Tesla makes history
on October 25, electric vehicle maker Tesla became the second-fastest company ever to reach $1 trillion in market capitalisation. It’s second only to Facebook, which will soon likely change its name, in this regard. But even the word ‘meteoric’ falls short to describe its rise from a valuation of ~$100 billion at the start of 2020 to 10x that figure now.
how did it get here?
only hardcore fans of Tesla or Elon Musk might remember this, but in 2008, the EV-maker was on the verge of going bankrupt. it was only a last-gasp $40 million loan that saved it. as Musk himself tweeted, back then, an electric car company was considered “super quirky”. fast forward to 2020/21, and it’s anything but that. people are switching to electric vehicles by the droves, and everyone from venture capitalists to traditional carmakers are spending big money to get in on the act.
Tesla delivered just under 500,000 vehicles in 2020, up from around 368,000 in 2019. in the first three quarters of 2021, it has already delivered over 627,000 vehicles. its sales in China, a large and competitive market, are growing fast, and now correspond to nearly half its sales in the US. In Europe, its Model 3 Sedan has become the first ever electric vehicle and the first one built outside Europe to top the monthly car sales charts. it’s also making its way to India soon.
however, the main trigger for Tesla’s single-day $119 billion valuation jump was an order for 100,000 Model 3 Sedans from rental group Hertz. given the value of the order was just $4.2 billion, a 28x leap in market cap appears rather enthusiastic. however, when it comes to Elon Musk - the world’s richest man (of all time), one can expect nothing less. investors valued every car Tesla delivered in 2020 at a mind-boggling $1.4 million as against ~$10,000 for traditional carmakers.
remember the self-anointed ‘Dogefather’ whipping up a frenzy over Dogecoin that led to a rollercoaster ride? it’s perhaps a good thing for him and Tesla, which made a $1.5 billion investment in Bitcoin earlier this year, that the news of the Hertz order coincided with Bitcoin registering a new lifetime high last week. perhaps some of the new crop of investors that tends to pile into stocks that are ‘going viral’, a bit like on social media, had a role to play in turning Tesla’s stock into a SpaceX rocket.
it appears to be a case of ‘Everything Elon Musk touches turns to gold’.