Tesla Powers Past $820 Billion Valuation; EV Trend Shows No Signs Of Slowing

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Nothing like a 700 percent increase over the past year to boost the fortunes of Tesla’s stock – and Founder Elon Musk’s net worth – as continued stock market gains have taken both to new highs.

Not only has Musk become the world’s richest man, but Tesla’s market value reached $820 billion Friday, nudging aside Facebook to muscle its way into a top-five position, where it now sits behind only Apple, Microsoft, Amazon and Alphabet.

Even though Tesla has only been included in the benchmark S&P 500 Index for three weeks, the company’s growth prospects remain bright, analysts said, as it is building new plants to boost production to meet demand.

“We believe tech/retail investors see Tesla as two separate tech companies,” according to a research note from Evercore ISI. “One that is a market leader in electric vehicles and another offering driverless-car technology, solar-power stationary storage, battery and powertrain technologies, and others.”

In addition, expectations that the incoming administration of President-elect Joe Biden will advance new climate initiatives and stricter emissions rules are underpinning hopes that Tesla’s share price is not about to go up in smoke.

EVs in EU

Speaking of smoke…

Thanks to a “tremendous ramp-up” in second-half sales of EVs, Germany’s Daimler – the world’s largest luxury carmaker – was able to meet its annual fleet-wide emission requirements and avoid millions of euros in regulatory fines. Mercedes shipped just under 160,000 plug-in hybrid and fully electric cars in 2020, with the fourth quarter accounting for about half of those deliveries, Daimler CEO Ola Kallenius told reporters on Thursday (Jan. 7).

The surge in EV demand came at a time when Europe’s total vehicle sales slumped to a 35-year low, dropping below the 11-million vehicle mark for the first time since 1985. Daimler also said it sold a record 30,000 of its smart electric microcars. Similarly, Benz rival BMW also saw strong EV and hybrid demand, and was able to meet its emissions goal and avoid penalty.

Ebbing Incentives

Once Tesla sold its 200,000th EV a few years ago, it was no longer eligible for a $7,500 federal tax credit, but many of its rivals still are. Although EV trade publication Elektrek says it takes a little bit of calculating in some cases to figure out how much the government is willing to pay you to buy – and drive – an emission-free vehicle, it’s definitely worth the time and effort.

Aside from the production quota cap (which Tesla almost did in the fourth quarter alone last year), other things that will affect EV rebates are personal income and tax rates, as well as additional state incentive programs that some jurisdictions offer on top of the federal cash.

For example, if an EV qualifies for a $7,500 credit but the owner only owes $3,000 in federal taxes, Elektrek said Uncle Sam will only wipe out what is owed and no more, with no carry-forward for unused amounts. There’s also the wildcard of leasing, which gives the credit to the vehicle’s actual owner – who may or may not pocket the money themselves.

Either way, get ’em while they’re still available, because as EV ownership surges – and state and federal budget deficits rise – the notion of subsidizing affluent car buyers who plunk down 50, 60 or even $90,000 for a new car is increasingly hard to defend, and does not sit well with a growing number of lawmakers.

EV Enthusiasm

Clearly, there is a growing enthusiasm for – and belief in – the future growth and viability of alternative-powered cars or trucks, as there are now over 5.5 million hybrids and close to two million electric vehicles on the road in the U.S. While the uptake of the new vehicular technology has been strong, it still only accounts for about 2 percent of the country’s 270 million total vehicles.

While companies like Tesla are adding manufacturing capacity and many dealers have enthusiastically embraced this transformational mega-trend within the industry, not everyone is on board.

For example, nearly one in five Cadillac dealers have balked at a costly EV upgrade mandate from HQ that requires things like revamped showrooms, new charging stations and service training to make sure everyone is ready for the future. In some cases, dealers have agreed to a $500,000 franchise buyout instead of making the estimated $200,000 upgrade.

Similar reports have said that about 40 percent of Hummer’s 1,700 dealers and roughly 30 percent of Ford’s 3,000 dealers have also not yet signed up to become EV-certified.

The current head of the industry’s top trade organization said dealers always want to sell whatever kind of car people want to buy, and the so-called “mausoleum mandates” are out of step with the industry’s rapid shift to digital sales.

“[The automakers] have got to understand that COVID has put this digital world on hyperspeed,” said National Auto Dealers Association chairman Rhett Ricart. “We’re telling [the manufacturers] that people don’t care how big your showroom is, that a big showroom is not a reflection of the quality of the car or of the dealer. It’s not a reflection on anything other than a big showroom.”

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