Tesla surges past $1 trillion valuation after record Hertz order

Rental company announces plans to purchase 100,000 electric cars

The order, to be delivered by the end of 2022, will primarily be Model 3 vehicles. AFP
Beta V.1.0 - Powered by automated translation

Electric vehicle maker Tesla joined the $1 trillion market capitalisation club on Monday as the company’s stock surged to a record high of more than $1,000 a share nearly 11 years after the company went public.

As of Monday, the only US-based companies with a market cap of more than $1tn were Amazon ($1.7tn), Apple ($2.5tn), Microsoft ($2.3tn) and Alphabet ($1.8tn).

Tesla’s shares soared after the company received its biggest-ever order from the car rental company Hertz. They were also driven by the news of the company's saloon car Model 3 becoming the first EV to top the monthly sales of new cars in Europe.

The Nasdaq-listed company's stocks were trading at more than $1,020 at 3.30pm New York time, up more than 11 per cent, valuing the company at $1.01tn.

The Model 3 has become the first EV to outperform its combustion engine counterparts, such as Renault Clio and Volkswagen Golf in the European market, data compiled by research firm Jato Dynamics show.

Florida-based Hertz, which came out of bankruptcy about four months ago, announced plans to buy 100,000 electric rental cars from Tesla by the end of next year.

Industry analysts predicted near-term Tesla shares are unpredictable.

“Our long-term perspective is based on Tesla targeting large markets including EVs, energy, autonomy and insurance,” Loup Ventures managing partner Gene Munster and analyst David Stokman wrote in a note to clients.

“These businesses should deliver sustainable revenue growth and our thinking is sales can increase from $70 billion next year to $400bn in 2027,” they said.

Loup Ventures company expects Tesla stocks to cross $2,500 share price by 2027.

“We caution, a lot of things need to go right [including keeping competition at bay] to get there, but that potential is on the table,” Mr Munster and Mr Stokman said.

Wedbush Securities analyst Daniel Ives predicted the world’s second-biggest economy, China, will represent more than 40 per cent of Tesla’s global deliveries next year. In China, Tesla competes with local brands such as Nio and Xpeng.

Tesla did not respond immediately to The National’s request for comment on the bulk order from Hertz. The deal is is reportedly worth $4.2bn.

Customers will be able to rent a Model 3 at Hertz airport and neighbourhood locations in major US markets and select cities in Europe from next month, Hertz said in a statement.

It is also installing thousands of chargers throughout its location network. Customers who rent a Tesla Model 3 will have access to 3,000 Tesla supercharging stations across the US and Europe, the company said.

"Electric vehicles are now mainstream, and we have only just begun to see rising global demand and interest," Hertz’s interim chief executive Mark Fields said.

"The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America and a commitment to grow our EV fleet and provide the best rental and recharging experience for leisure and business customers around the world," he added.

With the current order, EVs will comprise more than 20 per cent of the Hertz global fleet. This is expected to be supported by a combination of Level 2 and DC fast charging in about 65 markets by the end of next year and more than 100 markets by the end of 2023.

However, the company said these targets could be affected by factors such as semiconductor chip shortages that have upended the automotive industry, including Tesla, globally.

Last week, Tesla said it is facing Covid-induced challenges related to supply chain, transport and production. However the world’s biggest manufacturer of EVs said it is running its production lines “as close to full capacity as conditions [allowed]”.

It delivered a record 241,300 vehicles in the third quarter of this year, topping analysts’ expectations of 220,900 vehicles.

The company, which joined the S&P 500 index in December, reported a 389 per cent jump in its third-quarter net profit to $1.6bn.

Updated: October 26, 2021, 5:57 AM