure on Monday.

The National Transportation Safety Board's new chief sent Mr Musk a letter questioning why Tesla was rolling out its "Full Self Driving" software even though the company has not officially responded to the board's questions about the automated driving system's safety.

"It (the Hertz order) puts an exclamation point under guidance for 50 per cent-plus 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.

Rivals are not sitting still. Daimler's Mercedes-Benz brand, General Motors, Ford Motor as well as start-ups such as Lucid and China's Xpeng, are all battling Tesla with new electric cars or trucks.

Investors and analysts, for now, are looking past the near-term challenges. Morgan Stanley boosted its Tesla price target by 33 per cent to US$1,200 as the brokerage expects the electric carmaker to surpass eight million deliveries in 2030.

"We absolutely believe that this is going to be a competitive advantage for us," Mr Fields said of the Tesla order.

He 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 per cent of its global fleet.

REUTERS, BLOOMBERG