Hertz has announced it is going big with electric vehicles. The car rental giant has placed an order for 100,000 EVs from Tesla in a deal reportedly worth $4.2 billion.
Car renters in the US and Europe will soon lease an electric car from Hertz, who recently agreed to purchase 100,000 Model 3 units from Tesla. This is the second time an EV maker will get such a big order after Amazon bought 100,000 electric vans from Rivian for package delivery. Amazon, however, is an investor in Rivian.
Hertz is on a mission to electrify its more than 500,000 cars in a big push for zero-emission mobility.
Tesla will deliver the cars within 14 months, which will be a remarkable feat given that the total number of vehicles represents about 10 percent of its annual capacity and the global chip shortage that has gripped the automobile industry.
CEO of Tesla, Elon Musk, claims Hertz paid full price for the Model 3, surprising as car rental companies typically get discounts on bulk purchases. This shows Tesla had a strong lever during the negotiation.
Hertz most likely did not buy the lowest trim of the Model 3, which should make the cars nicer for the renters.
The contract kicks in immediately, as Hertz says people would be able to rent the Tesla cars from November.
Hertz also announced it is building public chargers for the cars to complement Tesla’s own Supercharger global network.
This is a complete turnaround for Hertz, which went bankrupt last year due to the pandemic. A debt management company bought it out about a month after.
Hertz’s purchase is a win-win for the two companies. The car rental company has now become the first big car rental company to go electric, a big selling point for lovers of environment conservation. Other car rentals will now be compared to Hertz when it comes to zero-emission.
Hertz has also possibly blocked out its competitors who might want to make the same order as Tesla is perhaps the only EV maker with the capacity and appeal.
Since these are electric cars, Hertz will spend less on maintenance as they do not break down as much.
For Tesla, this is a free advertisement because the more Hertz advertises the new cars, the more Tesla shows up. The vehicles will even go to places Tesla as a company might not be able to reach. Ironically, Tesla does not do traditional advertisement, instead relying on constantly being in the news and the CEO’s use of Twitter.
Hertz’s cars will also serve as a massive test-drive scheme as people who are new to electric cars might become interested in buying a Tesla car after renting one from Hertz.
It is also nice to have chunk payment, apart from becoming more established as the EV company to beat.
More significant for Tesla is the effect of the news on its stock price. On the back of this mega-contract, Tesla’s share price has surged to above $1000, making the American EV a trillion-dollar company, a status few companies like Apple, Microsoft, and Google enjoy. It has also rocketed Musk’s fortune to close to $300 billion.
Below is part of Hertz’s press release on the deal:
“Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest,” said Hertz interim CEO Mark Fields. “The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America and a commitment to grow our EV fleet and provide the best rental and recharging experience for leisure and business customers around the world.
Today, 40% of US consumers say they are likely to consider an electric vehicle the next time they are in the market for a new vehicle, according to Pew. Global EV sales skyrocketed 200% in the last year and will likely continue to grow with commitments from global automakers to increase EV sales. For example, in August, three US automakers pledged to boost EV sales to 40-50% by 2030.
The growth is powered by electric vehicles’ high efficiency, positive user experience, and climate change benefits – coupled with battery breakthroughs and rapidly expanding charging networks. EV drivers also benefit from lower maintenance and fuel costs.
Beginning in early November and expanding through year-end, customers will be able to rent a Tesla Model 3 at Hertz airport and neighborhood locations in US major markets and select cities in Europe. To learn more, visit hertz.com/ev.
Hertz also is installing thousands of chargers throughout its location network. Customers who rent a Tesla Model 3 will have access to 3,000 Tesla supercharging stations throughout the US and Europe.
Hertz will offer a premium and differentiated rental experience for the Tesla EVs. This includes digitized guidance to educate customers about the electric vehicle to get them on their way quickly, and coming soon, an expedited EV rental booking process through the Hertz mobile app.
With the current order, EVs will comprise more than 20% of Hertz global fleet and is expected to be supported by a combination of Level 2 and DC fast charging in approximately 65 markets by the end of 2022 and more than 100 markets by the end of 2023. Hertz said these ambitions could be affected by factors outside of Hertz’s control, such as semiconductor chip shortages or other constraints.”
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