FINANCE

THE ELECTRIC RENTAL

Hertz buys $4B+ worth of Teslas in a significant bet on large-scale EV rentals.

ROBIN SMYTH

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Car-rental giant Hertz is buying 100,000 Teslas at sticker price for an estimated $4.2B, the biggest EV purchase ever. Hertz predicts the Tesla Model 3s should be available to rent in early January 2022. Shares of both companies spiked, and Tesla’s market cap hit $1T, putting the EV leader in the trillion-dollar club with Apple, Microsoft, Saudi Aramco, Google, and Amazon.

Renting a Tesla for your weekend getaway requires less commitment than dropping $42,000 on a Model 3. The Hertz deal will give Tesla more exposure (rentals = test drives). And it could be a game-changer for Hertz, which emerged from bankruptcy just four months ago.

Hertz liquidated 30% of its fleet when car prices were high, generating more cash on top of the nearly $6B in bankruptcy investments and $10B in loans. As gas prices rise and sustainability booms, Hertz could set itself apart from competitors with Teslas-for-rent. Hertz plans to attract EV-curious renters with its revamped fleet, which will be 20% electric when its Teslas arrive over the next year. Hertz’s mega-deal will suck up 10% of Tesla’s production capacity, making it hard for rivals to copy its strategy.

Hertz is tapping into two key trends: commitment-phobia and sustainability. 70% of US companies will continue offering remote or flexible work options, and over a third of Gen Z and millennial workers are looking for new jobs. When you don’t know where you’ll be, commitment is daunting. That’s why Volvo, Nissan, Porsche, and Land Rover have launched short-term car subscriptions. Meanwhile, Volkswagen rolled out an EV-specific subscription.

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