Tesla CEO Elon Musk said on Monday night that his electric vehicle company has yet to sign a contract with rental car company Hertz. The tweet from Musk seemingly contradicted a prior announcement and advertisement released by Hertz on Oct. 25.
Famously, Tesla hit a $1 trillion market cap for the first time a week ago after Hertz announced it would grow its fleet of battery-electric vehicles with “an initial order of 100,000 Teslas by the end of 2022.”
A commercial featuring seven-time Super Bowl champion Tom Brady, alongside parked Tesla Model 3 electric sedans in a Hertz garage, accompanied the announcement.
Interim Hertz CEO Mark Fields last week said the rental company started talking with Tesla “many months ago” about the purchase of the vehicles. He described it as a “great relationship” and part of Hertz’s move to lead rental companies in managing large fleets of EVs.
“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 .
Fields, formerly CEO of Ford, described the move as a “strategic discussion” to help automakers that started with Tesla and will continue with other companies. “We’ve done that with Tesla and our intent is to do that with all of the automakers,” he said.
Investors have traditionally frowned upon automakers when they sell large amounts of vehicles to daily rental fleets. That’s because cars and trucks sold to rental companies are usually sold at a discount, with such deals used to reduce bloating inventories and increase their total vehicle deliveries.
However, shareholders and analysts responded favorably to the idea of Tesla selling 100,000 fully electric vehicles to Hertz. The move was seen as a sign that battery-electric cars were going more mainstream.
For example, Wedbush Securities’ Dan Ives 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.”
Since Tesla’s Oct. 22 close prior to the announcement, the stock has surged around 33%.
Last week, Musk said it was “strange” the news moved the company’s valuation by so much.
Musk, who owns around 20% of Tesla, has seen his net worth rise with the electric vehicle maker’s share price. He is now the world’s wealthiest person.
Other shareholders within and outside the company have benefitted, too including long-time bulls like Ron Baron, Tesla employees who have earned and vested options over time and Musk’s fellow board members.
Two days after announcing the initial order of 100,000 Teslas, Hertz said it would make up to half of the cars available to Uber drivers to rent by 2023. The company said “if successful,” the program could expand to 150,000 vehicles over the next three years.
Hertz “pointed out that these ambitions could be affected by factors outside of its control, such as semiconductor chip shortages or other constraints.”
During the burgeoning coronavirus pandemic, Hertz filed for bankruptcy protection — but as travel rebounded somewhat and demand for rental vehicles picked up, investors from Knighthead Capital Management and Certares Management said they would take over the company.