Fresh out of bankruptcy, Hertz announced today it has acquired 100,000 Teslas in what represents the largest electric vehicle fleet in North America and one of the largest in the world.
Tesla’s stock soared on the news in pre-market this morning and was up 4.3% midmorning. Last week, the company reported its third-quarter earnings, exceeding analysts’ expectations. And earlier this month, Tesla exceeded delivery expectations, announcing it had delivered 241,300 vehicles in the third quarter despite global supply chain issues that have hindered many carmakers.
Following the announcement, Tesla hit a $1 trillion market cap, CNBC reported, joining the trillion-dollar market cap companies such as Apple, Amazon and Microsoft. The stock was up 10% at more than $1,000 this afternoon. Morgan Stanley’s Adam Jonas raised his price target on Tesla to $1,200 a share from $900 on Sunday, CNBC said.
This morning, Hertz said that 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 U.S. major markets and select cities in Europe.
With the current order, EVs will represent over 20% of the Hertz global fleet and are 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, according to the statement. However, the company said these goals could be affected by factors outside of Hertz’s control, such as semiconductor chip shortages or other constraints.
“Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest,” Hertz interim CEO Mark Fields said in the announcement. “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.”
It’s the single-largest purchase ever for EVs and represents about $4.2 billion of revenue for Tesla, according to people familiar with the matter who declined to be identified because the information is private, Bloomberg reported. While car-rental companies typically demand big discounts from automakers, the size of the order implies that Hertz is paying close to list prices, Bloomberg added. The order is equivalent to about 10% of what the automaker can currently produce in a year, Bloomberg reported, adding that this might help Hertz prevent rivals from copycatting the strategy.
Hertz also said it is teaming up with Super Bowl champion 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.” Two new ads are beginning today.
Hertz came out of bankruptcy in June, after having filed in May 2020. The company said at the time that the impact of COVID-19 on travel demand was “sudden and dramatic,” causing an abrupt decline in its revenue and that the financial reorganization would best provide a path forward, as GOBankingRates reported at the time. In April 2020, the first full month of operating during the pandemic, the company’s global revenue was down approximately 70% from April 2019, according to court filings.
Now, the company says it has “a substantially stronger balance sheet and greater financial flexibility” than it had prior to the onset of the COVID-19 pandemic. Hertz’s Chapter 11 restructuring was expected to eliminate over $5 billion of debt, including all of Hertz Europe’s corporate debt, and provide more than $2.2 billion of global liquidity to the reorganized Company, according to a statement in June.
