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Tesla has displaced Volkswagen as the world's second most valuable carmaker, after a dramatic rise in share price pushed its market value to more than $100bn (£76.1bn).

The milestone sets the stage for chief Elon Musk to collect billions in pay tied to hitting that target.

Tesla's share price has more than doubled since October, when the firm reported a rare quarterly profit.

Shares rose 4% on Wednesday, making its valuation second only to Toyota.

Although Mr Musk's company has some way to go to catch up with the Japanese car making giant. Toyota has a stock market valuation of more than $230bn.

Some analysts say the rise in price reflects Tesla's performance in recent months, during which it has opened a factory in Shanghai and met its production goals.

This month, Tesla said it had delivered more than 367,500 cars last year - up 50% from 2018. Investors expect the new factory to act as a springboard that will allow it to capture more of the Chinese market.

Despite the increase, Tesla's sales remain small compared to those of its competitors.

Volkswagen delivered almost 11 million vehicles last year, while Toyota sold more than 9 million in the first 11 months of 2019.

Tesla has also never made an annual profit and it is facing investigations after complaints about battery fires and unexpected acceleration.

The company is due to report its latest quarterly results to investors this month.

If Tesla sustains the $100bn valuation, it could unlock the first piece of a $2.6bn compensation package for Mr Musk.

The plans calls for Mr Musk to receive payouts in shares over 10 years, with the first award contingent on the firm reaching $100bn in market capitalisation and sustaining that value over both a month, and six-month average.

Tesla also had to reach $20bn in revenue and earn $1.5bn, after adjusting for items like taxes - thresholds the carmaker reached in 2018.

Tesla was valued at about $55bn when the pay deal was approved.