Tesla overtakes Toyota to become world's most valuable carmaker
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Palo Alto, California - Tesla has raced past Toyota to become the world’s most valuable car company.
In a sign of the times, the electric car maker’s value rose by almost 4 percent to $209.5bn (R3.5tr).
That made it more valuable than its much bigger Japanese rival, which is worth $202bn (R3.4tr), and came as Tesla celebrates the tenth anniversary of its stock market listing in 2010, when its shares went for $17 each. They are now changing hands for more than $1100 (R18 700).
The changing of the guard with Toyota follows an extraordinary 500 percent rally in Tesla’s share price since lows last year, as its leader and co-founder Elon Musk overcame production issues, to help it turn in a string of quarterly profits.
More crucially, the California firm’s market capitalisation reflects what investors believe it will be worth in the future.
It delivered just 367 656 cars to customers last year, compared to the 5 to 10 million sold annually by rivals Toyota, Volkswagen, Hyundai, GM, Ford, Nissan and Honda.
And it is yet to turn a full-year profit, despite three profitable quarters recently. But analysts believe Tesla has an edge, thanks to its cutting-edge batteries and computer technology powering its cars.
Tesla founder Elon Musk. File picture: Reuters.
Its Model S sedan recently became the first electric car to boast a certified range of more than 640km.
And after shares rose above $1000 for the first time during the pandemic, some believe Tesla could hit $1500. Daniel Ives, a Wall Street analyst at Wedbush Securities, told clients recently: "We believe that Tesla’s stock likely has room to run further."
Yet both Goldman Sachs and Morgan Stanley downgraded it just days later, based on recent price cuts for its cars, concerns the stock is overpriced and the threat of competition from tech giants such as Amazon.
Tesla also remains a favourite target for short sellers, who have long claimed it will crash back down to earth. But that has not turned off Tesla and Musk’s supporters, who range from British fund giant Scottish Mortgage Trust to the army of small shareholders investing through retail trading platforms.
The transformation has also handed Musk a huge paper profit. The 49-year-old, who owns an 18.4 percent stake, has seen his fortune increase from $20bn to an estimated $52bn since June 2019.
He has been portrayed as both Tesla’s greatest asset and its major weakness, with his use of social network Twitter getting him into hot water.
Musk was forced by regulators to give up the position of chairman after a tweet in 2018, claiming that he had "funding secured" for a bid to take the company private, sent shares soaring.
Supporters point to Musk’s defiance of critics, who have repeatedly claimed that Tesla was just a few years from bankruptcy over the past decade.
Thirteen months ago the shares were scraping lows of $177 as it struggled to ramp up production of its Model 3 cars to 100 000 per quarter.
That was after a 2018 Musk referred to as the "most difficult and painful year of my career". But Tesla bounced back. The Model 3 problems were ironed out and a Shanghai factory was built in record time to cater for Chinese buyers, boosting sales in a crucial market.
AP Photo/Ben Margot.
Russ Mould, investment director at AJ Bell, said: "Risk-tolerant investors will embrace the shares, risk-averse ones will shun them."
He said that buyers needed to consider its prospects over "the next 10, 20 years or more".
"Over that time, the electrification of transport could come into its own and Tesla might just be in the vanguard of that. To keep the stock going in the near term, Musk and his team need to drive volumes for the Model 3, Model Y SUV and its Cybertruck, and to start generating cash on a sustainable basis."
But he warned that if rivals muscle in then the stock could prove costly for investors.
Norihiro Fujito, strategist at Mitsubishi UFJ Morgan Stanley Securities, said: "There isn’t a single person who thinks that simply because Tesla’s market cap has come close to Toyota, that Tesla is a company that is on par with Toyota.
"However, if you look ten years down the road and factor in extreme expectations, $1000 a share may be appropriate."
Quint Tatro, president of Joule Financial, told CNBC: "Tesla just has this wonderful history of proving every single person wrong, so it’s very tough to bet against this company, the stock or Elon Musk. It is a play based on your belief in him as a visionary and as an entrepreneur."
This story originally appeared on IOL