Tesla has now displaced Volkswagen as the second-biggest carmaker based on market capitalization. The share price of the manufacturer rose to $100 billion, which has given the company’s CEO, Elon Musk, a huge pay rise due to the share price increase.
Since October last year, the company’s share has increased tremendously, with the current share price more than two times its former value. Yesterday, the shares of the car company rose by 4%, which was enough to take the second spot as the second-largest by valuation, second only to Toyota.
Tesla may have done great and leaped into the second spot with its share price increase, it’s still far behind Toyota’s valuation of $230 billion. As it stands, Tesla still has a long way before catching up with Toyota. But the company’s shareholders would not mind remaining number two for now because doubling its shares within the space of a few months is already a big achievement on its own, according to some analysts.
Rise in share price a reflection of Tesla’s performance
Some analysts have stated that the increase in share price is a testament to the improved performance of the company in recent months. Within this period, the car manufacturer opened a new production unit in Shanghai and met the production targets for the factory.
Tesla recently announced that it sold more than 360,000 cars last year, which is 50 percent higher than its sakes the previous year. Investors are hoping that the new factory in Shanghai will further increase its production capacity and gain more customers in China. But the investors still believed that China would be a tough market to conquer because of the significant presence of Toyota, the biggest car manufacture by valuation.
Despite this massive increase in sales, the company’s sales rate is still relatively small when compared with other car manufacturers.
Toyota delivered about 9 million cars from January to November last year while Volkswagen sold about 11 million.
Although Tesla has increased its share price, the company is still facing some challenges. It’s still trying to resolve the complaints of unexpected acceleration and battery fires made against the company. Also, despite the steady success, Tesla has not made an annual profit yet.
But if the recent growth rate can be sustained, its first annual profit report won’t be far off. Mr. Musk would also have a cause to smile more because the company could give out the first batch of his $2.6 billion in compensation packages. Tesla will be reporting its quarterly results to investors in a few weeks’ time.
The compensation plan provided a condition for the payment of $2.6 billion to Mr. Must. It stated that Mr. Must would receive compensation if the firm reaches the $100 billion in valuation and sustains it for six months. The requirement for the compensation also involves Tesla reaching $1.5 billion in earnings and $20 billion in revenue. When the compensation deal was approved, the company was valued at $55 billion.