Hertz Orders 100,000 Teslas in Rental Market Shake-Up
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Hertz Global Holdings Inc., barely four months out of bankruptcy, placed an order for 100,000 Teslas in the first step of an ambitious plan to electrify its rental-car fleet, according to people with knowledge of the matter.
It is the single-largest purchase ever for electric vehicles and represents about $4.2 billion of revenue for Tesla Inc., according to the people, who asked not to be identified because the information is private. While car-rental companies typically demand big discounts from automakers, the size of the order implies that Hertz is paying close to list prices.
The cars will be delivered over the next 14 months, and Tesla’s Model 3 sedans will be available to rent at Hertz locations in major U.S. markets and parts of Europe starting in early November, the people said. Customers will have access to Tesla’s network of superchargers, and Hertz also is building its own charging infrastructure, they said.
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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 typically are slow to change.
The Hertz order helped send the price of Tesla shares jumping nearly 13% into record territory late Oct. 25. The stock was trading at $1,024.84, pushing the world's most valuable automaker's total market value to just over $1 trillion for the first time.
The increase also added $23.7 billion to the net worth of Tesla CEO Elon Musk, the world's richest man. He's now worth just over $253 billion, according to Forbes.
By locking up so much of Tesla’s production — the order is equivalent to about one-tenth of what the automaker currently can produce in a year — Hertz may box out rivals from copycatting the strategy. Hertz also is breaking with tradition by paying full price for well-appointed cars rather than the typical base-model, heavily discounted sedans that populate rental lots.
A spokesman for Hertz declined to comment. Tesla didn’t immediately reply to a request for comment.
In 2020, General Motors Co. was Hertz’s biggest car and truck supplier, followed by Nissan Motor Co. and Ford Motor Co.
Teslas, with zero tailpipe emissions, will appeal to rental customers who want a green option or those eager to try out a battery-powered vehicle. Hertz may look to EVs because they are less expensive to maintain and refuel, and they typically don’t lose as much value in the resale market as vehicles with internal combustion engines.
Earlier this month, Knighthead and Certares brought on Mark Fields, the former CEO of Ford, as interim CEO of Hertz. They also have hired Tom Brady, the seven-time Super Bowl-winning quarterback, to star in Hertz ads showcasing the new Teslas, the people said.
GOAT’s recognize GOAT’s. Introducing our all new EV fleet (@TomBrady not included) #Hertz #LetsGo pic.twitter.com/TElSE2PDKb — Hertz (@Hertz) October 25, 2021
Along with the Tesla rollout, Hertz, the biggest U.S. car-rental company after Enterprise Holdings Inc., is embarking on a broader revamp of its business around mobility and digitization, the people said. One component of that will be expedited rental bookings on the Hertz app.
Wild Journey
Electrification is the latest turn in Hertz’s journey through the COVID-19 pandemic. When demand for rental cars collapsed in early 2020, the company, whose brands also include Dollar, Thrifty and Firefly, was forced to file for bankruptcy and began liquidating its fleet.
Now, 17 months later, Estero, Fla.-based Hertz is thriving thanks to a sharp rebound in travel and the global shortage of new cars. Day traders have embraced it as a meme stock.
As of June 30, Hertz had $1.8 billion in cash and its debt-to-equity ratio, a key measure of financial health, had improved to 2.4 from almost 10 at the end of 2019, according to an Oct. 15 regulatory filing.
Knighthead, a distressed-debt hedge fund, and Certares, a private equity firm specializing in travel, won the bankruptcy auction for Hertz in May with a $6 billion bid. It already looks like a bargain: The company has a market value of $11.6 billion in over-the-counter trading ahead of its relisting on the Nasdaq Stock Market.
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