Hertz Global Holdings Inc., just under four months before bankruptcy, placed an order for 100,000 Teslas in the first step of an ambitious plan to electrify its rental car fleet.
The cars will be shipped in the next 14 months, and Tesla Inc.’s Model 3 sedans will be available to rent at Hertz locations in key US markets and parts of Europe from early November, the landlord said in a statement. Customers will have access to Tesla’s supercharger network, and Hertz is also building its own charging infrastructure.
It’s the largest single purchase ever for an electric vehicle or EV, and represents Tesla in approximately $ 4.2 billion in sales, according to those familiar with the matter who declined to be identified because the information is private. While car rental companies typically charge huge discounts from the automakers, the size of the order means Hertz pays near list prices.
“How do we democratize access to electric vehicles? It’s a very important part of our strategy, ”said Mark Fields, who joined Hertz as interim CEO earlier this month, in an interview. “Tesla is the only manufacturer that can produce electric vehicles on a large scale.”
The electrification plan, which will eventually include almost all half a million Hertz cars and trucks worldwide, is the company’s first major initiative since the company’s bankruptcy in June. And it signals that Hertz’s new owners, Knighthead Capital Management and Certares Management, are eager to shake up an industry dominated by a handful of big players who are usually slow to change.
Hertz, currently traded over the counter on the Nasdaq stock exchange ahead of its resumption, rose as much as 14% to $ 28.25 in New York at 9:39 a.m. Tesla shares rose as much as 6.7%, the strongest intraday since April 13, to a record $ 970.84, bringing the automaker closer to a $ 1 trillion valuation.
By blocking so much of Tesla’s production – the order is roughly a tenth of what the automaker can currently produce in a year – Hertz could deter competitors from copying the strategy. Hertz is also breaking with tradition by paying full price for well-equipped cars rather than the typical base models, heavily discounted sedans that populate rental fleets.
Talks with Tesla go back months when Knighthead and Certares put together an offer for then-bankrupt Hertz, Fields said. The relationship between the two companies is also not exclusive: Hertz can buy electric cars from other automakers, and competing car rental companies can order from Tesla if capacity is available.
“We want to work with every manufacturer to help them introduce electric vehicles and drive this secular shift towards electrification,” Fields said in an interview.
Palo Alto, California-based Tesla, which is moving its headquarters to Texas, did not respond to a request for comment.
In 2020, General Motors Co. was Hertz’s largest car and truck supplier, followed by Nissan Motor Co. and Ford Motor Co.
Tom Brady
Teslas with zero tailpipe emissions will appeal to rental customers who want a green option or want to try a battery-powered vehicle. Hertz said it has hired Tom Brady, the seven-time Super Bowl-winning quarterback, to star in ads with the new Teslas. A dedicated EV website has also been created to offer free recharging until the end of January.
Under Fields, who was CEO of Ford for nearly three years until May 2017, the company is looking for electric vehicles as part of its clean energy commitment. Teslas are also less expensive to maintain and refuel than vehicles with internal combustion engines, and they usually don’t lose as much value in the resale market.
The charging network that Hertz is building at its own locations will initially only be for customers, said Fields.
Together with the Tesla rollout, Hertz, the largest US car rental company after Enterprise Holdings Inc., is starting a more comprehensive transformation of its business around mobility and digitization. Part of this will be accelerated rental bookings via the Hertz app.
Wild journey
Electrification is the latest twist on Hertz’s wild journey through the Covid-19 pandemic. When demand for rental cars plummeted in early 2020, the company, whose brands include Dollar, Thrifty and Firefly, filed for bankruptcy and began liquidating its fleet.
Now 17 months later, Hertz, based in Estero, Florida, is thriving thanks to a sharp recovery in travel and the global shortage of new cars. Day traders have adopted it as a meme stock.
As of June 30, Hertz had $ 1.8 billion in cash and its debt level, a key measure of financial health, had improved from nearly 10 in late 2019 to 2.4, according to a government filing dated October 15.
Knighthead, a distressed debt hedge fund, and Certares, a travel-focused private equity firm, won the Hertz bankruptcy auction in May with a $ 6 billion bid. It looks like a bargain: On October 22nd, the company had an over-the-counter market value of $ 11.6 billion.
