Nov 25, 2020 - Economy

Tesla's wild rise and European plan

Tesla's market capitalization blew past $500 billion for the first time yesterday.
Data: FactSet; Chart: Axios Visuals

Tesla's market capitalization blew past $500 billion for the first time Tuesday.

Why it matters: It's just a number, but kind of a wild one. Consider, via CNN: "Tesla is now worth more than the combined market value of most of the world's major automakers: Toyota, Volkswagen, GM, Ford, Fiat Chrysler and its merger partner PSA Group."

What's new: Tuesday also brought some more nuts and bolts Tesla news. CEO Elon Musk said they're planning a small car for European markets to be built at its upcoming German factory, per Bloomberg.

  • "In Europe, it would make sense to do a compact car, perhaps a hatchback," he said at an online battery conference.

The big picture: Stocks move around for all kinds of reasons, but it's safe to say that investors see lots of growth potential for Tesla — and EVs in general, particularly with tailwinds from Joe Biden's win.

Between the lines: Tesla's market stature is also benefitting from its upcoming arrival in the S&P 500. Business Insider looks at what's in store...

  • "Of the 189 large-cap funds tracked by Goldman Sachs, 157 that manage roughly $500 billion didn't hold any Tesla shares as of September 30, the bank's analysts said Thursday."
  • "Those funds are set to buy $8 billion worth of shares once Tesla joins the index, according to Goldman."

Of note: Tesla is not alone. The share price of several public EV companies have been rising, and a whole bunch of others are about to go public.

What we're watching: How much Biden boosts U.S. deployment beyond the existing trajectory.

  • He wants big investments in charging and expanded consumer incentives.
  • The latter in particular would help Tesla, which is well past the 200,000-per-manufacturer limit for the $7,500 consumer tax credit.
  • But Biden's plans will be constrained by likely GOP control of the Senate.

The intrigue: Wedbush Securities analyst Dan Ives, in a note and email exchange, said GOP lawmakers could be on board with some kind of new EV incentives.

  • He argues the big investments that GM, Tesla, Ford and others are making in coming years will broaden their bipartisan political appeal, even though EVs are now just around 2% of U.S. sales.
  • It's partly due to geography, as EV manufacturing is expanding into states like Texas, where Tesla is building a factory, as well as Arizona and elsewhere.
  • All this spending and activity "creates a compelling scenario for many in the Beltway to support," his note states.

The bottom line: Overall, he sees lots of coming demand.

  • That's driven by China (which Ives sees accounting for 40% of Tesla deliveries in 2022), EU carbon regulations, new U.S. support, and a domestic industry that's "laser focused" on EVs (especially Tesla and GM).
Go deeper