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Tesla exceeds $1 trillion valuation after Hertz order

Tesla Exceeds $1 Trillion Valuation After Hertz Order

On Monday, Tesla reached a massive milestone, exceeding a $1 trillion valuation after securing a big car order from Hertz. It is the fifth firm ever to reach this landmark globally. Previous companies that had also reached the $1tn valuation included Microsoft, Amazon, Apple, and Google-owner Alphabet.

Tesla has just secured one of the biggest ever rental car deals with rental company Hertz. The company placed the biggest order ever for 100,000 Model3s worth $4.2bn for the next 14 months, amounting to around a fifth of the fleet. Moreover, the rental company will look into building many charging stations to accommodate the new purchases.

Hertz’s interim boss Mark Fields expressed that “Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest”.

Hertz’ background

Hertz, once known as Rent-a-Car Inc, first established its business in 1918. Over the years and many acquisitions, the company grew to be one of the most well-known American car rental companies worldwide.

Hertz, however, encountered some financial problems during the Covid-19 pandemic and resulted in filing for Chapter 11 bankruptcy back in May. Chapter 11 bankruptcy is when a business is unable to service its debt/ pay its creditors.

Above all, the rental company managed to come out of bankruptcy in July this year after a new group of investors secured the funds to clear their $5bn debt. This then allowed the company to branch out and invest in electric cars to add to their fleet. The order they placed represents 20% of the 500,000 vehicles that Tesla sold in total last year.

Tesla on the road to success

Tesla exceeds a $1 trillion valuation after the Hertz car order. The company has grown to be one of the world’s more valuable carmakers. The carmaker’s shares climbed up by 12.6% after the Hertz deal took place on Monday. In addition to this, Hertz also benefited from the deal, with their shares rising by 10%. Hertz no longer trades their shares on any major stock exchange market.

Similarly, Elon Musk’s fortune also grew from the company’s stock rise by a massive amount of $25bn. Musk being the world’s richest person, is now worth $255 billion.

Moreover, Tesla produced around 500,000 cars in 2020, a far lower amount in comparison to other big carmakers. These include the likes of Volkswagen (made 9.3 million) and Toyota (manufactured 7.2 million). Musk has set a sale growth aim of 50% with the hopes of reaching 20 million vehicles to be produced yearly.

Final Thoughts

Tesla is the first carmaker in the world to reach this significant milestone of a $1tn valuation. The carmaker is now worth as much as the market cap of the nine biggest carmakers globally, including companies such as Toyota and Volkswagen. In addition to that, Tesla only makes up less of the 1% of car sales globally.

“Tesla getting an order of this magnitude highlights the broader electric-vehicle adoption under way as part of this oncoming green tidal wave now hitting the U.S.,” according to analyst Daniel Ives.

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