Hertz Global Holdings Inc., just four months after bankruptcy, placed an order for 100,000 Teslas as the first step in an ambitious plan to electrify its rental car fleet, according to people familiar with the matter.
It is the largest ever electric vehicle purchase and represents approximately $ 4.2 billion in revenue for Tesla Inc., according to people, who asked not to be identified because the information is private. While car rental companies typically demand hefty discounts from automakers, the size of the order means Hertz is paying near list prices.
The cars will be delivered over the next 14 months, and Tesla’s Model 3 sedans will be available for rent at Hertz branches in major U.S. markets and parts of Europe from early November, people said. Customers will have access to Tesla’s network of superchargers, and Hertz is also building its own charging infrastructure, they said.
The electrification plan, which will eventually encompass nearly all of the world’s half-million Hertz cars and trucks, is the company’s first major move since it emerged from bankruptcy in June. And it signals that Hertz’s new owners, Knighthead Capital Management and Certares Management, intend to shake up an industry dominated by a handful of big players who are generally slow to change.
By locking in much of Tesla’s production – the order is equivalent to about 1/10 of what the automaker can currently produce in a year – Hertz can prevent rivals from copying the strategy. Hertz also breaks with tradition by paying top dollar for well-equipped cars rather than the typical, heavily discounted base sedans that populate rental lots.
A spokesperson for Hertz declined to comment. Tesla did not immediately respond to a request for comment.
In 2020, General Motors Co. was Hertz’s largest supplier of cars and trucks, followed by Nissan Motor Co. and Ford Motor Co.
Zero exhaust emissions
Teslas, with zero tailpipe emissions, will appeal to rental customers who want a green option or those keen to try a battery-powered vehicle. Hertz may turn to electric vehicles because they are cheaper to maintain and refuel, and they typically don’t lose as much value in the resale market as vehicles with internal combustion engines.
Earlier this month, Knighthead and Certares recruited Mark Fields, the former CEO of Ford, as interim CEO of Hertz. They also hired Tom Brady, the seven-time Super Bowl-winning quarterback, to star in Hertz commercials featuring the new Teslas, the people said.
Along with Tesla’s rollout, Hertz, America’s largest car rental company after Enterprise Holdings Inc., is embarking on a broader overhaul of its business around mobility and digitization, people said. One component of this will be expedited rental bookings on the Hertz app.
Electrification is the latest turning point in Hertz’s wild journey through the Covid-19 pandemic. When demand for rental cars collapsed in early 2020, the company, whose brands also include Dollar, Thrifty and Firefly, was forced to file for bankruptcy and began liquidating its fleet.
Now, 17 months later, Estero, Florida-based Hertz is thriving on a sharp rebound in travel and the global shortage of new cars. Day traders adopted it as a meme action.
As of June 30, Hertz had $ 1.8 billion in cash and its debt-to-equity ratio, a key measure of financial health, had improved to 2.4 from nearly 10 at the end of 2019, according to a regulatory file of October 15.
Knighthead, a distressed debt hedge fund, and Certares, a private equity firm specializing in travel, won Hertz’s bankruptcy auction in May with a bid of $ 6 billion. It already looks like a good deal: the company has a market value of $ 11.6 billion in OTC trading before it re-listed on the Nasdaq stock market.