Bloomberg reported the news a few minutes ahead of the press release, with sources who asked not to be identified, and said that it represents around $4.2 billion of revenue for Tesla. It will be the single-largest purchase ever for electric cars. (Editor’s note update: In 2019, Amazon placed an order with Rivian for 100,000 delivery vans.) The cars will be delivered over the next 14 months from an already tight supply of Tesla vehicles.
Bloomberg points out that the cost of the order implies that Hertz is paying list prices for the Teslas, and is thus not getting a discount for its large order, which car-rental companies usually get from automakers.
Tesla Model 3s will be available to rent at Hertz locations in major US markets and parts of Europe starting in early November, according to the source. Customers will of course have access to Superchargers, and Hertz is also building its own charging infrastructure.
The electrification plan, which eventually will encompass almost all of Hertz’s half-million cars and trucks worldwide, is the company’s first big initiative since emerging from bankruptcy in June. And it signals that Hertz’s new owners, Knighthead Capital Management and Certares Management, are intent on shaking up an industry dominated by a handful of large players who are typically slow to change.
In response to the news and also a Morgan Stanley upgrade, TSLA stock is up 4-5% in premarket.
Hertz filed for bankruptcy in May 2020 as a result of the pandemic travel slump. Demand for rental cars then swung sharply upward, partly due to the result of a car shortage, driven by high demand for used cars and supply chain disruptions, as well as a rebound in travel.
In a quick turnaround due to high demand for rental cars, Hertz officially emerged from bankruptcy on June 30, which allowed it to shed more than $5 billion in debt.
Update: The press release includes a new “Let’s Go” campaign with NFL quarterback Tom Brady:
In addition, Hertz is teaming up with seven-time Super Bowl champion and entrepreneur Tom Brady to showcase how it is making EV rentals fast, seamless and more accessible, as the company accelerates its commitment to lead the future of mobility and travel.
“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.
This is a huge win for Teslas and EVs in general. Getting bottoms in seats will speed adoption. It’s interesting to see Hertz interim CEO Mark Fields leading the charge here, since Fields was ousted from Ford a few years back largely for not modernizing the company and preparing properly for the onslaught of EVs.
It’s also a big win for Hertz since we, and I assume most Tesla owners, will look there first when renting cars. I’m going to assume that they won’t expect to return the cars charged and hope they don’t charge some idiotic “recharging fee” akin to the $9.99 they charge for gas if you don’t return the car full.
Tom Brady, love him or hate him, is an EV guy and has been driving an EV for years. His celebrity will reach many of the middle America folks who’ve not caught the EV bug yet. This is a big mainstreaming moment.
The other big thing to consider is how this is going to affect the supply of Model 3s. Tesla already can’t make enough cars and is currently at a 1 million-car-per-year run rate. However, assuming Austin and Berlin get online soon, the automaker should be able to cover this extra demand in stride over the next year and two months.
But that’s really just the start. We have to assume that other rental car agencies will have to buy in to keep up. Nothing but upside here.
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Author: Michelle Lewis