Being the car company that changed the perception of how people looked at electric cars, building the largest and most efficient electric chargers across the US and regions of the world, and achieving 0-60 mph run times no-one would expect from a family-sized car are some of the undeniable facts about Tesla Motors. The success of Telsa is the stuff of dreams and recently Tesla hit $1 trillion in market capitalization value this week as Hertz, the rental company that just announced a few months ago to have gone out of bankruptcy, made an order of 100,000 Tesla Model 3. This drove up the price of Tesla shares to $1,114.00 as of the time of writing this story.Keep in mind that market capitalization is the market value of a company based on its share price multiplied by share numbers. But this doesn’t clearly reflect the true reason Tesla is worth a trillion dollars. Read on to find out more about how an 18-year-old company ranked up this high market capitalization, it’s not just cars or Hertz.
Why Did Hertz Order 100,000 Model 3 EVs From Tesla In The First Place?
Hertz is a rental car company that just announced going out of bankruptcy 4 months ago. The order set for 100,000 Teslas represents a total revenue of $4.2 billion. Hertz came out of bankruptcy with a sustainable business model in mind. They will rent out these cars to Uber at 300$ per week - full time Uber drivers will now have the choice to drive carbon neutral cars while retaining high profits, something they couldn’t afford before. Hertz is building an economy of scale, allowing Uber and other commercial businesses to rent cheaper compared to buying or leasing. Another positive point that led Hertz to order these many Teslas is also the perception of people, as not everyone can afford to buy a Tesla it is still a trend for people to drive one. Thirdly, people now like companies which take a sustainable change in their operation, management and especially killing the harmful gases released by any sort of machine - cars included.
Jay Leno Mentioned Tesla Is Worth The Trillion Dollar Because Of Elon Musk And That’s 100% True
Musk, who co-founded the company, has been instrumental in making Tesla the success it is today, Leno says. The order set by Hertz didn’t only increase the market cap for Tesla to the trillion-dollar mark but also made Musk the richest man on Earth. Elon owns 20% of the shares at Tesla which accounts for more than $300 billion. Being the chairman of the company he can do whatever he likes with Tesla, which in some way has made Tesla unique.
From naming the Model S Plaid as a reference to the movie Spaceballs to developing a cheetah mode for extra racing spirit, Elon has sparked some uniqueness in the Tesla fleet.
Tesla: A Different Business Model
Just because Hertz put an order of 100,000 cars and the share prices went up in value doesn’t necessarily mean the trillion-dollar market value is purely becasue of that. Actually, what really has driven the market cap value of Tesla so high is its business model. Vertical integration has made Tesla more powerful than ever. If you look at it from the core components, the batteries, they have been the first company to develop lithium-ion car batteries that have a long enough mile range, don't catch fire, and much more.
If we were to look at the biggest car company in Germany, Volkswagen (which owns a bunch of other car companies as well) its market value is just $120 billion, despite selling more cars than Tesla they don’t necessarily build all the parts on their own. Similarly, GM built production plants to assemble, not build, batteries for their Chevy Bolt, which got recalled as most were catching fire. Production facilities and assembly factories make up a big portion of Tesla's worth.
It’s Not Just Cars: Tesla Energy And Robotics
Cars are not the only thing Tesla sells, indeed they don't even have dealerships utilizing full lots but people rather order their cars online in a direct order leaving dealers outside the game. Tesla operates in renewable energy. Basically, anything that runs on electricity can be utilized by Tesla. Tesla is expanding its renewable energy sources, building large areas of solar panels, wind turbines, and much more. Tesla Energy amounted to $806 million or 6% in the third quarter of this year and as time goes by so does the demand for renewable energy.
Tesla also revealed their Tesla bot, a human-sized robot that could do most boring jobs according to Tesla. It is not out for sale yet and it will not be there anytime soon but these factors build up some really healthy standpoints for a company that seems to be shaping the future.
Tesla Has Its Own In-House Software
In addition to all the great perks of driving a Tesla, its software system is a crucial and powerful tool the company incorporates with its electric vehicles. The software is built in-house and the infotainment system matches with no other car manufacturer out there. A simple ABS braking issue would require cars produced by another manufacturer to be recalled, which is an expensive operation for any car company. Tesla got rid of that as the software updates itself right from the driver's garage with no requirement to visit a dealer. Tesla’s autopilot is also one of the most advanced self-driving pilots among all car companies and Tesla is working harder to push into level 5 self-driving autonomy. All these factors mated together to build up a really competitive car company. Tesla directly races against super cars like Ferraris and competes in comfort, reliability, and daily driving against Toyota, Mercedes, and all other brands.
A Final Take On Tesla
While Elon reported working 100 hours per week to get the Model 3 production running, Tesla is shooting up in value daily. The financial step that helped Tesla gain so much value was most definitely the Hertz order of 100,000 cars but Tesla is thriving day-to-day to bring innovation and better cars to the market. It took Apple almost 2 years to go from a trillion-dollar to two trillion in market value. As we will see more Hertz rental cars in operation and worldwide government incentives we should be expecting Tesla’s market value to soon reach higher ends. This is a well-deserved spot for the car company that is shaping the future.