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Tesla is Now the World's Second Most Valuable Automaker as Shares Top $1,000 After CEO Elon Musk Announces Plans to Build its Semi Truck

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【Summary】For the first time since Tesla became a public company in June 2010, the company’s shares have topped the $1,000 mark on news that Tesla Chief Executive Elon Musk told staff that it’s time for “volume production” of the semi truck. The fully-electric truck will reportedly have a range of over 600 miles.

Eric Walz    Jun 10, 2020 11:00 AM PT
Tesla is Now the World's Second Most Valuable Automaker as Shares Top $1,000 After CEO Elon Musk Announces Plans to Build its Semi Truck
Tesla's Semi Truck was first revealed in Nov 2017.

As the auto industry begins to recover from economic fallout of the coronavirus pandemic, shares of electric automaker Tesla have nearly tripled since March, when the company's stock price fell to $361.22.  

Now for the first time since Tesla became a public company in June 2010, the company's shares have topped the $1,000 mark on news that Tesla Chief Executive Elon Musk told staff that it's time for "volume production" of the semi truck. The fully-electric truck will reportedly have a range of over 600 miles.

The jump in the automaker's stock price past the $1,000 mark makes Tesla the world's second-most valuable automaker, behind Japan's Toyota Motor Corp. 

The stock also got a big boost from a bullish call by Wedbush Securities, which lifted its target price for the automaker to $1,000 and said Tesla could have "more room to run."

Musk's intention to start production of the electric Semi truck was part of an email sent to Tesla employees on Wednesday, which was viewed by Reuters. However, Musk did not specify a time frame for ramping up production of the Semi, and simply answered "yes" when asked about the plans on Twitter. 

"Production of the battery and powertrain will take place at Giga Nevada," Musk wrote. Most of the other work will probably take place in other states, he wrote, without stating where.

The surge in Tesla's value also resulted in a big payday for the mercurial CEO, whose compensation is tied to Tesla's share price. Tesla confirmed that Musk will receive a $770 million payout in a stock-based compensation package triggered by the company meeting several key financial metrics.  

Today's stock share surge also brings billionaire Musk closer to another payout from a stock compensation plan tied to the company's market capitalization, which is now nearly $184 billion, triple that of Tesla's U.S. rivals Ford Motor Co and General Motors combined.

Tesla is currently experiencing a strong rebound from the coronavirus pandemic, which began just as deliveries of the new model Y crossover began in early March. 

As production of the model Y was beginning to ramp up, the automaker was forced to close its Fremont, California factory on March 23 after a county-wide shelter-in-place order was put into effect in Alameda County, which is home to Tesla's factory.

CEO Musk initially defied the shelter-in-place order to temporarily shut down vehicle production, stating that Tesla was an "essential business" and therefore should remain open. The factory employs around 10,000 workers. However, Musk ultimately was forced to shut the plant after he was overruled by local authorities. The plant was eventually allowed to resume partial operations on May 13.

Tesla is Once Again Becoming Attractive to Investors

With its newly opened Shanghai factory and launch of the new Model Y crossover, things are looking very positive for Tesla, which is why the company stock is soaring and attracting the attention of investors. 

Even without the production of the Semi Truck, Tesla's new Model Y crossover has the potential to become a big hit for the automaker. The Model Y is the company's first crossover vehicle, an auto industry segment that is widely popular with U.S. consumers. 

Musk said in the past that the Model Y has the potential to outsell all of Tesla's other models combined. The Model Y is currently in production in Fremont, California.

Tesla's lineup includes the Model S sedan, which first went on sale in 2012. The Model S was followed by the Model X SUV and the mass-market Model 3 sedan. 

Tesla's new Shanghai factory is also building the Model 3 for the China market, giving Tesla direct access to the world's biggest auto market. Producing the vehicle in China allows Tesla to avoid steep import tariffs, giving the company an extra advantage over its rivals.

Tesla was the first overseas automaker to wholly own a factory in China after China relaxed rules that required automakers to hold no more than a 50% stake in any joint venture with Chinese partner. The factory started building the Model 3 late last year, and took just nine months to construct.

In addition to the Semi Truck plans, Investors also are anticipating Musk will soon unveil the company's new "million-mile" battery that could lower costs and provide a much longer range for future Tesla vehicles.

Tesla is scouting locations for its next U.S. factory, which Musk said he wants to build in the middle of the country to bridge both the east and west coast of the U.S. Rumored locations include Austin, Texas, Oklahoma and California.

Nikola Motor Could Become Tesla's Biggest Competitor

Tesla stock surge comes a day after rival startup Nikola Motor debuted on Wall Street, so Musk's timing of the Semi Truck announcement is interesting, if not intentional. 

Not since Tesla went public in June 2010 has a U.S.-based electric vehicle startup has attracted the attention of Wall Street as Nikola. The company is viewed by many as having the potential to disrupt the long-haul trucking industry with its innovative hydrogen powered and battery electric trucks, the same way Tesla did to the auto industry when the Model S was introduced in 2012. 

Nikola initially planned on developing battery powered trucks, but decided to focus on hydrogen fuel cell technology instead. Nikola's trucks will use a hydrogen-powered fuel cell to produce the electric to power the trucks' electric motors.  

Nikola is trading on the NASDAQ under the symbol NKLA after it merged with New York-based special purpose acquisition company VectoIQ.

Shares in Nikola have more than doubled in price this week as the company's CEO Trevor Milton has used social media and media interviews to promote plans to launch a pickup truck called the Badger to compete with Tesla's Cybertruck, as well as the popular Ford F-150 pickup. 

Tesla revealed its Cybertruck last November and said production will begin in "late 2021."

Musk first unveiled the prototype of the futuristic looking Semi Truck in 2017. At the time, he said the Class 8 truck would go into production by 2019. Now that timeline has been pushed back to sometime in 2021.

resource from: Reuters

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