Tesla Inc on Monday (Oct 25) neared US$1 trillion in market capitalisation as the company founded by Elon Musk received its biggest-ever order from Hertz, which announced plans to buy 100,000 electric rental cars.
Tesla shares opened up 4.5 per cent at US$950.53, a new record high, following the order. Shares were also buoyed by news of the company's Model 3 becoming the first electric vehicle to top monthly sales of new cars in Europe.
The news from Hertz comes as Tesla is coping with a backlog of unfulfilled orders for its vehicles and continuing supply chain disruptions, but it does solidify the mainstream appeal of electric cars.
Interim Hertz Chief Executive Mark Fields in an interview told Reuters the order, delivered by the end of 2022, will primarily be Model 3 vehicles. Tesla vehicles will start being available at Hertz rental facilities in November.
"We absolutely believe that this is going to be a competitive advantage for us," Fields said of the Tesla order. "We want to be a leader in mobility ... Getting customers experienced with electrified vehicles is an absolute priority for us."
Hertz has around 430,000 to 450,000 vehicles worldwide, Fields said. He said Hertz would work with other automakers producing electric vehicles.
Tesla would have to top US$995.75 to become a company worth a trillion dollars, according to Reuters calculations based on its latest filing. The world's most valuable carmaker will join an elite club that includes Apple Inc, Amazon.com Inc, Microsoft Corp and Alphabet Inc
The world's most valuable automaker delivered a record 241,300 electric cars globally in the third quarter, even as it warned that supply chain headwinds would pressure margins.
Tesla's cheapest Model 3 sedan starts at about US$44,000, making this order worth about US$4.4 billion, if the entire order were for its mass-market sedan.
Fields declined to say how much Hertz was paying for the order. Tesla was not immediately available for comment.
With the current order, Hertz said EVs will make up more than 20 per cent of its global fleet.
"It (the order) puts an exclamation point under guidance for 50 per cent+ growth in deliveries," Roth Capital analyst Craig Irwin said. "Another solid piece of evidence EVs are going mainstream."
The car rental firm also said it was installing thousands of chargers throughout its network. Customers who rent a Tesla Model 3 will have access to 3,000 Tesla supercharging stations throughout the United States and Europe.
"Electric vehicles are now mainstream, and we've only just begun to see rising global demand and interest," said Hertz interim Chief Executive Officer Mark Fields.
US President Joe Biden has made it a priority to support the rollout of electric vehicles to combat climate change, but a lack of charging network infrastructure could remain a key hurdle to his ambitious plan.
Analysts at Morgan Stanley bumped their price target on Tesla by 33 per cent as the brokerage expects the electric carmaker to keep posting higher volumes, reaching more than 8 million deliveries in 2030.
A Cox Automotive study said Americans are hesitant to buy EVs due to anxieties about the ranges of the vehicles and high price tags, as well as weak charging infrastructure.
Bloomberg News was first to report about the order.
Hertz had filed for bankruptcy protection last year as travel demand sank during the height of the pandemic and talks with creditors failed to provide relief.
It was rescued by a group of investors including Knighthead Capital Management, Certares Opportunities and Apollo Capital Management.