Posted on November 03, 2021
The American manufacturer of electric cars continues to panic the Stock Exchange. It has just joined the club of the most expensive companies in the world, such as Apple or Microsoft, by exceeding 1000 billion dollars in value. The good news is piling up, with a giant contract won with Hertz or the title of Europe’s best-selling car won by the Model 3. But the difficult ramp-up of its production tool is starting to cause concern.
How far will Tesla go? The American automaker has just surpassed $1 trillion in market valuation and joins the highly prized club of the world’s most valuable companies. Without yet reaching the heights of Apple and Microsoft (more than 2400 billion each), Tesla has seen its share price rise dramatically this year (+40%). It becomes the most expensive automaker in the world, with its more than $1 trillion market capitalization far exceeding that of other mainstream automakers.
The reason why the Californian firm has crossed this new threshold is to obtain a lucrative contract with the rental company Hertz. The latter, which wishes to electrify its range, has ordered 100,000 Tesla cars for a total of more than 4 billion dollars. It was enough to electrify the stock market!
Another good news for the manufacturer, the Tesla Model 3 has risen to the top of the best-selling cars in Europe in September. This is a first for an electric model, the podium of the best-selling vehicles being generally won by small European city cars (Volkswagen Polo, Renault Clio, etc.).
These new milestones will undoubtedly continue to spur car manufacturers, who are increasingly seeking to align themselves with the success of the American. Volkswagen, whose production exceeds 10 million vehicles per year when that of Tesla is limited to 500,000 copies, has notably planned a vast investment plan both to electrify its range of vehicles, but also to develop on-board software. . A large part of Tesla’s business model is indeed based on its software, more than on its cars, and it is precisely for this reason that stock market investors consider it more as a Tech company than as an industrialist. automobile.
Still many challenges
Despite its financial prowess, Tesla still faces many challenges. Starting with that of scaling up for the industrialization of its models. Even Elon Musk, the leader of the group, displays his skepticism about the valuation of his company. On Twitter, he expressed surprise that investors had overreacted to the contract with Hertz. “Strange that this moved the valuation, given that Tesla has much more of a problem with ramping up production, than demand.“, he writes.
Strange that moved valuation, as Tesla is very much a production ramp problem, not a demand problem
— Elon Musk (@elonmusk) October 25, 2021
Tesla must now strengthen its industrial tool if it wants to continue its momentum. The 100,000 cars ordered by Hertz indeed represent a high proportion of Tesla’s annual production, which it will have to absorb by developing its production. The Gigafactory in Berlin has just been inaugurated, but has still not started manufacturing. The objective put forward by Elon Musk to produce 20 million cars per year by 2030 is therefore very ambitious. Financial analysts are also beginning to worry. According to the Financial Times, analysts at Bernstein estimate that the stock price should fall to $300 by the end of the year, from $1,000 currently.
Arnaud Dumas, @ADumas5