Tesla surpasses $1tn valuation following 100,000 vehicle order from Hertz

Electric car giant Tesla has become the fifth company in history to reach a valuation of $1tn. The US firm, founded by Elon Musk surpassed the mark on Monday following a large order from car rental firm, Hertz.

The deal to sell 100,000 vehicles to Tesla, so shares in the company increased by more than 12% – and made it the world’s most valuable car manufacturer. Tesla has achieved this total, despite making fewer cars than Toyota, Ford and General Motors.

Prior to the deal, only Apple, Microsoft, Amazon, and Alphabet had reached the $1tn valuation.

Hertz will pay $4.2bn for 100,000 Tesla Model 3s over the next 14 months, and the company has started to build a network of charging stations across the US.

Earlier this month, Tesla announced record revenue and profits in Q3 2021. Revenue in Q3 was $13.8bn, a 57% year-on-year increase and modestly ahead of market expectations. Operating profits came in at $2.0bn, a 148% year-on-year increase but slightly less than the market had hoped.

The company’s revenue growth was driven by a 58% increase in automotive revenues, to £12.1bn, as overall vehicle deliveries in the quarter rose 73% to 241,391. Reduced revenue per vehicle reflects a change in mix from the higher-priced Model S/Xs to lower-priced Model 3/Ys, as well as a 30% decline in automotive credits.

Automotive revenue rose to $12.06 billion and costs of automotive revenue amounted to $8.38 billion for the quarter.

The record results were also driven by improved gross margins of 30.5% on its automotive business and 26.6% overall, both of which are records for at least the last five quarters.

Operating profits rose despite Tesla setting aside $190m for likely share-based payment to Elon Musk in the quarter. The operating margin growth reflects the benefits of increased scale as well as cost reduction. Headwinds in the quarter included lower average sales prices, lower regulatory credit revenue and a $51m bitcoin-related impairment.

Capital expenditure in the quarter was $1.8bn, up 81% year-on-year, as the group continues to invest in new factories in Berlin and Texas as well as ramping up production in Shanghai. Free cash in the quarter came in at $1.3bn, versus $1.4bn a year ago.

The company also reported $1.62 billion in (GAAP) net income for the quarter, the second time it has surpassed $1 billion. In the year-ago quarter, net income was $331 million.

Tesla finished the half with net cash of $7.9bn, up from $846m. However, the group continues to face challenges with semi-conductor shortages, congestion at ports and rolling blackouts that are preventing factories running at full capacity.