Tesla shares vaulted to new heights on Monday, giving the electric-car maker a market capitalization of $1 trillion for the first time.
The latest gain — of nearly 13 percent in the day’s trading — came after Hertz announced that it would buy 100,000 Tesla cars by the end of next year. Electric vehicles would then make up more than 20 percent of its global fleet.
Tesla’s share price has risen more than tenfold since mid-March of last year, in the early days of the pandemic, when it fell below $100. The stock closed Monday at $1,024.86, its first close above $1,000.
The trillion-dollar valuation is the latest sign of how Tesla has disrupted the auto industry. The company is now more valuable than General Motors, Toyota Motor, Ford Motor, Volkswagen, BMW, Honda Motor and several other automakers combined.
Tesla crossed the $1 trillion mark more than three years after Apple became the first publicly traded company in the United States to do so — in August 2018 — making Elon Musk’s electric-vehicle maker the latest member of an elite club of highly valued tech companies that dominate the American markets.
Today Apple is worth roughly $2.5 trillion, while Microsoft is valued around $2.3 trillion. Amazon and Alphabet — the parent of the search giant Google — each carry market capitalizations of more than $1.5 trillion. Facebook, a relative runt, weighs in around $930 billion.
The almost unthinkable value investors have ascribed to these companies underscores both their remarkable profitability and the fact that they face few serious competitive threats. But their huge valuations are also part of a broad transformation of the American economy over the last 30 years.
For decades, the country’s largest companies have been capturing an ever-larger share of business profits. The disruptions of the coronavirus pandemic have only supercharged those dynamics, as more activity shifted to the online economy.
The $1 trillion valuation is also a prominent milestone for Tesla, which struggled to make money for nearly two decades.
When Tesla was founded in 2003, and for many years after, the chances that sales of electric cars would take off seemed slim. Other automakers viewed electric cars primarily as gas savers, but Tesla envisioned using electric power to make fast, exciting and futuristic luxury vehicles. The company also designed its cars to be controlled almost completely by software that it could update and modify the way smartphones can. The concept built a zealous following of customers and investors.
But just four years ago, Tesla was mired in production difficulties at its plant in Fremont, Calif., that Mr. Musk, its chief executive, described as “manufacturing hell.”
Even after straightening out its production difficulties, Tesla remained on shaky financial footing, and it had to raise capital on several occasions. Mr. Musk has said that in the spring of 2018, as it was trying to produce its Model 3 compact sedan, Tesla was just weeks away from financial collapse.
But the Model 3 proved a hit, and when Tesla opened a new factory in China in late 2019, the company’s bottom line steadily strengthened. It is building additional factories in Austin, Texas, and near Berlin in Germany.
How much higher Tesla stock can go is open to question. The company’s sales continue to rise, and it is on track to sell close to one million cars this year. But it still faces many challenges, one of which is increased scrutiny of its Autopilot and so-called Full Self-Driving systems.
Autopilot, which uses cameras to steer and brake a car with little help from a driver, sometimes fails to see other vehicles, a flaw that has led to a series of crashes, including some that were fatal. The National Highway Traffic Safety Administration is investigating why Autopilot sometimes fails to see stopped emergency vehicles. It is looking at 12 instances in which Teslas in Autopilot mode crashed into police cruisers or fire trucks with their lights flashing.
On Monday, the National Transportation Safety Board, in a letter to Tesla, chided the company for failing to carry out safety improvements for Autopilot that the agency outlined four years ago.
Tesla has also faced criticism for allowing a small group of customers to test on public roads a more advanced system called Full Self-Driving. The safety board has criticized the name, because the system is not capable of driving a car without a driver’s help, as well as the practice of letting untrained drivers use unfinished safety software.
Over the weekend, Tesla sent new Full Self-Driving software to its test customers but only hours later turned it off remotely after customers found that their cars were braking unexpectedly and making other maneuvers some considered unsafe.