Tesla's value shot up over $1 trillion on Monday after Hertz announced its order of 100,000 Tesla Model 3 cars, to be delivered by the end of next year. It's the largest single order of electric vehicles ever, according to Bloomberg, which first reported the news. Once delivery is completed, Tesla's will make up more than 20 percent of the rental company's fleet, according to Hertz's press release. And Hertz says it's just getting started. "Electric vehicles are now mainstream, and we've only just begun to see rising global demand and interest," Hertz interim CEO Mark Fields said in the release.
The run-up in Tesla's share price and the vesting of additional shares drove Elon Musk's net worth up $36.2 billion, to $288.6 billion -- the largest one-day gain in the history of the Bloomberg Billionaires Index. Not only is he the world's richest man, he seems on track to become the world's first trillionaire, as at least one expert has predicted.
Why did Hertz choose to order 100,000 cars from Tesla? Probably for a very simple reason -- because it could. Anyone who's rented a car in 2021, or tried and failed to rent one, knows that the car rental industry is struggling to find enough cars to fill demand. Car rental companies, just like the rest of us, are having trouble buying cars because of the computer chip shortage that has slowed production at just about every automaker other than Tesla. Both GM and Ford saw sales drop by more than 25 percent last quarter, not because people didn't want to buy cars but because they couldn't make enough of them to sell. With dealerships struggling to get enough cars on their lots and even used cars in short supply, would either company have accepted an order for 100,000 cars to be delivered in 13 months? It seems unclear.
Tesla may sell 900,000 cars this year.
Tesla, meanwhile, made more cars last quarter than in any previous quarter, and appears set for total sales of more than 900,000 cars this year. How did the company manage this when it's facing the same chip shortage as everyone else? It's likely partly due to the good luck of having a software engineer for a CEO, a battery division from which it could pull some chips, and the company's willingness to adapt on the fly, rewriting firmware swiftly to make alternative chips work in its cars.
But Tesla has one additional advantage -- its relentless focus on its product. Musk discussed the importance of focusing on product in a Wall Street Journal video interview last year. "My recommendation is to spend less time on finance, spend less time in conference rooms, less time on PowerPoint, and more time just trying to make your product as amazing as possible," he said back then. Musk is famous for doing things like sleeping at the Tesla factory floor, so it's pretty clear that he's practicing what he preached. That focus extends to providing a nationwide network of chargers, something likely to calm the "range anxiety" of first-time EV drivers renting from Hertz, who will be able to use those chargers for their Tesla rentals.
Musk's focus on product has paid off pretty well this year. It's led to record sales and a huge order that will let hundreds of thousands of people who've never driven an EV get familiar with Tesla cars. Not to mention an extra $36.2 billion. Where will it lead him next?