Current Affairs

03072020---tesla

Image source: phol_66, Kathy Hutchins, G.roman, Lauritta - Shutterstock

What's going on?

Electric vehicle maker Tesla and its otherworldly CEO shocked their gas-guzzling rivals this week by becoming the world’s most valuable car company.

What does this mean?

Tesla’s market value surpassed the $208 billion mark, eclipsing previous frontrunner Toyota’s $203 billion. The companies’ products aren’t as different as you might think, with the latter’s hybrids also having taken the world by storm. But their numbers couldn’t be further apart: Tesla delivered just shy of 368,000 cars last year, compared to Toyota’s almost 11 million. Nor has Tesla managed to deliver an annual profit, while Toyota has a long track record of doing exactly that (tweet this).

So what gives? Well, this week’s surge might’ve been thanks to an email Tesla’s CEO sent employees to congratulate them on a good quarter. Investors may have taken that to mean the 73,000 second-quarter deliveries – and, in turn, the revenue – that analysts were expecting was actually a serious underestimation.

Why should I care?

For markets: Drive toward the light.

Given the impact global trade wars and the ongoing pandemic have had on demand, it’s been a tough couple of years for carmakers. But after Thursday’s better-than-expected deliveries announcement, investors who thought they could see light at the end of the tunnel kept buying Tesla’s shares – sending them up 7%. And if some early investors hadn’t sold off stock to lock in their profits, those shares might well have risen even more.


The bigger picture: Coochy coochy coo.
Tesla’s critics argue that the carmaker’s decision to drop its prices amid rising electric vehicle competition doesn’t bode well for its future earnings. That might be why it’s the most bet against company in America. But investors expecting its shares to fall may recently have been forced to curb their losses by buying those shares back, pushing Tesla’s stock higher still. And it’s not just the company’s existing investors who are benefiting: CEO Elon Musk’s bonus should set sweet little X Æ A-Xii up for life…

Originally posted as part of the Finimize daily email.

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