Hertz Global Holdings, 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. Tesla's shares soared, pushing the automaker’s value past $1 trillion for the first time.
The cars will be delivered over the next 14 months, and Tesla 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 rental company said in a statement.
Customers will have access to Tesla’s network of superchargers, and Hertz is also building its own charging infrastructure.
It’s the single-largest purchase ever for electric vehicles 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.
Tesla’s shares climbed 13 percent on Monday, the biggest one-day gain since March 9, to a record $1,024.86, making it one of only five publicly traded U.S. companies with valuations above $1 trillion. Hertz, which currently trades over the counter ahead of its relisting on the Nasdaq Stock Market, surged 10 percent to $27.17.
While car-rental companies typically demand big discounts from automakers, the size of the order implies that Hertz is paying close to list prices.
"How do we democratize access to electric vehicles? That is a very important part of our strategy," Mark Fields, who joined Hertz as interim CEO earlier this month, said in an interview. "Tesla is the only manufacturer that can produce EVs at scale."
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. 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 which are typically slow to change.
By locking up so much of Tesla’s production -- the order is equivalent to about one-tenth of what the automaker can currently produce in a year -- Hertz may box out rivals from copying 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.
The discussions with Tesla go back months, to when Knighthead and Certares were putting together an offer for then-bankrupt Hertz, Fields said. Also, the relationship between the two companies isn’t exclusive: Hertz can buy EVs from other automakers and rival car-rental companies can order from Tesla, provided it has available capacity.
“We want to work with every manufacturer to help them launch EVs and drive this secular shift to electrification,” Fields said in the interview.
In 2020, General Motors was Hertz’s biggest car and truck supplier, followed by Nissan and Ford Motor.