Tesla surpassed $1 trillion in market value on Monday after securing its biggest ever order from car rental company Hertz. The deal, which includes the delivery of 100,000 Tesla cars, reinforced the electric car leader’s ambitions to dominate the entire car industry in sales over the next decade.
Tesla’s shares jumped 14.9% to $1045.02, making it the world’s best-valued carmaker, according to Reuters calculations.
Even Tesla CEO Elon Musk said he was surprised by the speed of the surge. “It’s strange that the valuation has changed, because Tesla is really a production ramp problem, not a demand problem,” he said in a tweet in response to a comment from Ross Gerber, co-founder of investment fund Gerber Kawasaki and a Tesla shareholder.
Most carmakers don’t brag about their sales to rental car companies, which are often done at discounted prices to sell off models that are slow-selling. But for Tesla and its investors, Hertz’s decision to order 100,000 Tesla cars by the end of 2022 has shown that electric vehicles are no longer a niche product, but the force that will dominate the mass car market in the near future.
“Electric vehicles are now mainstream, and we are just beginning to see an increase in demand for the interest globally,” said Mark Fileds, Hertz’s acting managing director.
The huge order does pose some problems for the carmaker, however lekarna-slovenija.com. Tesla now faces the daily challenge of becoming a high-volume carmaker. Its growth is unprecedented since the early 1900s, when demand exploded when Henry Ford’s Ford T entered the market.
Likewise, disruptions to production and supply chains are expected, such as those already affecting chips and other microprocessors. Tesla CFO Zachary Kirkhorn warned investors on a call last week that Tesla’s near-term production goals will depend on resolving these disruptions and setting up two huge new assembly and battery plants in Austin and Berlin.
The Hertz deal also underscores the power of the Tesla brand, as the car rental company emerges from bankruptcy and aims to revive its once dominant brand. The rescue of Hertz is being led by a group of investors including Knighthead Capital Management, Certares Opportunities and Apollo Capital Management.
With the order, Hertz said electric vehicles will make up more than 20% of its global fleet. Fields cited the growing number of electric vehicles for sale and consumer interest in electrified vehicles.
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