(DETROIT) — Hertz announced Monday that it will buy 100,000 electric vehicles from Tesla, one of the largest purchases of battery-powered cars in history and the latest evidence of the nation’s increasing commitment to EV technology.
The news of the deal triggered a rally in Tesla’s stock, driving the carmaker’s market value over the $1 trillion mark for the first time.
The purchase by one of the world’s leading rental car companies reflects its confidence that electric vehicles are gaining acceptance with environmentally minded consumers as an alternative to vehicles powered by petroleum-burning internal combustion engines.
In an interview with The Associated Press, Mark Fields, Hertz’ interim CEO, said that Teslas are already arriving at the company’s sites and should be available for rental starting in November.
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Hertz stated in an announcement that the Tesla Model 3 small car purchases will be complete by 2022. In an effort to create the largest fleet of rental electric cars in North America it also announced that it will set up its own charging station for electric vehicles.
Fields wouldn’t say how much Hertz is spending for the order. He said that the company had sufficient capital and healthy financial records after it emerged from bankruptcy protection.
Because each Model 3 comes with a base price around $40,000. The purchase is likely to be worth approximately $4 billion. The Model 3 is also the highest-ranked electric vehicle order by any single company. Rivian, which is a new startup maker of electric pickup trucks and SUVs, was the supplier for Amazon’s 100,000-plus electric delivery vans. Rivian is owned by Amazon.
The Hertz order sent Tesla shares soaring nearly 13% to a record closing price of $1,024.86, and pushed the world’s most valuable automaker’s total market value to just over $1 trillion. Forbes reports that Elon Musk’s wealth, which is the most valuable person on the planet, increased 11.4% to $255.8 billion.
Fields spoke with the AP to clarify his conviction that electric vehicles have become more mainstream. Hertz also stated that it intends to provide a large number of EVs to rent customers. Surveys show that electric cars have been a popular choice for consumers over the last five years.
“More are willing to try and buy,” he said. “It’s pretty stunning.”
Fields indicated that Hertz (based in Estero in Florida) is also in negotiations with other automakers to purchase additional electric vehicles, as it increases its EV fleet and adds new models.
Hertz is also investing in its charging network. Fields stated that Hertz plans to install 3,000 charging stations in 65 US locations by 2022, and 4,000 at the end 2023. He said that many of these sites would be located at Hertz airports and others in suburbia.
Customers also would be able to use Tesla’s own large charging network for a fee, Fields said. There are approximately 25,000 charging stations worldwide.
Fields refused to disclose the exact price Hertz would charge for renting Teslas, or whether customers will pay more than they cost to lease gas-powered cars.
Daniel Ives, a technology analyst at Wedbush Securities, wrote in a note Monday to investors that Hertz’s order represents a “major feather in the cap” for Tesla and shows that a broad adoption of electric vehicles is under way “as part of this oncoming green tidal wave hitting the U.S.”
China and Europe lead the U.S. in electrification. Ives said that demand is increasing in America, but Tesla, General Motors (startup Lucid Motors), Ford and others are leading the charge. These companies will be pursuing a potential market of $5 trillion over the next 10 years.
In an interview, Ives said he expected other rental car companies to follow Hertz’s lead.
“It’s a wake-up call for the rest of the industry as well,” he said.
Ives said that Tesla and other manufacturers will benefit from the agreement by giving electric vehicle owners the chance to experience driving them.
“It’s the ultimate test drive,” he said. “For a company that doesn’t normally market, this is the best brand and marketing deal they’ve ever struck,” he said of Tesla.
Hertz’s order may also help alleviate a nationwide shortage of rental cars, he said. Due to a shortage of computer chips worldwide, automakers have cut production and sold fewer rental cars.
Still, Ives said he doesn’t expect Hertz to receive significant numbers of Teslas until the automaker’s new factory near Austin, Texas, starts producing late next year.
Ives pointed out that Hertz will likely charge more for the Model 3s than it would to rent a conventional vehicle with combustion engines.
Hertz Global Holdings Inc. filed bankruptcy protection two months after the outbreaks of coronavirus across the nation. It was the largest corporation to suffer from the epidemic that caused widespread infections. This drove both business and leisure travel across the globe to a halt.
Fields was a former Ford Motor Co. CEO and Hertz appointed Fields as interim chief executive in October.
Shortly after Hertz’s announcement Monday, the National Transportation Safety Board released a letter from its chairwoman chastising Tesla for failing to respond to recommendations that emerged from several fatal crash investigations involving the company’s Autopilot partially automated driver-assist system. The agency recommended four years ago that Tesla limit where its Autopilot system can operate and that it better monitor drivers to make sure they’re paying attention.
