As reported, this week Tesla received extremely happy news that they have officially joined the S&P 500 index before going official on December 21. Based on the 11/16 closing prices, Tesla will be one of the 10 most valuable companies in the S&P 500.
After the announcement, Tesla’s stock price increased by 15% during overtime trading in New York, reaching $ 467.5 / share. Its current market value is about 390 billion USD, higher than any other automaker in the world.
In addition, the rise in Tesla’s stock price also boosted CEO Elon Musk’s fortune, helping him pocket an additional $ 10.2 billion, bringing his total wealth to $ 120 billion.
According to the Bloomberg Billionaires Index, the 500 richest people on the planet, Tesla’s CEO is now only $ 8 billion behind Bill Gates.
This is the second day in a row that Musk’s fortune has risen sharply. Earlier, on Nov. 17, the 49-year-old businessman added $ 15 billion after information Tesla was added to the S&P 500 index from December 21. Thereby, Musk overcame Facebook boss, Mark Zuckerberg to become the third richest person in the world after his fortune skyrocketed after just a few hours in that session.
Zone up from the brink of bankruptcy
Earlier this month, when Tesla’s stock continued to hit peak after peak, CEO Elon Musk gave a surprising secret. It turns out, in the past, his company was on the verge of bankruptcy.
In less than a month, the company will file for bankruptcy when it is difficult to bring its best-selling Model 3 to market.
When asked by an account on Twitter how long Tesla was about to go bankrupt, Elon Musk replied, “It’s been about a month since the production of the Model 3 has caused a lot of pressure and difficulty. for a long time, from mid-2017 to 2019. Both production and delivery activities stalled. ”
Tesla fell into a serious cash shortage as losses piled up and had difficulty reaching its Model 3 production target. However, Musk did not immediately disclose that the company was on the verge of bankruptcy. Although he joked about filing for bankruptcy on April Fool’s Day 2018, of course no one believed it to be true.
Currently, those difficulties have fallen into the past.
Tesla recorded third-quarter profit of $ 874 million, up 156% year-on-year and nearly double the second quarter. Analysts previously only forecast this figure to be 593 million USD.
Tesla revenue reached $ 8.8 billion, an increase of 39% from last year. Cash flow also tripled to $ 1.4 billion. From a company that used to run out of cash, Tesla now owns $ 14.5 billion, up 69% in just three months.
Achieving huge profits, but not through car sales
Tesla went through a lot of ups and downs before it entered its current prime. Just last year, Tesla lost $ 862 million and generated only $ 799 million “free cash flow” (the amount of cash the business generates through its operations, minus asset expenses). Tesla’s valuation is now four times higher than this. Even some investors and financial experts think Tesla’s valuation could reach $ 1 trillion by 2025 or 2030.
So is the business result good because Tesla makes more cars and sells more? The answer is “no”.
In fact, Tesla doesn’t make a lot of money from electric car sales. In 2019, Fortune revealed that Tesla has a steady stream of cash income that is selling greenhouse gas credits (permits to release CO2 and other types of greenhouse gases from the business). Before 2012, Tesla’s greenhouse gas credit sales were only about $ 3.4 million a year.
However, since 2015, Tesla’s emissions credit sales have steadily increased. In the fiscal year ending June 30, 2020, the company sold up to $ 1,048 billion in emissions credits.
Tesla’s emissions credit sales over the years.
Tesla holds the maximum amount of emissions credits because its cars do not consume gasoline and do not emit emissions into the environment. The more cars Tesla makes, the more credits the company owns. The sale of emissions credits has become a steady stream of revenue for Tesla.
In California and some other states in the US, car manufacturers like Ford and General Motors must comply with certain emissions standards for all vehicles. Violating companies will be fined heavily, and may even be revoked their business licenses by the state government. So they have to buy emissions credits.
The future is sure?
While in power, former US President Barack Obama tightened regulations to control greenhouse gas emissions. “The Obama administration put great pressure on car manufacturers, forcing them to buy emissions credits,” Fortune quoted an economist Ben Leard at the University of Tennessee said.
By the time President Donald Trump’s administration loosened these rules. Therefore, in the foreseeable future, American car manufacturers will not need to buy too many credits. Expert Leard forecasts that credit prices and sales will plummet from 2021.
However, the election of Mr. Joe Biden to the US President promises many advantages for the electric car company Tesla. The goal that Mr. Biden once declared on clean energy could mean a new package of stimulus measures by the government for electric car manufacturers in the US, such as Tesla, or General Motors, Rivian and Lucid.
Specifically, Mr. Biden aims to surpass China in electric vehicle productivity, including in materials and parts; strengthening domestic battery research and development; At the same time, building electric vehicle charging station infrastructure, adding at least 500,000 charging stations in the US.
In that case, carmakers would have to increase buying credits from Tesla.
Still, experts say selling credits will be Tesla’s only short-term source of revenue. Because if under great pressure from Democrats, American car corporations will accelerate the transition from fossil fuel cars to electric cars. Ford said it will launch a series of electric cars from 2023.