Tesla Surpassed VW To Become The Second Most Valued Carmaker Of The World

Following a dramatic rise in its share price that pushed the market value of the United States based electric car maker Tesla past the $100bn mark, the company became the second most valued  car maker of the world by surpassing the German auto giant Volkswagen.

This record valuation also pushes Tesla’s chief Elon Musk to become eligible for claiming billions in incentives related to the company achieving a specific target.

Since October last year, the share price of the company has more than doubled right after the company had reported its first ever quarterly profits.

Tesla is now behind Japan’s Toyota which is still the most valued car maker of the world with a stock market valuation of $230bn which means that Tesla now has quite a distance to cover to catch up with the Japanese auto company.

According to a section of analysts, the performance of Tesla in recent months is behind the meteoric rise in its shares. In recent months, the company has managed to set up its first factory outside of the US in Shanghai in China and has started production and delivering its electric cars to customers in China. On the overall, Tesla has also managed to achieve the production goals that it had set for itself.

Delivery of more than 367,500 cars last year was made by Tesla, the company said earlier this month. That number was 50 per cent more than what it had managed the year before. Investors are hopeful that the new Chinese factory of the company will help it to reduce price of its vehicles in China thereby capturing a greater share of the second largest electric car market of the world.

However, despite the growth in valuation, the sale figures of Tesla are dwarfed by those of the more established rivals such as Volkswagen and Toyota.

Last year, almost 11 million vehicles were delivered by Volkswagen while in the first 11 months of 2019 more than 9 million vehicles were delivered by Toyota.

Moreover, Tesla has never been able to make an annual profit. The company is also facing a probe over complaints filed by Tesla car owners of unexpected acceleration and battery fires.

Later this month, Tesla will be reporting its performance for the latest quarter.

If the market value of Tesla remains at $100bn, it could lead to Musk receiving the first chunk of the $2.6bn compensation as agreed with the company’s board. According to the compensation plan, payout in shares over 10 years is to be paid to Musk. The first installment of that payout is to be given to the Tesla chief after the company reaches a market value of $100bn and manages to retain that value for both a month, and six-month average.

Other preconditions included Tesla reaching revenues of $20bn and managing to earn profits, adjusting for items like taxes, of $1.5bn – a feat that the company has already attained in 2018.

Tesla was valued at about $55bn when the pay deal was approved.

(Adapted from TheHinduBusinessLine.com)

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