Road Race: Tesla’s Market Capitalisation Surpasses $1 Trillion

The Story

On Monday 25 October, Tesla’s market capitalisation surpassed $ 1 trillion for the first time. In doing so, Elon Musk’s visionary car company becomes only the seventh company to hit the $1 trillion value mark (after Apple, Microsoft, Saudi Aramco, Alphabet, Amazon, and Facebook). The news comes after rental car company Hertz ordered 100,000 Tesla Model 3’s in pursuit of its own fleet electrification.

What It Means For Businesses and Law Firms

The stock market valuation follows a recent string of stellar financial results that have seen net profit grow by 380% to $1.62 billion compared to a year ago. Despite the pandemic and a global semi-conductor chip shortage, Tesla increased its vehicle production by 72%, to 500,000 cars per year (Financial Times). Although this is far less than rivals such as Volkswagen (9.3 million cars per year) or Toyota (7.2 million cars per year), Tesla’s growth looks set to continue, as Musk targets 50% annual sales growth per annum by 2030 (Bloomberg).

Tesla’s $1 trillion valuation remained until the closing bell on Monday’s trading. The company overtook its nearest rival Toyota as the world’s most valuable car manufacturer in July 2020 (The Guardian), and is now worth more than all of the other publicly traded car companies combined (BBC).

Tesla is driving profit from new, innovative areas such as software upgrades. The company sells fully autonomous driving software for $10,000 – one example of how it is generating huge profit margins on soft products that reduces the cost of manual labour (Reuters).

Hertz’s recent order of 100,000 Tesla Model 3’s is set to help the car rental company to meet its goals of having a 20% electric fleet. The deal is worth $4.2 billion to Tesla and added $80 billion to its stock market value. The announcement of the deal saw Tesla’s shares shoot up 12.6% to tip the company into trillion-dollar territory (CNBC).