Hertz, the rental car company that emerged from Chapter 11 bankruptcy in June with $6 billion in capital, has agreed to buy 100,000 Tesla Model 3 all-electric sedans by the end of 2022, paying about $4.2 billion for the lot.
Hertz will make Teslas available for rent this year in Atlanta, Austin, Nashville, New Orleans, and Tulsa, with other markets added in coming months.
Tesla’s controversial self-driving feature will be enabled in the rental cars.
Hertz’s share price rose 10 percent on its announcement; Tesla’s share price shot up to almost $1,100, vaulting its market capitalization above $1 trillion for the first time and cementing Tesla founder Elon Musk’s place as the richest person on Planet Earth.
To capitalize on public curiosity about electric vehicles (EVs), Hertz is launching a marketing campaign that has enlisted football legend Tom Brady to talk up the initiative.
Hertz will offer digital guidance to EV newbies and expedite Tesla bookings through its app. It also has pledged to install “thousands” of charging stations for its Tesla customers.
The bold move is part of Hertz’s plan to reinvent itself as a “mobility company.”
The deal also expands Hertz’s customer base: with public interest in EVs on the rise, the rental car company is counting on not only travelers to rent its Teslas, but also curiosity-seekers who want to find out what driving an EV is like.
“When a lot of consumers think electric vehicle, they think of Tesla, and now if they want to rent one, they’ll think of Hertz,” Morningstar auto analyst David Whiston told Bloomberg.
When Hertz has taken delivery of all 100,000 Teslas, 20 percent of the company’s global rental fleet will be all-electric, while EVs still make up less than 3 percent of all new car sales.
“With a purchase that represents 20 percent of its global fleet and a commitment to install thousands of charging stations, Hertz is giving notice that EVs are mainstream and here to stay,” Duke University environmental policy analyst Jennifer Weiss said in an interview with Grist.
Hertz’s purchase will claim about 10 percent of Tesla’s annual production and raises questions about its ability to deliver 100,000 cars in 14 months amid materials shortages and delivery clogs.
As it announced its Tesla purchase, Hertz also unveiled an agreement with ride-hailing service Uber to let its drivers rent Teslas from Hertz, which the rental car company claims will be cheaper for drivers than buying or leasing a new car for their shifts.
Hertz also has penned a deal with online car sales site Carvana to sell its used fleet vehicles. Carvana will take a commission on sales, which will leave Hertz with more money from each sale than disposing of its old cars itself, the company said.
TRENDPOST: Yesterday, Elon Musk tweeted that he’d like to “emphasize that no contract has been signed yet.”
Today, Hertz says deliveries of Tesla cars into its rental fleet are already occurring.
Regardless of the confusion, one danger ahead is the supply of materials needed to make batteries.
With supply chains tangled for at least a few more months and copper and other minerals not being mined in adequate amounts fast enough to meet current demand, putting 100,000 battery packs into Teslas in the next 14 months will be a challenge at best.
We detailed some of the problems Tesla faces in “Commodities Supercycle Underway?” (11 May 2021), where we quoted Bank of America analysts’ warning that “the world risks running out of copper.” More broadly, Musk may be seeing at least as much value in the headline as in the sale.
Hertz has placed its “seal of approval” on electric vehicles, bringing them another step closer to public acceptance. However, the bottom line is going to be price. The more EVs cost, the lower the demand.