Tesla Rental Deal is Propaganda Coup for Hertz’s “Selling Shareholders” & for Tesla. But Rental Fleets Are Low-Quality Sales Automakers Don’t Tout

Hertz +10% ahead of share offering, Tesla +13%. But why does Tesla get into low-margin rental fleet sales if there’s strong retail demand?

By Wolf Richter for WOLF STREET.

Hertz touted today that it had made a deal to buy 100,000 vehicles from Tesla for the US and Europe by the end of 2022, and that in just a few days, “beginning in early November and expanding through year end,” you can rent a Model 3 at select Hertz rental locations. Customers will be able to use Tesla’s charging network. In addition, the company said it will build out its own charging infrastructure at its rental locations over the next two years.

This is an astounding announcement, but not for reasons touted.

What does it say about Tesla’s retail demand when it can deliver cars to a rental fleet in just a few days? Those cars must already be sitting around somewhere, no? The talks have been going on for a while. But where are the cars coming from that you can rent from Hertz in a few days?

Tesla’s website shows that if you order a Model 3 now, the estimated delivery date is in June 2022. Are a bunch of 2021 model-year Model 3s sitting on a lot somewhere that Tesla can deliver to Hertz in a few days? Or did Tesla build those cars for Hertz and set them aside?

And 100,000 vehicles would account for about 10% of Tesla’s current annual capacity. Why not sell them through its retail channel and get full price – if there is enough retail demand for them?

For Tesla, this announcement was a propaganda coup. Tesla shares jumped by 12.7% today on this deal, to $1,024.86, giving it a market value of over $1 trillion.

If GM had announced that it sold a whole bunch of cars to a rental fleet instead of through the retail channels, it shares would have dropped.

For Hertz, this announcement is an EV propaganda coup that got its new shares to spike by 10% to $27, just as insiders are preparing to sell a large stake via a public offering.

These “selling shareholders” have not yet been named in the preliminary S-1 registration statement, filed with the SEC on October 15, which is full of blanks to be filled in later. But Hedge fund Knighthead and PE firm Certares bought Hertz out of bankruptcy last May with a $6 billion winning bid. Currently, the market cap, after today’s well-executed propaganda coup, is $12.8 billion. I mean, every little billion counts.

Hertz new shares [HTZZ], which were issued at the beginning of July and still trade over the counter, had shot up to $35 a share after trading started in July, but then fell by over half in September to around $16 a share. Then in late September, the price began to rise. Who knew what of the talks with Tesla?

And what does it say about the legacy automakers that have been caught asleep by EVs and that are now struggling to wake up, and now have models either on the road or coming soon, but in the US still cannot produce any of them in large enough quantity to satisfy retail demand, much less rental demand?

The backdoor is wide open: Hertz’s grand announcement of its “ambitions,” as it called this – getting 100,000 Teslas and installing its own charging network at its rental locations – “could be affected by factors outside of Hertz’s control, such as semiconductor chip shortages or other constraints,” Hertz said.

Selling vehicles to rental fleets is a low-margin business that automakers don’t tout and that investors consider low-quality sales. When the percentage of fleet sales to overall sales is large, investors consider them a negative. And automakers are hounded for it. And that’s why automakers don’t tout those deals.

Rental fleets in the US buy between 2 million and 3 million vehicles in a normal year, and automaker such as Ford, GM, FCA, and foreign brands make huge deals. But they do it quietly. In their monthly or quarterly sales reports, they disclose what percentage of their total unit sales went to fleets. But they try to downplay this.

During the semiconductor shortage that has caused production to get slashed, automakers have been prioritizing high-end models sold through the retail channels, and have been deprioritizing the low-margin sales to rental fleets, leaving rental fleets to complain since spring that they’re not able to get enough new vehicles. That’s how rental sales fit into the value chain of automakers: at the bottom.

But the rental business keeps factories running when there is excess capacity and not enough retail demand, and that’s a good thing for everyone, even if those rental units don’t make money.

Sales to rental companies fall into two categories: “At risk” sales, where the rental fleet is responsible for selling the unit when it comes out of rental service, and is “at risk” from the resale value of the vehicle; and program sales where the rental fleet sells the vehicle back to the automaker under a predetermined formula, similar to a lease, and the automaker takes on the risk of the resale value of the vehicle.

According to unnamed sources that talked to Bloomberg, the deal is valued at $4.2 billion for 100,000 vehicles. Hertz in its announcement – which is short on details but long on propaganda – didn’t specifically say that they were all Model 3s, but only that the vehicles that will be available in November through the rest of the year will be Model 3s.

What version of the Model 3, and what other models, are included in the 100,000-vehicle deal? Hertz could have said that all 100,000 cars will be the base Model 3. But it carefully didn’t say that. It said, “Beginning in early November and expanding through year end, customers will be able to rent a Tesla Model 3.” But what about in 2022? And it added, “Customers who rent a Tesla Model 3 will have access to 3,000 Tesla supercharging stations throughout the U.S. and Europe.” And that’s it, in terms of what models and versions it will buy.

Rental cars tend to be equipped with upscale packages that cost the automaker little but add large dollar amounts to the vehicle’s retail price. That’s where a big part of the heavy discounting of rental sales is made possible, and that’s why rental cars generally are well-equipped.

But we don’t know the specifics about the Tesla deal, not even if all 100,000 vehicles will be base Model 3s, of if it will later include some Model Ys, or a mix of versions, which would be typical for a big rental car deal.

Bloomberg asserts that the $4.2 billion deal divided by 100,000 vehicles would price the vehicles close to list (at $42,000 each). Tesla’s website lists the base Model 3 at $43,990. But we don’t know what’s in the deal. So was the statement that the price is close to list just more hype that the unnamed sources were able to get Bloomberg to cite to cause Tesla shares to jump?

There is a promo aspect for automakers with rental deals: Renting a car can function like an extended test drive. If people are impressed, they can end up buying that type of model when they’re in the market for a new vehicle. In this case, Tesla – and EV makers in general – can benefit by the exposure of non-EV owners to EVs.

Rental cars can cheapen the luxury brand. When 1 to 2-year-old rental vehicles are taken out of the fleet, with 15,000 to 50,000 miles on them, they appear on the used vehicle market.

These vehicles look similar to their new brethren, but cost a lot less in normal times. In our craziest times ever, pricing in the used vehicle market has gone bonkers. But in normal times, these rental vehicles compete with new vehicles and can restrain pricing on new vehicles. A number of brands do not participate in large-scale rental fleet sales for that reason.

Prices of used Teslas have held up well in the used vehicle market. This rental deal indicates that there are going to be a lot more low-mileage Teslas coming into the market a year or two from now that then compete with new Teslas.

However this deal is going to turn out, one thing seems to have worked perfectly: Hertz’s selling shareholders in the upcoming share offering got a 10% boost. And Tesla got a 12.7% boost.

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  155 comments for “Tesla Rental Deal is Propaganda Coup for Hertz’s “Selling Shareholders” & for Tesla. But Rental Fleets Are Low-Quality Sales Automakers Don’t Tout

  1. 42 says:

    miss my $tsla. sold around 700

    • andy says:

      That sucks.

    • spaceranger says:

      Believe me, it’s better to miss a stock you sold at a substantial profit before it went even higher than to be stuck with a stock that’s worth a lot less than you paid for it and shows no signs of getting higher.

  2. Augustus Frost says:

    I read the release on CNBC. So a one-time lower margin $4.2B transaction equals about $100B increase in market cap?

    That makes a lot of sense, doesn’t it?

    Yet another example of idiotic financial behavior justified by rationalization in a mania.

    • otishertz says:

      Flim Flam Man strikes again. Apparently investing has been replaced by idolatry.

      It’s not clear if these are program sales or at risk.

      If program sales, the deal is much less in valuation. Looks like they just took the total MSRP and said that was the value of the deal, which wouldn’t surprise me considering all the shenanigans this space clown pulls.

    • Javert Chip says:

      …not to mention a PE of 333…

      • ivanislav says:

        But they have a *positive* P/E. That can’t be said of many listed companies with large valuations.

        It took me too long to appreciate that there is only one time when the price is constrained – it is when a company goes bankrupt and the share price is zero. In between IPO and eventual bankruptcy (be it in 1 year of 100 years), the price can do absolutely anything based on sentiment. That’s why I no longer short individual stocks and probably shouldn’t short indexes either.

  3. Gerry says:

    You completely misunderstand what tesla is doing here. These cars will use long lasting lfp battery technology. They wont be on the used market in 1 or 2 years and have a drivechain that will last hundreds of thousand of miles. If and when tesla gets full self driving to a safe enough standard for autonomous taxis hertz will already have a fleet of cars ready to. Their cars will spend more hours on the road than if tesla sold these cars to residential owners.

    • Wolf Richter says:

      Gerry,

      You’re being funny on so many levels. At first, I thought you were being sarcastic, and if you are, forgive me.

      NO American wants to rent an old vehicle. 50,000 miles already causes a lot of raised eyebrows. Especially with a luxury vehicle. And you think someone is going to rent a Tesla — a high-dollar rental — with “hundreds of thousand of miles” of rental service???? Or even just 100,000 miles of rental service? That’s funny.

      In terms of your “if and when Tesla gets Full Self Driving mode”… guess what… FSD is expensive. If Hertz got FSD as part of the $4.2 billion, then Tesla is giving it away — which would turn this into an even lower-margin deal.

      BTW, I doubt Hertz wants to be held responsible for the damage that a malfunctioning FSD can cause, or that drivers claim it caused.

      • Bobber says:

        I think the wake-up call for TSLA investors could come sooner, rather than later. With a $1T market cap, TSLA is now competing in the same investment arena as MSFT, AAPL, GOOG, AMZN, and FB, all of which bring home $20B to $60B of growing profits.

        TSLA is struggling to make a profit, and that small profit appears to be following a lower margin commoditization path.

        • Jake W says:

          all of those bigtech profits are reliant on the credit bubble. without it, they tank, as they lose their customer base.

        • roddy6667 says:

          Is Tesla making a profit? GAAP? I didn’t think so.

        • Djreef says:

          Exactly. How much lost leader will investors accept. I dunno, I guess when you join a cult you willingly blind yourself to many things.

        • Thomas Roberts says:

          Wolf,

          Ahh, but Tesla is a “market disruptor”, once Tesla or any “market disruptor” does something, the old rules no longer apply. It’s about time GM and Ford sell themselves to Tesla, that way, Tesla might allow them to stay alive a little longer. It’s a Tesla world and Tesla just lets GM and Ford live in it.

          ;)

      • Boneidle says:

        Some rental companies don’t even bother to service their cars properly. Just bare essentials. If a vehicle looks like it’s going to need major servicing it’s sold off.

      • drifterprof says:

        Maybe I might rent an old Tesla if it cost less to rent than a midsize, and charging issues didn’t conflict with my itinerary.

        But I have an uncanny tendency to deviate from the herd. So I’m clueless about what American want to do.

        For me, luxury in any area is usually worthless, even irritating – even at very discounted prices. But it can be interesting to check out.

      • Sams says:

        Is there a legal requirement that cars should have an odometer?
        If not, a rental Tesla may not have an odometer. At least not a visible one, the mileage is something for the service manager and fleet manager. Then how can people renting a Tesla from Hertz know the mileage?

        If the car is to be sold second hand the SW flag show mileage will be changed but not before. On the other side, if the cars can be used in the rental fleet for a longer time, they may even go straight to recycling instead of being sold.

        • Wolf Richter says:

          This whole idea is just so nuts. Why do people keep bringing it? Who would benefit from trying to fool rental car customers about the age of the vehicle they’re paying to rent? Americans are used to having an odometer. It’s a requirement to document the miles the vehicle has under its belt. The mileage is in every legal document about the car, from the title to every rental contract signed by every customer.

        • Sams says:

          The idea may be nuts in the USA, it may not be other places. Different perspectives could be the reason the idea are brough up again.

          To me, maybe to others, a rental car is a tool i need at the moment. If it look ok, smell ok inside, work ok and drive ok I do not bother about the age and mileage of the car. The car must be fit for the purpose of the transport, past that it may be any other car.

          If the rental company charge by the mile the odometer reading is important, if they charge by the day it do not matter that much.

        • Ridgetop says:

          Most rentals are driven hard and put away wet. I do not like renting high mileage cars. They are like staying at a cheap seedy motel. Yuck!

    • Anthony A. says:

      Tesla just pulled FSD beta off the cars today. Musk cites software problems (LOL!).

      There’s a long road to travel to get to Level 5 autonomy which some tech gurus say is not achievable with current known technologies. Maybe someday, not for a good while.

      Like wolf says, not much detail in the announcement except this is a way to pump up the stock price of the new Hertz so the hedge funds can sell for a big profit.

      • qt says:

        So is it safe to buy Puts on Tsla yet?

        • Nacho Bigly Libre says:

          You will be up against a passionate army of tsla fans who are flush with stimulus money and meme stock money. That should scare any short seller.

          Perhaps that hesitation of short sellers is the reason stock price is only going up.

          I was being lazy and didn’t check the short interest levels etc. Do please correct me if that theory is wrong.

        • cas127 says:

          Wolf,

          Along these lines, I think a post covering various shorting techniques would be welcome.

          As always, the trick is timing (the mkt can stay irrational longer than we can stay solvent), so cheaper/longer lived shorting techniques might be particularly interesting.

          Are LEAPs still around?

        • Harry Houndstooth says:

          Sell this Blow Off Top with Both Hands

        • Bet says:

          Read it was an explosive gamma squeeze for calls at 900. The ultimate ursus wedgie

      • Thomas Roberts says:

        As someone who did study computer science.

        The hardware is already there, some improvements could still be made to hardware of course. I imagine that cars could have lights on them, that emit light (that humans cannot see) and maybe even emit sounds (sound part is iffy, but possible) that humans couldn’t hear, to signal; and help coordinate self driving cars to drive safer, than people ever could. This is optional. They can also communicate wirelessly, of course. Those additional lights might prove useful. In addition, future self driving cars might be able to signal, what they are doing to human drivers and pedestrians, more clearly than a human driver could. For instance, the turn lights that are often on mirrors (as well as back lights), might be a different color if car is self driving and could blink differently if it is going to move over multiple lanes. There is alot that could be done like this, while also making car look nice.

        The actual problems lie with the software design approach. All major current self driving car software, is being done independently and in private by different companies. Realistically, to actually satisfy governments and the populace (and to actually accomplish self driving), all the self driving software, should be open source public projects. Basically anyone can use or contribute to open source projects in the world. Rather than let companies, put rapidly changing self driving cars on the road, all the changes would be reviewed by interested parties across the world. People across the world, could help contribute. With the companies who want self driving cars, putting money in and hiring full time programmers to work on it, and to give out cash rewards for bugs found and solutions to problems.

        It’s pretty crazy that all the self driving cars are currently running on different programs and that the automakers can change the way the cars drive on a whim. If we went instead with the public approach, the department of transportation, would have to approve changes to the in use self driving cars in America. Also, all the self driving cars would drive the same, which is hugely safer. The actual software they approve, would be open to all to see.

        Open Source projects that receive enough attention, have better security than closed projects. A big problem too is companies like Tesla (and everybody else) are not properly segmenting the way the cars computers link together, which is a major security problem. A better designed, self driving car would have multiple computers doing different functions in a way that, if the network connected computer gets hacked, they can’t crash the car. An open source self driving cars project, would also help maintain competition. Individual computers are very cheap, and it would be cheaper, if done the public project way.

        Different countries could choose different software projects/programs to allow on the road. When driving between countries; it would be possible for the cars to just switch over.

        Overall, I think very great self driving cars, if done with the public project approach, would definitely take under 10 years. The actual hardware needed, could be agreed upon, several years prior to that.

        • intosh says:

          Very good point about the open source approach. But it won’t happen in our world, where capitalism is the ultimate driver (pardon the pun).

          (The data used to train the program, the AI algo, should be made public too. In fact, the data is much much more important than the algo itself.)

          By the way, remember a few years ago when Tesla made open sourced some of its tech? A PR stunt.

        • ivanislav says:

          Comma AI has the second-best self-driving software stack and a lot (most?) of their stuff is open source – you can make pull requests on GitHub. For those who don’t do software: 1) a pull request that another party include your code submission in their project and 2) GitHub is a website and hosting infrastructure for codebases and software development.

          Aside, Comma AI was founded by George Hotz (aka geohotz) who gained fame/notoriety as a teenager for jail-breaking the iPhone and also telling Sony to F*** off when he hacked some of their hardware.

        • ivanislav says:

          Edit: “a pull request is a request that…”

        • robert says:

          No need for warning/notice lights. I treat Teslas the same way I treat cars with drivers that can’t see over the steering wheel, i.e. stay clear.
          You never know if they’re exercising ‘full attention and control’.

        • Maximus Minimus says:

          Open source way would be nice, but it won’t happen until some major self-driving shop goes bust, and license the software as open source. This scenario happened with WebKit, on which Chromium is based, and every other browser is based on Chromium, save two.
          The self-driving software would have to be highly modular to allow for different sensors, and placement.
          This is where government could step in to set standards, but good luck with government bureaucrats: they can’t even grasp money printing, which is much easier.
          Most probably, some system will beat out all others from the market.

        • Thomas Roberts says:

          I would assume that the hardware arrangement would be pretty standardized. Right now, for cars considering how complex they are, there is little difference in how the safety equipment actually works and the standards are pretty much the same. Some countries are alot looser with the safety requirements, of course.

          Bureaucrats follow the money, so I don’t see too much issue there. Because of the sheer money and interests behind it, it will get pushed forward. With the open source approach, we can be sure what’s happening “under the hood”, to ensure safety standards are being maintained.

          It’s important to note that it’s almost impossible for closed source, network connected, operating systems to avoid security problems. Foreign governments will demand source access to self driving software, meaning that foreign governments are nearly guaranteed full ability to hack closed source systems (i.e. Your Tesla self driving car).

          This is the exact issue Microsoft caused by openly selling in China. Despite the Chinese market, being a net loss, Microsoft directly handed over the windows source code to Chinese hackers (as well as many others), it still does this. It’s completely impossible to secure windows against foreign governments for this reason.

    • Carl Wilson says:

      Assuming that Hertz does actually obtain a large fleet of Teslas, it does present an opportunity to actually test the low maintenance claims for EVs (or at least for Tesla’s brand of them). A single owner who sees a high rate of usage of a large number of vehicles will be motivated in ways that a dispersed ownership will not. Hertz might actually profitably develop a side line of keeping Teslas in good condition.

    • intosh says:

      Long-lasting hundreds of thousands of miles drivetrain matters little when new EVs are popping up left and evolution is accelerating. A two-year old EV is gonna look outdated in a rental fleet.

      And you are one of those who severely underestimate the difficulty of getting fully autonomous driving right. That said, Hertz’s deal could help add more beta testers for Tesla.

    • Breta says:

      Good points by Gerry. This is a game-changing transaction.

  4. Carl Wilson says:

    “Selling vehicles to rental fleets is a low-margin business that automakers don’t tout and that investors consider low-quality sales. ”
    This is because such sales are used to compensate for over-capacity. Tesla is under-capacity and has no need to give Hertz a price break. My understanding is that Hertz will be at standard pricing. The speculation that Tesla has extra vehicles sitting around to be sold is typical of the unrelenting FUD against Tesla which has lead to a lot of pain to short sellers.

    • Catxman says:

      Tesla has both negative and positive coverage, with more positive than any amount of FUD.

      For a new company charting uncharted territory, they are doing just fine, thank you. The press is usually kind to interacting characters and interesting storylines that provides them with ready-made tales for them to ram into their little word crunchers. (See Trump during his early days.) I don’t think the press will abandon Tesla until the day it is quivering on the verge of collapse, and maybe not even then.

    • cas127 says:

      “unrelenting FUD”

      Well, 333 is a helluva PE.

      Astronomical PEs assume perfect, flawless operational execution and mkt domination far into the future.

      In the real world, things go wrong…but hopped up buyers paying for 100+ PE stocks are bedazzled by an idealized future where mistakes aren’t made and competition never responds or even arises.

      • Carl Wilson says:

        I question whether PE can give us very much information in this situation.

        When I Googled PE is got (among other things)
        “If you want to get a general idea of whether a particular P/E ratio is high or low, you can compare it to the average P/E of the competitors within its industry.”

        Now, if instead of E being earnings we take E to be some sort of probable future earnings and estimate (as some do) the the probable E for “competitors within the industry” is less then zero the results we get are ……?????

      • Yaun says:

        I just had a look at Tesla’s valuation metrics just to get a kick out of it and it does not disappoint. Nearly every standard valuation metric is 1000% overvalued vs sector. But then, Tesla is all about growth so it’s PEG must be better than competition? No, by this metric it is also overvalued, albeit ‘just’ by 300%. Eventually will see a normalization here, but it may take till the bubbly credit cycle has fully run its course and that could be many years.

  5. DR DOOM says:

    EV’s are useful for a growing population of sedentary Americans. Including me. Watching a Tesla going around the pick-up window for over priced Joe at a Star Bucks reminds me of crusin’ an A and W Rootbeer stand in Tuscon Az. in 1968 with my buddy Ron in his 64′ Vette. Fully tricked out. Military shipped us overseas just as we learning the ropes. Sitting on my butt here in the Great Smokies watching the rain gives me time to wonder how does rental charging work? Are you one and done? Will Hertz offer a pick up and return after charging? Where did Hertz get the money? Is the general public that is trained on the ICE and the gas station on every corner ready for a different mind set that proabaly comes with the EV in general much less a rental? I bet there is a lot of wiggle room in the agreement. The market priced in 500,000 cars today that have already been priced in 100x before. Tesla’s kryptonite is the time value of money. If the time value of money stays negative the cult will proabaly keep buying. If Tesla sold no cars there is not much that fundamentally changes about the company. Tesla main business is selling stock , not cars.

    • Brian pawlak says:

      I concur with your analogy. Media now touting EV’s at 17% market share, let’s just sit back and see what is the true under current is here .Pun intended. Just the charging station availability is going to be amusing at best. The think tank overload at GM will be pure angst.

  6. Ethan in nova says:

    Is there an obligation to show the end user the odometer? Couldn’t they hide this information from the renter? Refurb the interior every so often, pump in a few squirts of new car smell and run them longer than the old autos?

    Also, they might snatch a good chunk of the rental biz. I would rather rent a tesla and do burnouts than some GM econobox with not-leather interior.

    • Wolf Richter says:

      “Couldn’t they hide this information from the renter?”

      By hiding the odometer, you’re into odometer tampering, violating federal law.

      But even without an odometer reading, you can tell the difference between a vehicle with 20k miles and a vehicle with 100k miles. Rental service is not easy on cars. There’s visible wear and tear even at 20k. Sure they look good, but you can see the wear and tear at 20k. Then look at something with 100k of rental miles.

  7. Chris P says:

    You got to love the games they play to make their billions. There is no way an EV is going to make it in a rental fleet with the limited amount of level 2 chargers available. It’s all about manipulating the stock price. I have been looking at what it takes to install a level 2 charger in your home and most homes can not spare a 40 amp circut. This will mean a costly upgrade to your existing main panel. $$$$$

    • Carl Wilson says:

      No problem with rental fleet and chargers. The charger system can be built up in pace with the build up of the fleet.

      • Nick Kelly says:

        The time of the build up is specified, by the end of 2022. So they better get building right now.

        3000 Tesla charging stations for the US AND Europe??

        In other words. practically zero in terms of this land mass. However to be fair, I suspect most rentals are for a relatively few urban destinations, near an airport. BTW: if I was T, I would get over this ‘Tesla station’ bit right away. As the front runner they need to involve all levels of govt in vastly expanding chargers for charging any EV. (I don’t know if the chargers around here fit any car)

        Moving on, a question was anticipated by Doom. MD. Who is financing this and on what terms. ?

        Back to announcement: ‘Hertz has made a deal to buy 100,000 3s in 2022.’ Can Hertz, just out of bankruptcy do this or is T financing it?
        The thing about a rental is that its reason for existing, the rent, comes in slowly. If this is anything like a typical airplane deal it means there is an option. but not an obligation. to buy 100,000 cars.
        Who knows.

        Does anyone know if the Hertz bankruptcy was a $ hit for the car makers? If it was you would think it would affect the terms of a new deal with Hertz.

        Other questions concern the desirability of an EV as a rental. The savings on gas and maintenance will be irrelevant to the short term renter.

    • Maximus Minimus says:

      Not just the number of charging stations, but some seem to have reliability problems while brand new. Search “The PAINS of Living with an EV”.

  8. Dawood says:

    The main man has spoken by tweeting: “Strange that moved valuation, as Tesla is very much a production ramp problem, not a demand problem”
    These vehicles are not sitting on parking lots but rather a percentage of production will be allocated to them. This is one of the reasons why the wait time and prices have gone up.

  9. Seneca's cliff says:

    Hey Ma, The power is out again. Go down and rent one of them Tesla’s and we can bring it home and it hook it up to the big screen for the game. Then when the juice is gone we can call up Hetz and tell them to pick it up.

    • Nick Kelly says:

      That is funny! But it got me thinking. It doesn’t get seriously cold here. We have the BBQ (OUTSIDE!) so actually in a power outage our main want would be TV and lite, both not big power hogs, so easily supplied by an EV.

  10. Minutes says:

    Tesla worth the next 9 car makers combined I believe. I guess this makes sense to someone.

    • Carl Wilson says:

      Worth is very hard to determine in this case given that most of those 9 are doomed to bankruptcy.

      • edmondo says:

        Because no one else can build an electric car? Except VW, Toyota, GM, Ford and even Fiat.

        • Carl Wilson says:

          Oh yes, they will be building them. And selling them for less than it costs to make them. And of the companies you name, they will be depending on falling IC vehicle sales (and government help) to make up the difference.

        • Nick Kelly says:

          And Volvo and BMW and I suspect the bumpers will stay on.

          Prediction: a bunch of the early Tesla’s are approaching battery life. T will not have enough and the cost will be steep on those they have.

        • Auldyin says:

          @e
          It’s the newcomers they all need to worry about. They may be good at making ICE’s but there’s nothing to say they will be best at EV. GE wiped the whole USA steam locomotive industry over 10yrs with a nifty Bo-Bo diesel electric.
          Just sayin’

    • Old School says:

      Good thing is I actually have been able to pick up a couple good stocks at about 10 times free cash flow and 4.5% dividend with good balance sheets. Making high single digit returns doesn’t appeal to fast money crowd any more.

      I think people are under estimating how much trouble economy is in. Because QE acts much like the negative interest rates once Fed hits the zero bound, the effective Funds rate is equal to minus 2%. If you believe Fed the runoff would then equal to a quarter percent rise each month once they start the taper. That’s going to bite the high fliers pretty quick.

      • Jake W says:

        that’s because many people, including the market as a whole, don’t believe the tapering will ever happen. i’m starting to think they’re right.

        • Jon says:

          True
          No meaningful tapering or rate hike coming.

          FeD would do dog and pony show of tapering and hiking but at the end it’d be just a show

          Btw.. the real inflation on ground is 20 percent plus

  11. Xavier Caveat says:

    I’ve mentally shorted Tesla stock like 9 times already, but the 10th time will be the charm!

  12. Richard Greene says:

    I worked in product development and product planning in the auto industry for 27 years. The LAST thing a manufacturer wants to publicize are the typically low margin fleet sales.

    If I were renting a car away from home, the last model I would want is electric, and also a small car, like the Tesla Model 3. I wouldn’t want to waste time at a charging station. I wonder how much extra the rental agency charges you if you bring the car back with less than a full charge?

    In 2021 Tesla had among the worst reliability (3 months in service) and dependability (3 years in service) scores in the J. D. Power surveys.

    Maximum battery life requires slow charging (usually at home overnight). Fast charging significantly reduces battery life. If rental cars will have a lot of fast charging (I’m not sure), they will not be very desirable as used cars.

    Because the EV batteries do not last as long as a gas or diesel engine, EVs already have faster depreciation.
    An EV that was frequently fast charged is not a good choice for a used car.

    One use of fleet sales is to introduce people to your brand. One rental of a Toyota Camry for a week two decades ago led to me becoming a Toyota Camry customer ever since. I own two today. (I had retired from another auto company with much less reliable products. Even their luxury products. )

    • intosh says:

      Good point about charging. Do Hotels have the charging infra to accommodate more EVs? Will they include service to charge your EV overnight and bring it back to your parking spot?

      Having to fully charge the car before returning it will be a major pain in the butt so the right thing to do for rental companies is to not require the returning car to be fully charged.

    • drifterprof says:

      “I worked in product development and product planning in the auto industry for 27 years.”

      This is what I really like about Wolfstreet – concepts and perspectives of people who have a vast amount of experience in areas being discussed.

    • MarMar says:

      “EVs already have faster depreciation.”

      No, they don’t. As Wolf said, “Prices of used Teslas have held up well in the used vehicle market.”

      • Richard Greene says:

        I wrote that EVs have faster depreciation than ICE vehicles, and that is a correct statement. Among the fastest depreciating vehicles sold in the US are the BMWi3, Fiat 500e, Chevy Volt and Nissan Leaf — all are electric vehicles.

        Tesla is not the only brand of electric cars in the world.

        There are about 11 million electric cars on the road in the world.

        Tesla sold about 2 million electric cars so far (my guess –I know they reached 1 million lifetime sales in April 2020).

        That means Tesla accounts for less than 20% of all electric cars in the world today even if every one ever sold is still on the road.

        Now to make you happy, Teslas have held their value well, completely unlike other electrics.

        You also have to compare used cars with similar mileage and age to come to a conclusion.

        The highest volume Tesla, the model 3, was launched in mid-2017, so the oldest of them is only four years old.

        I’ve read that electric cars average only 5,000 miles a year.

        So a four year old (or less) model 3 is likely to be very low mileage when compared with a four year old ICE car with an average of about 50,000 miles.

        Check the current prices of used cars and you will see that electric cars in general, depreciate faster than iCE cars when you consider the age and mileage.

    • Sams says:

      You may not want to rent an electric car, others may. It may even fit the usage profile of rental cars that in some localisations is common. The car is picked up in the morning at the airport, driven to a meeting not that far away and returned in the afternoon after siting on the parking lot most of the day. Or it could be a two day rental with a short trip to the hotel in between. Delivered fully charged and charged over night when returned.

      • Richard Greene says:

        It might be cheaper and more convenient alternative to take a taxi or Uber to a meeting, and back to the airport (do people fly to meetings anymore?.

        And then you wouldn’t have to find a parking space or pay for parking,

  13. SpencerG says:

    “There is a promo aspect for automakers with rental deals: Renting a car can function like an extended test drive. ”

    I think Wolf gets the essence of what is attracting Tesla to this deal with this sentence. As much as we talk about Tesla, I have never even laid eyes on one.

    That said… NOBODY has a spare 100,000 cars lying around… particularly not these days. That part of the Press Release just reeks of “puffery.”

    • Carl Wilson says:

      NOBODY is talking about 100,000 cars lying around except the FUD masters.

    • Richard Greene says:

      My best guess is Tesla is selling cars to Hertz to mainly get more people to try electric cars, and for the publicity. A lot of people don’t like EV prices and inconveniences — so never drove one. A rental is a chance for extended “test drive”. I’ve never driven a BEV. I think hybrid engine vehicles are a much better choice for a rental. But if I needed a rental car for not that much driving, I’d try a Tesla.

      I can only wonder why Tesla is not suffering from the IC shortage like other auto manufacturers. A 100,000 car rental deal suggests they have no supply chain problems. If so, they must be doing something right.

      • Vid says:

        Tessa and Hertz counting on the 30% government rebate for commercial EVs in the upcoming BBB bill. Lots of room for financial wizardry

  14. Gary Yary says:

    Tesla – WTF – why not get this charade over with and make Tesla the largest capitalized stock in history. Add Trump, Fauci and Powell as board members. They can downward rescale the car size and sell them to children to stick into their mouths as lozenges “for safety”.

    Bankrupt car rental company now renting BMW 3 series priced cars. Ha ha ha ha ha!

    Is this considered a premium rental?

    Luxury rental?

    Priced at Hertz Corvette/ Camaro rates or Hertz Malibu rates?

    Reeks of baloney. Oscar Meyer…

  15. historicus says:

    Wasn’t hertz broke about a year ago? So who is funding this? Is Tesla the lender for the purchase?

    So if tesla is doing so well can they pay back the government for all the money that was given to them?

  16. DarkMatter says:

    Great points Wolf.

    For the FOMO traders this is a huge get out now warning. Hertz propaganda, their business model couldn’t succeed on buying fleets of cheap ~$15-25k vehicles and now expect to hit a home run with a $50k Tesla with a terrible quality record. And, they want to build out their own charging network in a crowded space. I’m just surprised Tesla hasn’t made a big acquisition with their valuation.

    • Carl Wilson says:

      “surprised Tesla hasn’t made a big acquisition with their valuation”
      That valuation cannot be used very much since it is (paradoxically) based a good part on the negative true value of most of the other car makers.

      • DarkMatter says:

        Are you sure? They could buy one of the biggie automakers in a stock deal alone and no one would think twice in this environment.

        • Carl Wilson says:

          Yes, you could buy a “biggie”: unreal stock for unreal stock. But could you turn the “biggie” into anything that wouldn’t lose money?

        • Anthony A. says:

          I think the “biggie auto maker” may have some say in something like that.

  17. ThePetabyte says:

    Indeed the stock inflation is something of a gimmick move, but the intangibles here are the real story. This gives Tesla an opportunity to streamline production issues across it’s whole supply chain. On top of that it can now sell fleet maintenance. For the rental companies, the reduced maintenance costs are a win-win.

    • Carl Wilson says:

      I would guess that Tesla is not very interested in selling fleet maintenance to Hertz since no one at this point knows how to price such maintenance. I suspect that Hertz will have to develop its own fleet maintenance program though with a great deal of help from Tesla. Tesla would very much like to know what that maintenance would be but would much rather research new product than keep track of old.

  18. Roger Pedactor says:

    I sold my Tesla stock months ago. Made a killing. Won’t ever buy that again. If I had held on I would sell asap.

    A PE multiple of 333 heavily reliant on Chinese supply chains. Is Wall Street on peyote????

    • Depth Charge says:

      Wall Street is high on Weimar Boy Bucks, insider trading and pump and dump schemes.

  19. Depth Charge says:

    Fundamentals don’t matter anymore. It’s all just reckless gambling with shills, touts and con artists pumping and dumping. People thought BitCON was bad, then here comes Dogecoin and people were like “whoa, wait a minute, this is getting a little weird.” Enter Shiba Inu coin, etc….

    • Depth Charge says:

      My point is why even have a company anymore? All you need is a “coin” and a name.

      • ivanislav says:

        No, altcoins are no longer en vogue. Now you need a jpg of a monkey (NFTs). That’s where it’s really at. About $40,000 per jpg.

    • DarkMatter says:

      People have made some serious money on them s*it coins. I saw it a sign of the end times akin to dot com foolery. Advised friends to FOMO and sell while ahead, transferring to safer asset classes – which was one of the biggest lessons for me during 2000.

      • Depth Charge says:

        Absolutely. There are a bunch of multimillionaires based entirely upon crypto. Bernie Madoff had a lot of money, too….

  20. joe2 says:

    I thought Hertz was bankrupt.

  21. Pete says:

    This so called ‘flim-flam’ inventor, thinker, innovator is presently reinventing rocketry, internet service, car engine propulsion (among other business revolutions)…yet curmudgeons across the world see in every detail a way to disbelieve or defame him. Get a horse boys (& girls)!!!…PJS

    • historicus says:

      What he really invented was over the top governmental sponsorship…
      carbon credits and States willing to tax him NOTHING to come into their state.
      BTW, Schumer is Sen from NY…..what deal does Musk have for solar panel production in NY regarding paying taxes…
      Isnt big money paying fair taxes the mantra of the Dems?

      • Tom S. says:

        Well, that’s the point, TESLA has the full and complete backing of the US government, so it’s a no lose investment. Unless there is a signal the US government that the subsidies for EVs will end, and that Tesla isn’t TBTF, why put your money anywhere else?

        • Duke says:

          except Biden is angling to give a BIGGER EV subsidy to union automakers than Tesla. I would in fact argue that they should not subsidize Tesla at all. Makes no sense to subsidize something that is selling like hotcakes.

    • otishertz says:

      Just believe and everything will be fine.

    • Depth Charge says:

      Right. He’s so concerned about pollution from ICE vehicles that he’s burning up the ozone in untold fashion with rocket fuel.

  22. breamrod says:

    there’s a rat in the woodpile here for sure. Someone made a pile of money today in Tesla calls. Wouldn’t surprise me if its the hertz folks. Who is liable if one of the these Tesla melts down and burns up a entire hertz rental location? Hertz or Tesla or both?

    • Anthony A. says:

      Or burns up a family of four during a rental on vacation?

    • Duke says:

      Come on guys. ICE cars burn up more often per mile than Teslas. Tesla just makes the news more cuz we are scared of new things. Stop your slandering.

  23. Island Teal says:

    Tesssla…..the whole deal, both sides, is just part of the ongoing stonk market scam. As we all know Elon mfgs and sells stock. Now you add the spac of H and it just gets better 🤑💸😂😂

  24. Bet says:

    TSLA is making a classic double top with negative divergences. First top =smart money. Second top = dumb money.
    Elon. Laughing all the way making bank

  25. Mak says:

    A WIN, WIN deal. Or so it seems by the share price jumps. But since when has Tesla’s share price been at all a reflection of reality.

    From a marketing perspective it certainly is a WIN-WIN deal.

    Also I can certainly see advantages in an EV for rental cars businesses. EVs are lower maintenance and have a high desirability from customers as long as they don’t have range anxiety. Being a rental you generally know what you will be doing with so range anxiety and most customers won’t even have to worry about recharging it. Again WIN-WIN

    Personally I’d love an EV for 90% of my driving. Except for 10% it would be a big hassle and plugging in for a recharge at my apartment parking isn’t suitable.

    Like Wolf says, the rental market is generally low margin. I don’t see an actual economic with for Tesla here. It is just a promotional win.

    Tesla’s are currently priced as a premium product and they don’t want to change that market perception. The reality is that within 5 years an EV with a fancy touch screen will not be a premium product.

  26. Seneca’s Cliff says:

    I hope this happens soon. I would like to rent one of these for Halloween, put on a Stanford hat and go out as a tech bro bozo*.

    * I would use other descriptors here but I want to respect The blogs values.

  27. Old School says:

    Of all the fundamentals on this stock price it’s tough to pick the one that is the most ridiculous. My favorite is price to sales ratio of 27. At that price I don’t think anyone is counting on holding the stock for a decade. They are hoping to find someone to sell to when time is right.

    It’s hard to believe that a trillion dollars of printed money flowed into this stock. Chinese must think our EV bubble is crazier than their real estate bubble.

    • Jake W says:

      china probably thinks we’re crazy for not having any manufacturing ability anymore.

      • RH says:

        We have some still. We could automate now or soon and as robotics advances handle more.

        On the other hand, I think that the CCP is crazy: their economy apparently was full of Ponzi schemes and inflated by trillions in local and corporate debt. Enough said. Watch their economy circle the drain.

  28. Cyclops says:

    Does Musk make Sun Ray solar panels in Buffalo, NY?

  29. SnotFroth says:

    Regular oil changes are the least of a rental car’s worries. Now we’ll find out how a Tesla holds up after being driven dozens of times over a curb at 25 mph.

    • Duke says:

      Hertz will know if you abuse the Tesla. Black box records all. Can ding customer financially or internally blacklist them or both.

  30. OutWest says:

    None the less, glad to see electric cars becoming the norm. Loud stink-pots, before long, will be frounded upon…

    • Depth Charge says:

      Typical NIMBY response. Those “loud stinkpots” are what dig the holes in the ground from which all of the materials to produce the cars come.

      • 91B20 1stCav (AUS) says:

        sidebar-as the ‘stinkpots’ numbers presumably decline and EV numbers rise, are there any realistic proposals for making up shortfalls in fuel taxes for funding adequate roads maintainence (EV’s still carry wear-and-tear highway degradation mass…)? Taxes invoked on electricity at the chargers, perhaps? Discuss.

        may we all find a better day.

        • Wolf Richter says:

          Yes, this is an issue. And they’re already doing it, such as higher fees for EVs at the DMV. Mileage rates are also being considered.

      • Duke says:

        Depth Charge.

        Check this out.. Largest EV earthmover in the world chargers itself!!!!

        “A quarry in Biel, Switzerland, is operating the world’s largest electric vehicle, a 110-ton dump truck, to haul lime and marl off the side of a mountain to a cement factory. Perhaps best of all, it consumes no energy doing it.

        How is that possible, you ask?

        The dump truck, at 45 tons, ascends the 13-percent grade and takes on 65 tons of ore. With more than double the weight going back down the hill, the beast’s regenerative braking system recaptures more than enough energy to refill the charge the eDumper used going up.

        The Elektro Dumper—eDumper for short—made by Kuhn Schweitz, is based on a Komatsu HB 605-7: 30 feet long, 14 feet wide, and 14 feet tall. The tires are six feet high, and the dump bed reaches to more than 28 feet, fully raised.

        Kuhn Schweitz adds a 600 kilowatt-hour battery pack—big enough for six, long-range Tesla Model Ses—from Lithium Storage that weighs 9,000 pounds.”

        • Auldyin says:

          @D
          Clever! Just like 2 loaded wagons downhill pulling up 4 empty wagons on a cable in 1825. Or better still a water tank that filled at the top and emptied at the bottom for a cable car 1810-ish.
          Wow! 600KWH that’s $60k at $100 per KWH. I hope they keep it locked up at night but of course it will be charging I expect.
          Would they do it if it didn’t have to be ‘Green’???

  31. Duke says:

    I’m guessing this article won’t age well WR.
    You make a lot of speculation that feels like the -TSLA bias seem to have.

    I read it possibly quite differently.
    Yes, the timing is great for both sides. Distract from negative NTSA news and pump HTZZ.

    But if Tesla can lock in 100k in sales at almost full price. How can you call it low-margin? Tesla has the highest profit margin of any manufacturer. 26% and rising.

    Millions of people will get to experience driving a TESLA and almost zero cost to Tesla.

    Also, ICE makers probably could not guarantee an order of 100k cars in the same timeframe.

    This was probably inevitable as well. Rental fleets will have to go electric just like everything else in the next 10 years. Why not give the people what they want early.

    The environment wins too. Cleaner air around airports.

    Sure Tesla delivered a few cars by bumping Hertz to the front of the line. That costs them almost nothing as well.

    I have a cybertruck reservation. (Which I fully expect may never be delivered, or at least not for years.) I also have never sat in a Model 3 or Y. Would I love to get one at an airport? hell yes.

    I bet many people will choose Hertz as first choice because of this.

    You fail to mention that Tesla is supply constrained and can sell every car it produces. With new production lines coming online this next year Tesla aims to produce 2 million vehicles by end of 2022.

    How many times has Tesla raised prices this year? And they still have a long wait on deliveries.

    Don’t forget, Tesla made a Billion $ just sitting on BTC.

    Hertz can either keep this fleet longer or sell it off for more than they bought it for the way things are going.

    Also, everyone hates having to fill up the gas tank before returning a rental or getting dinged for agency to refill with marked up gas. I’m sure they can do away with that nonsense as they will charge on site.

    I also did see the first two F mach e’s in my area this week. F has sold 13000 evs in the first half of the year. Tesla sold around 400k.

    Momentum.

    • MJC says:

      Slow down that TESLA roll you got going on.

      That TESLA-romance is extremely limited and focused.

    • Richard Greene says:

      “Tesla has the highest profit margin of any manufacturer. 26% and rising.”

      Please ,no Tesla hyperbole !

      2020 Tesla sales were $31.54 billion
      Net income from continuing operations $690,000 !

      Tesla is doing a lot better so far in 2021

      Trailing 12 months numbers, including part of 2021:
      Tesla sales were $41.86 billion
      Net income was $2.15 billion

      That is a net profit margin of 5%

      If you think 26% is the “right number”,
      there may be a job waiting for you
      in Tesla public relations !

      • Duke says:

        I think you have to take out new capital expenditures. (Building new factories)

        The gross profit margin per car is input costs vs sale price per car. You can look this up. It’s talked about on many articles. And with the price increases and ongoing cost reductions through efficiency, it keeps going higher.

        Search for
        Tesla Gross Profit Margin (Quarterly):26.60% for Sept. 30, 2021
        on Ycharts
        The higher higher %’s I mentioned were calculated on Tesla Daily Podcast

  32. DUKE says:

    It keeps getting better. Tom Brady new spokesman for Hertz EV advertising.
    Huge huge win for TSLA and HTZZ. Watch on YouTube.

  33. Duke says:

    Mark Fields. Ex Ford executive said Tesla is the only manufacturer that can produce EVs at scale.

    With price increases this week TSLA gross margins per vehicle should hit 30% (3 and Y) and 40-50% (S and X)

    TSLA wait time for base model 3 is now Sept. 2022 after raising price by $6k this year..

    Morgan Stanley price target now $1200.

    • Wolf Richter says:

      BTW, Fields got fired from Ford for screwing up the company and distracting it from making cars. Under his leadership, Ford blew off EVs. So now he landed at Hertz, when it emerged from bankruptcy. That’s your genius. But he knows how to issue propaganda.

      If retail demand is so great, why sell to rental fleets? This is just nuts. Some people ate this propaganda hook line and sinker, you included. But that’s not how the car business works, no matter how you twist it.

      • Duke says:

        Haha. Good info on Fields. That is funny. Just a quote I heard yesterday. But you didn’t dispute the mass production claim.

        I’m all for other EV manufacturers. It just remains to be seem if they can scale up battery production.

        Tesla doesn’t seem to be wasting time in securing their own batteries.. Again, which other manufacturers will be able to scale up like this?

        “Tesla released a new important detail about the Megafactory under construction in California.
        It aims to produce 40 GWh of Megapacks per year, which indicates a massive ramp-up in energy storage deployment.”

        We actually would prefer to buy an Ioniq 5 if we could get our hands on one.

        Nuts?
        Every manufacturer should love to sell in bulk to one buyer. Every retail sale takes more effort, and coordination and customization. Tesla can make 100k cars in a few weeks. So it’s not big deal to make a few thousand $ less per car. It’s called economy of scale and buying in bulk, win/win.

        And they cock blocked any other manufacturer from getting the deal.

        If you make the same or more money or even a bit less money with less effort and streamlined production and gain massive exposure, it’s obvious to me this is a good deal.

        It would be crazy NOT to make this deal. Millions of new people get to try EV Teslas for the first time. And the people are basically paying for the test drive. What could be better? Delivering to individual buyers? Psssh.

        Not only that. If Hertz puts in the charging infrastructure, and everything works out well, they will likely make ongoing annual purchases. So it’s likely Tesla just secured 50k more vehicle sales per year. And when robotaxi is ready, Hertz will have the largest fleet ready to displace uber/lyft.

        $Trillion Co.

        • Wolf Richter says:

          “But you didn’t dispute the mass production claim.”

          Hahahaha… I’m furious at the legacy automakers, have been for decades because it’s such a badly run industry, which I saw first-hand when I was working in the industry back in the day, and I love it that EVs are now shaking them out of their rut, and I’m even more furious that they’re so lethargic in trying to catch up. They keep announcing stuff, but mass production just isn’t happening. They’ve got all kinds of issues building their EV supply chains. The European automakers are a little faster moving. But here?

        • Nick Kelly says:

          VW has committed 17 billion to EVs and is building its battery factory in German. Since VW holds the record for production of a type. I assume they are more capable of mass production than T, which is constantly in the auto news for flaws.

          I give the production record to the Beetle. It was previously held by Model T at around 22 million. Some records give it to Corolla, by including rear wheel and front wheel drives.

          VW is the most serious challenger for T in the budget segment.

        • DUKE says:

          The point of massive Gross Margins at this time is that T will be able to reduce the price as demand slows. Basically they can reduce the price of the Model 3 and Y by up to 30%, as needed, to keep selling as many cars as they can produce.
          I bet TESLA Model 3 and Y will be the VW Beetle of the EV revolution. The longer they run the production lines, the cheaper each EV gets in real terms. Assuming raw materials keep flowing.

        • Duke says:

          WR
          I know the PE ration on T seems insane. But isn’t the fact that the legacy automakers are so far behind evidence that T will be able to accelerate their EV lead for quite some time?

          It’s no more insane that valuations on Uber or Lyft that don’t do shit except connect rider and driver and take a huge cut. When Robotaxi is ready, each model 3 and Y will be worth $100k.

          Not to mention T plans to 10x the utility scale battery storage business. Which alone would be $8B annual.

    • Richard Greene says:

      Tesla’s net profit margin was 5%
      for the past 12 months
      (4 the most recent quarters)

      Gross margins are not the whole story
      The bottom line is.

      • DUKE says:

        The point of massive Gross Margins at this time is that T will be able to reduce the price as demand slows. Basically they can reduce the price of the Model 3 and Y by up to 30%, as needed, to keep selling as many cars as they can produce.
        I bet TESLA Model 3 and Y will be the VW Beetle of the EV revolution. The longer they run the production lines, the cheaper each EV gets in real terms. Assuming raw materials keep flowing.

  34. Xaver says:

    TSLA was manipulated higher on the options market and now it was the right time for a coup on top.
    In the EV space, so often “orders” are the big news. The round number of orders shows that it was news marketing. None of us knows the details of the agreement between TSLA and HTZZ. Easily the number of sold cars could be much lower in the end. Don’t fall for the game.
    Fundamentals don’t matter right now, as long as the mania continues.

  35. Stupid says:

    This is the one of the most insightful articles you have ever written.

  36. Nicolas P Cignetti says:

    More and more electric cars will increase the demand for battery material this material is done by strip mining destroying the earth along with that they are made of toxic materials and when they are scrapped will have to be done with care as not to once again destroy the earth. Anybody remember the PCB event and what it cost???? Fools rushing in where wise men fear to tread.

  37. Nemo 300 BLK says:

    Like Car and Driver said a couple of months ago, no two Tesla’s are alike.

    It’s a shame because I would like to buy my wife and S Plaid, but I can’t bring myself to pay that kind of money for something of marginal quality.

    One of the local business owners here recently bought one and took me for a ride. It’s ungodly fast but the fit, finish, and paint was much to be desired.

  38. Patrick says:

    So, I have not noticed much above about the blood that runs through Musk’s veins, he is an excellent salesman and by giving Hertz a 100,000 vehicles he will collect valuable marketing data on each driver, where they go, plus stats on cars’ performance data and additions to his other main business, mapping. Did you ever remember getting a sales offer directly from Ford, or GM, or Toyota after you experienced their rentals? No, because rental companies didn’t share the names of drivers with motor companies. I don’t know what the percentages will be but when you have 100,000 cars being driven by potentially hundreds of thousands of new customers each year AND your the rental car (Tesla) is logging every detail (not necessarily Hertz) even your licence and address. You can then be sure you will get an invitation to try a Tesla very soon after you return the car. Consumute selling, allow the buyer to try the car first. You may not like him but he is a genius and a brilliant salesman. Musk has said that the future of driving is shared use. You may even be able to tick that box so the car is available when you are stuck in meetings all day on the business trip.

    • Bobber says:

      You think Tesla is going to money because it knows I went to the grocery store on Monday? Even if that were true, that data is already collected by cell phone providers.

      You also think receipt of a flyer in the mail is going to effectively incentivize Average Joe on a $75k salary to go out and buy a $50k-$100k Tesla product? In Tesla’s prime markets, many people are already devoting 50% of their income or more to a house payment.

      You assume a lot with your reasoning.

    • Nick Kelly says:

      ‘and by giving Hertz a 100,000 vehicles’

      He may have to ‘give’, i.e., finance them, because we don’t know if Hertz can. Actually all we know so far is the announcement. It would be the height of crazy to seriously commit with $ to 100K EVs without knowing how fast they will rent. I suspect this an option to buy not an obligation. Hertz will lease a few hundred and see how it goes.

    • Wolf Richter says:

      Patrick,

      Must invented “sales offers?” Hahahaha

      I’ve been getting sales offers from Ford and GM for many years. Infiniti finally stopped sending them. You don’t have to rent a car to get a sales offer. They can market directly to consumers based on all kinds of criteria that they select from data brokers, such as your income level, your family, what you like to eat, what part of town you work in, etc. Your smartphone is a big source of this type of info, as is everything else you do. Your credit card transaction shows who you rented the vehicle from. Your smartphone shows where you went with it, where you charged up your EV, and how fast you drove. Did you miss the past 30 years of advertising revolution? And now you think Tesla invented it?

  39. El Katz says:

    The biggest harm caused by selling vehicles to fleets is the impact that it can have on the used vehicle resale value and residuals (which are tied to resale value).

    Normal retail follows no schedule – people can keep a car for a year or 10. However, fleet sales are usually disposed of on a schedule…. be it mileage or age. Fleets will dump inventory in volume, whereas Joe Customer doesn’t.

    This can impact the resale value because, if the supply outstrips the demand at a price, the used vehicle price will drop until the inventory is liquidated. Cars going through an auction are immediate barometers of value and many dealers use online auction reports when evaluating trade ins.

    The lower residual raises the cost to lease for the customer (or the subsidy from the manufacturer to make the numbers work). That’s why it’s a fine line that some manufacturers walk and keep their non-retail sales low by not having corporate “fleet” departments and letting their dealerships supply their local DRACs from their own inventory.

  40. So isn’t this a marketing stroke of genius? People who don’t know what a Tesla is can drive one for a day?

    • MJC says:

      That is one take…

      Or, perhaps they will reject it out of hand – once compelled to use one.

    • Wolf Richter says:

      Note a stroke of genius. Far from it. Automakers have done this for decades, as I pointed out. We used to do it ourselves with service loaner cars — when you brought your car in for service, you got one of our rental cars to drive for free. So if you have an 8-year old vehicle in service and you’re driving a new model to pick up your wife, well, you’re going to start thinking about buying it. That was ca. 1990.

  41. mjc says:

    When you don’t even make up ONE PERCENT of the total auto market, one does whatever they can.

    #TESLA

  42. RockHard says:

    >Bloomberg asserts that the $4.2 billion deal divided by 100,000 vehicles would price the vehicles close to list (at $42,000 each). Tesla’s website lists the base Model 3 at $43,990.

    Here’s what I’m wondering – retail customers don’t really have negotiating power on new vehicles, at least not in-demand vehicles. Maybe this shows that Tesla has the pricing power and doesn’t have to discount much? And Hertz thinks that the Teslas are a desirable product that will attract more customers and Hertz can price these as a premium rental? So maybe this is just Hertz trying something new to shake up their offerings and they’re willing to take the risk of buying more expensive cars to improve their product?

    Agree though, it’s weird that they’d commit 10% of their production capacity. But if they’re committing at basically retail price, is it really a low margin deal? It’s very possible I’m missing something. And I agree, FSD is probably a major liability for a rental company. All it takes is one FSD accident in a rental and Hertz is in major damage-control mode.

    I guess the key part is the next sentence: “Nobody knows what’s in this deal”

  43. Nick Kelly says:

    ‘he is an excellent salesman and by giving Hertz a 100,000 vehicles he will collect valuable marketing data on each driver’

    Would be the most expensive data ever. Who has the 4 billion? It’s not Hertz.

  44. Nostradopus says:

    Just when you think you’ve seen every angle on grifting shareholders. And by “shareholders”, I mean “people who own the shares today and foolishly think them to be a long term investment, being utterly ignorant of how capital marks now work”.

    Of course the people pulling this off and selling most of their stock soon will be fine.

  45. Patrick T Flanagan says:

    A lot of confused pushback, misread and miquoted but hey, time will tell.

  46. Vid says:

    Tessa and Hertz counting on the 30% government rebate for commercial EVs in the upcoming BBB bill. Lots of room for financial wizardry

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