(Adds Elon Musk's comments on Twitter)
Oct 25 (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 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
"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,
Amazon.com Inc, Microsoft Corp and Alphabet
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 and Toyota Motor
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
"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
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
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
Rivals are not sitting still. Daimler AG's
Mercedes-Benz brand, General Motors Co, Ford Motor Co
, and startups such as Lucid and China's Xpeng
are all battling Tesla with new electric cars or
Investors and analysts, for now, are looking past the
near-term challenges. Morgan Stanley 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
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.
(Reporting by Subrat Patnaik and Sanjana Shivdas in Bengaluru
and David Shepardson in Washington; Additonal reporting by Eva
Mathews, Aniruddha Ghosh and Kannaki Deka; Editing by Joseph
White, Shounak Dasgupta, Lisa Shumaker and Richard Chang)