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Tesla Overtakes Volkswagen as the World's Second Most Valuable Automaker

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【Summary】With the company's stock at record highs, electric automaker Tesla has overtaken Volkswagen to become the world's second most valuable automaker with a market cap topping the $100 billion mark on Wednesday.

FutureCar Staff    Jan 23, 2020 10:50 AM PT
Tesla Overtakes Volkswagen as the World's Second Most Valuable Automaker

While electric automaker Tesla is often the target of critics and short sellers, they is no denying its powerful presence in the auto industry, which is reflected in its record high stock price. Tesla's share price reached $592.96 on Wednesday. 

With the automaker's stock at record highs, Tesla has become the world's second most valuable carmaker, with a market cap reaching the $100 billion mark.

The $100 billion market cap is the first for any listed U.S. automaker. With that, Tesla overtook Volkswagen AG for the number 2 position. Toyota Motor Corp remains the world's most valuable automaker by far, with a market cap of $233.6 billion. Toyota sold over 10 million vehicles worldwide in 2019.

In addition to surpassing Volkswagen's $99.4 billion value, Tesla has become more valuable than well-established global automakers Honda, BMW, General Motors and Daimler.

Tesla's stock has more than doubled in value in the last three months, boosted by a profitable third quarter of 2019 and high demand and record deliveries for the company' s mass-market Model 3 sedan. 

Tesla's rising stock prices can also be attributed to the completion of its Shanghai gigafactory, its first overseas assembly plant. Tesla has started production of the Model 3 for the China market at its new factory and producing cars locally allows Tesla to avoid steep import tariffs. 

Tesla now has direct access to the world's biggest auto market and is currently building a third factory in Germany near Berlin. The company will also set up an engineering and design center there.

Amid Tesla's soaring stock price, many investors doubt that Tesla can maintain its momentum and lead in EV sales. Rival automakers are beginning to introduce their own fully-electric models, giving Tesla some formidable competition in the premium EV space for the first time ever.

German brand Audi has just releases its e-tron, the automaker's first fully-electric SUV, while rival Mercedes Benz has launched the EQC, another fully electric luxury SUV. Tesla is also facing new competition from U.S. automakers Ford Motor Company and General Motors. 

Ford recently unveiled its electric Mach-E SUV, which is inspired by the company iconic Mustang sports car, while GM is working on an SUV version of the battery-powered Chevy Bolt.

In China, which is the world's biggest market for electric vehicles. a host of EV startups are making inroads, including NIO, Xpeng Motors and Byton. The three EV startups are all looking to follow Tesla's lead by offering fully-electric models loaded with high tech features that buyers want.

However, Tesla's record high stock price reflects investor confidence in electric vehicles in general. EVs which were once dismissed a niche category in the auto industry, but with Tesla's growing popularity, other automakers are scrambling to introduce new electric models, which is causing a ripple effect throughout the auto industry.

Tesla's success of the past eight years has shown other automakers that electric vehicles can become mainstream, leaving them no choice but to follow in Tesla's lead. The other option is to continue to produce internal combustion engine models and risk getting left behind as the rest of the industry transitions to building battery-powered models.

Tesla's next vehicle the Model Y crossover could be its biggest hit ever, at least in the U.S. The Model Y is entering the most popular automotive category with consumers. In 2019, sales of SUVs and pickups made up 70 percent of U.S. vehicle sales. Production of the Model Y is scheduled to begin this summer.

Tesla chief executive Elon Musk said that the Model Y has the potential out outsell all of Tesla's other models combined, which may lift Tesla's market cap even higher.

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