Tesla’s Market Cap Surpasses $1 Trillion After Hertz Order

• Due to the pandemic, Hertz filed for bankruptcy. Less than four months after coming out of bankruptcy, they announced a deal with Tesla.
• The deal with Tesla will include 100,000 Model 3s, which will be shipped to Hertz by the end of 2022.
• Hertz has also signed deals with Tom Brady and Uber to help increase their market share. 

In 2020, Hertz Global Holdings filed for bankruptcy as their business and financial statements were below par due to the pandemic. However, Hertz came out of bankruptcy in June 2021 due to fewer travel restrictions and an increase in travel. Since then, Hertz has been looking for opportunities to repair and expand its business. 

On October 25, 2021, Hertz announced that they would be increasing their rental fleet by putting in an order for 100,000 Tesla Model 3s. This order increased Tesla’s revenues by 4.2 billion dollars, increasing Elon Musk’s net worth by 36 billion dollars. However, due to the large volume of cars needed, Tesla will not complete the order until the end of 2022. These cars will be produced and shipped from Austin, Texas, where Tesla moved its headquarters from Palo Alto, California.

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The large purchase price also caused Tesla’s stock price to surge 13% on Monday, making the stock exceed the $1,000 threshold for the first time. With the increase in stock price, Tesla’s market cap now exceeds $1 trillion. Furthermore, the stock of Hertz also received a price surge of nine percent on Monday due to their recent acquisition of Teslas.

Why Hertz Purchased Teslas

In a recent interview with AP, Hertz’s interim CEO, Mark Fields, explained how strongly the company believes sustainable energy is the future. Hertz’s new Tesla set would appeal to people who want to move away from the typical petroleum-based cars. There are also many plans in effect by governments worldwide who are trying to fight global warming by banning the sale of gasoline-based vehicles.

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Although the restrictions on purchasing gas cars have led to its alternative, electric vehicles have received an influx of demand over the past couple of years. Since electric cars have increased in popularity, the rental company believes the large purchase of these vehicles will help them increase their consumer share.

Marketing Efforts

As a result of Hertz wanting to retain current customers while also expanding their reach with their purchase of electric sports cars, they have also improved their marketing scheme to achieve a higher market share. For example, on Twitter, Hertz linked a commercial with future NFL Hall of Famer Tom Brady, showcasing the availability of their new cars.  

Currently, Tom Brady has over two million followers on Twitter and ten million followers on Instagram. Due to his large following, the marketing campaign constructed by Hertz will potentially increase their consumer base as they are tapping into a new marketing demographic.

Hertz Inks Deal with Uber

Out of the 100,000 Model 3s that Hertz purchased from Tesla, 50,000 of them will be available to Uber drivers. Uber drivers could only use their vehicles when they were drivers, but this new deal allows them to start renting and driving passengers around with a Tesla. The company reported that the fees for an Uber driver renting a Tesla would initially be $334 but will decrease to $299 after a while.

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The dynamics of daily life are changing rapidly, one of them being the shift from non-renewable sources of fuel to renewable sources of energy. As there is currently a global shortage of microchips to produce new cars, this large purchase of Teslas will allow people who wish to make the change to electric-powered vehicles the opportunity to drive one. In addition, Hertz is expected to receive high initial revenue in car rentals, so if customers are satisfied with their rental experience, they may want to purchase a Tesla of their own. 

What are your thoughts on Hertz purchasing such a large amount of Teslas at once? Do you think it’s a risky investment? Let us know in the comments below.

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