A Tesla Model S electric car on the sidewalk ahead of the World Economic Forum in Davos, Switzerland, on Sunday, January 19 2020. Picture: BLOOMBERG/SIMON DAWSON
A Tesla Model S electric car on the sidewalk ahead of the World Economic Forum in Davos, Switzerland, on Sunday, January 19 2020. Picture: BLOOMBERG/SIMON DAWSON

San Francisco/Frankfurt — Tesla’s market value has climbed above Volkswagen’s (VW) for the first time to more than $100bn, a threshold that will trigger a huge payout for CEO Elon Musk if he can sustain the feat for months.

The electric-car maker’s shares jumped as much as 4.6% shortly after the open of regular trading on Wednesday. At the early intra-day high of $572.11, Tesla’s market capitalisation was roughly $103.1bn, exceeding VW’s $99.8bn.

While Musk’s sceptics view Tesla being worth more than a carmaker that sold almost 30 times as many vehicles last year as absurd, VW’s Herbert Diess isn’t one of them.

He’s been arguably the most vocal CEO running a traditional carmaker to acknowledge that Tesla’s expansion heralds a radical shake-up of the more than one century-old automotive industry. After saying three months ago that Tesla was no niche manufacturer anymore, he told top VW executives at an internal meeting in Germany last week that connected vehicles will almost double the time consumers spend online, and that cars will “become the most important mobile device”.

“If we see that, then we also understand why Tesla is so valuable from the view of analysts,” Diess said.

The jump above $100bn is about more than just bragging rights for billionaire Musk. He’s eligible to receive the first tranche of an all-or-nothing pay award if the company’s market value stays above that threshold for a sustained period. On paper, the first chunk of the award would net him about $346m.

Tesla shares have more than doubled since the company reported a surprise third-quarter profit and told investors it was ahead of schedule bringing out its next product, the Model Y crossover, and opening its factory near Shanghai.

The stock has room to run as Tesla grows in China, Wedbush analyst Dan Ives wrote in a report on Wednesday. He boosted his target price to $550 from $370 while maintaining the equivalent of a hold rating.

While at least eight analysts have boosted their price targets by more than $100 since the year began, consensus is still well below where Tesla’s shares are trading.

The average target is $363.92 with just 10 analysts rating the stock a buy, compared with 10 holds and 16 sells.

Bloomberg