Daily Management Review

Tesla’s Market Valuation Surpasses One Trillion Dollars


Tesla’s Market Valuation Surpasses One Trillion Dollars
The United States based electric car maker Tesla is now a trillion dollar company.
This was possible after shares of the company surged and pushed the market cap of the company over the $1 trillion for the first time following the placing of an order for 100,000 Tesla cars by Hertz Global Holdings Inc., a company which came out of bankruptcy barely four months ago. Hertz’s orders are a part of its plans of using electric cars for its rental fleet.
Tesla's Model 3 sedans will be used by be Hertz for renting out at its outlets in major U.S. cities and parts of Europe beginning in early November, according to a statement from the rental business. Tesla will deliver the vehicles to Hertz over the next 14 months. 
Customers will be able to use Hertz's own charging infrastructure as well as Tesla's supercharger network. According to people familiar with the subject, this is the single-largest purchase ever for electric vehicles (EVs) and will account for nearly $4.2 billion in income revenue for Tesla. The scale of the order signals that Hertz is buying the Tesla cars close to its list prices even though car rental firms are known to frequently demand steep reductions in prices from car manufacturers.
“How do we democratize access to electric vehicles? That’s a very important part of our strategy,” Mark Fields, who joined Hertz as interim chief executive officer earlier this month, said in an interview. “Tesla is the only manufacturer that can produce EVs at scale.”
The plan of Hertz to use electric vehicles in its fleet is the firm’s first major push since emerging from bankruptcy in June, and it will ultimately encompass almost all of the half-million cars and trucks that the company rents out worldwide.
This also indicates that Knighthead Capital Management and Certares Management, the new owners of Hertz have serious plans of disrupting the vehicle renting industry which is currently dominated by a few large companies that have come to be known as notoriously slow to adapt to changes.
The stocks of Tesla rose by as much as 9.8 per cent in intraday trade to reach a new high of $998.74, which made the electric car maker among just five publicly traded American companies that have a market valuation of more than $1 trillion.
Currently, the stocks of Hertz are traded over the counter as the company prepares for relisting of its stocks on the Nasdaq Stock Market and its stocks rose by as much 14 per cent to $28.25.
Hertz may be able to prevent competitors from copying the tactic by securing such a large portion of Tesla's manufacturing — the order for Tesla cars is equivalent to around one-tenth of what the automaker can now manufacture in a year. The deal is also made unique as Hertz is breaking convention by purchasing the well-equipped cars at almost list prices instead of purchasing the standard base model and asking for significant discounts from carmakers as is done by typically all vehicle rental companies.