Tesla Model 3 to Rule the Rental Car Fleet Market After Huge Deal With Hertz

Tesla secured a huge deal with rental car company Hertz: an order for 100 thousand units, a deal that is the single largest order ever for electric vehicles, worth $4.2 billion in revenue to Tesla that, by the way, would drive it straight to the $1 Trillion club. Once again, Tesla disrupting yet another market niche.

In August 2020 a J.D. Power North America Rental Car Satisfaction Study measured customer satisfaction with the entire airport rental car experience, from reservation to vehicle return, and ranked airport-based rental car companies. Hertz topped the list for the second year in a row, followed closely by Enterprise and Alamo. On that survey, based on a 1,000-point scale, Hertz was number 1, with 852 points; then came Enterprise, with 849, Alamo with 848, National with 845 and Dollar with 836 points to complete the ´top 5´. Thrifty, with 835, Avis with 834 and Budget with 818 points made up for the 6th, 7th and 8th places.

Hertz left bankruptcy a year after the pandemic devastated the car rental business. An early victim of the pandemic, Hertz officially emerged from bankruptcy in July. Its return coincides with and was made possible in part by a red-hot market for rental cars. The company announced today that it will buy 100,000 electric vehicles from Tesla, one of the largest purchases of battery-powered cars in history and the latest evidence of the nation’s increasing commitment to EV technology.

News of the purchase was first reported by Bloomberg, which says the deal is, as I said before, the single largest order ever for electric vehicles, worth $4.2 billion in revenue. Tesla’s stock was up 4.3 percent on the news in pre-market trading. The purchase by one of the world’s leading rental car companies reflects its confidence that electric vehicles are gaining acceptance with environmentally minded consumers as an alternative to vehicles powered by petroleum-burning internal combustion engines.

Anyone renting a Tesla from Hertz will be able to use the automaker’s network of 3,000 superchargers across the US and Europe. Hertz says it’s planing on supplementing these chargers with “thousands” of its own, dispersed “throughout its location network.”

In a press statement, Hertz’s interim CEO Mark Fields said: “Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest. 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.”

Tesla envisions a future of self-driving cars, where the majority of people travel by autonomous Tesla vehicles. It’s also a future where car owners seamlessly rent out their vehicles to serve as self-driving cabs while they’re not using them. Part of the company’s mission is to ramp up the global transition to sustainable energy. In this case, the disruption will be in the car rental industry, as the TCOE of a Model 3 is by far better than any ICE car, as Hertz obviously understood very well.

But let´s take a look at the state of Elon Musk´s companies and how they are transforming and disrupting the industries in which they operate. In the automotive industry Tesla boomed in 2021, as Musk has propelled Tesla to become the most highly-valued carmaker in the world. In aerospace: SpaceX plans to build a “freeway” to Mars by reducing the cost of flying a spaceship to a fraction of what it is today, and to harness rocket technology for earth travel as well. In telecommunications: Musk’s work in space could revolutionize how we get online, and provide fast, affordable internet for those without access. In the Energy industry: according to a utilities lobbying group, Musk’s efforts with Tesla and SolarCity could “lay waste to US power utilities and burn the utility business model.”

As with the transportation industry, with the Hyperloop Musk proposed a “fifth mode of transportation” that is a “cross between a Concorde and an air hockey table,” and lots of progress has been made in that field. In infrastructure/tunneling, the Boring Company is trying to cut costs in the notoriously expensive tunneling industry, where a mile of tunnel can cost $1B to dig and each additional inch in diameter costs millions more.

In Artificial Intelligence – AI, Musk has said he is certain that the race for AI superiority will be the “most likely cause” of WWIII; even though his company is investing so much into building better AI. And finally, in the healthcare industry we just need to look at these high-bandwidth, minimally invasive brain machine interfaces that Neuralink is developing to create futuristic humans; which gives us an idea of how disruptive this technology might become soon.

The way I see it, with the Model 3 Hertzs 4,2 billion deal Tesla is again bringing innovation and very positive disruption into the car rental industry.

Nico Caballero is the VP of Finance of Cogency Power, specializing in solar energy. He also holds a Diploma in Electric Cars from Delft University of Technology in the Netherlands, and enjoys doing research about Tesla and EV batteries. He can be reached at @NicoTorqueNews on Twitter. Nico covers Tesla and electric vehicle latest happenings at Torque News.