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19 June


Tesla speeds past Toyota

Electric-car company's valuation grows fivefold in past year

Tesla-Toyota Photo: Bloomberg

/NOVOSTIVL/ Tesla's market capitalization reached $210 billion on Wednesday, driving the electric-car specialist past Toyota Motor to become the world's most valuable automaker.

Growing interest in environmentally conscious investing has helped Tesla's valuation swell nearly fivefold over the past year. Its shares touched an all-time high of $1 135 on Wednesday.

Investors have flocked to the company as a front runner in the auto industry's shift toward connected, autonomous, shared and electric vehicles. Tesla overtaking Toyota underscores the changing dynamics in the sector. In addition to being a top brand in the electric-vehicle market, the company is known for solar panels and storage batteries.

The recent rally was sparked by reports Monday that Tesla CEO Elon Musk had expressed optimism of breaking even for the April-June quarter in an internal memo. Market analysts have forecast a large swing into the red amid the repercussions from the pandemic.

Tesla shares were up as much as 12% in the next two days, closing Wednesday at $1 119 for a market capitalization of $207 billion. Toyota's market cap stood at $202 billion.

Tesla has established local production networks in both its main markets - the U.S. and China - with the opening of a factory in Shanghai late last year, and it plans to start up a plant outside Berlin in 2021. It aims to boost annual production capacity to 1 million vehicles next year, up 40% from current levels.

The company has reported net profits for three straight quarters since July-September 2019. And if Tesla remains on that path in the second quarter of 2020, this would increase the odds of its inclusion in the S&P 500. The prospect of an influx of money from index funds potentially pushing up the share price has also boosted the stock.

However, Tesla sold about 367 500 vehicles last year, a fraction of Toyota's 10,74 million. And while China's electric-vehicle market is expected to grow, some analysts argue that U.S.-China tensions have not been fully priced into the stock.

Electric truck startup Nikola in the U.S. and Chinese electric carmarker NIO are among the investor darlings in the sector, but some observers see an overbought market. Short sellers continue to target Tesla, with bets against the stock equivalent to 9,8% of the company's float.