Elon Musk, CEO of Tesla, stated on Monday night that his electric vehicle company has yet to sign a contract with Hertz, a rental car company.
Tesla’s market cap surpassed $1 trillion for the first time a week ago, after Hertz announced plans to expand its fleet of battery-electric vehicles with “an initial order of 100,000 Teslas by the end of 2022.”
Elon Musk, CEO of Tesla, stated on Monday night that his electric vehicle company has yet to sign a contract with Hertz, a rental car company. Musk’s tweet appeared to contradict a previous announcement and advertisement released by Hertz on October 25. Famously, Tesla’s market cap surpassed $1 trillion for the first time a week ago after Hertz announced it would expand its fleet of battery-electric vehicles with “an initial order of 100,000 Teslas by the end of 2022.”
The announcement was accompanied by a commercial featuring seven-time Super Bowl champion Tom Brady alongside parked Tesla Model 3 electric sedans in a Hertz garage.
Interim Hertz CEO Mark Fields stated last week that the rental company began discussions with Tesla about purchasing the vehicles “many months ago.” He described it as a “great relationship” and part of Hertz’s initiative to lead rental companies in managing large fleets of electric vehicles. “This is about relationships. From that standpoint, the Tesla relationship is very important to us, but … we also have relationships with all of the automakers, and we want to help them as they introduce their electrified vehicles,” Fields said during an interview.
Fields, a former Ford CEO, described the move as a “strategic discussion” to assist automakers that began with Tesla and will continue with other companies. “We’ve done it with Tesla, and we intend to do it with all automakers,” he said.
Historically, automakers have been frowned upon by investors when they sell large numbers of vehicles to daily rental fleets. This is due to the fact that cars and trucks sold to rental companies are typically sold at a discount, with such deals used to reduce bloated inventories and increase total vehicle deliveries. Shareholders and analysts, on the other hand, reacted positively to the prospect of Tesla selling 100,000 fully electric vehicles to Hertz. The move was interpreted as a sign that battery-electric vehicles were becoming more common.
Wedbush Securities’ Dan Ives, for example, wrote in a bullish note about Tesla on Oct. 26: “The Hertz deal we believe will be viewed as a tipping point for the EV industry as this 100k Model 3’s/$4 billion+ deal for Tesla speaks to more mainstream adoption for EVs as today only 2% of autos in the US are EV driven compared to 10%+ in China with rapid growth on the horizon.” We believe this is the biggest transformation to the auto industry since the 1950’s with more consumers heading down the EV path over the coming years.”
Tesla’s stock has risen around 33% since its close on Oct. 22 prior to the announcement.
Musk said last week that the news had a “strange” effect on the company’s valuation.
Musk’s net worth has risen in tandem with the share price of Tesla, which he owns roughly 20% of. He is now the world’s richest man.
Other shareholders, both inside and outside the company, have benefited as well, including long-time supporters such as Ron Baron, Tesla employees who have earned and vested options over time, and Musk’s fellow board members.
Hertz announced two days after announcing an initial order of 100,000 Teslas that it would make up to half of its cars available for Uber drivers to rent by 2023. According to the company, “if successful,” the program could grow to 150,000 vehicles over the next three years.
Hertz “emphasized that these ambitions could be hampered by factors beyond its control, such as semiconductor chip shortages or other constraints.”
During the burgeoning coronavirus pandemic, Hertz declared bankruptcy; however, as travel resumed and demand for rental vehicles increased, investors from Knighthead Capital Management and Certares Management announced plans to take over the company.