Tesla joins the trillionaires’ club! Car firm’s market cap hits $1tn and shares hit all-time high after Hertz announces deal to buy 100,000 of its cars for rental across US and Europe
- American rental car company Hertz has made the largest single-purchase of electronic vehicles after buying 100,000 Tesla Model 3 cars
- Tesla CEO Elon Musk’s company stock soared this morning after they hit a $1 trillion market cap
- The purchase also reflects Hertz’s new ‘electronification’ for more eco-friendly vehicles
- The deal is said to be worth $4.2 billion as each vehicle has an average base price of about $42,000
- Hertz interim CEO Mark Fields said that the vehicles will be arriving at the company site in November
Tesla saw its market cap hit $1 trillion and its shares rocket to an all-time high of $998 each after rental firm Hertz signed an estimated $4.2billion deal to buy 100,000 of its cars.
The deal, announced on Monday, will see Hertz roll out the $42,000 Model 3’s across its locations in the US and Europe by the end of 2022, and is the largest single order for electric cars ever placed.
Tesla’s soaring stock price means – with shares climbing by nine per cent on Monday alone – means that its owner Elon Musk is now in the same $1 trillion club as other, far longer established firms including Apple, Microsoft and Amazon.
Former Ford CEO turned interim Hertz boss boss Mark Fields’ announced the deal Monday. It also marks a stunning turnaround for Hertz, which filed for bankruptcy in May 2020 after its fragile finances were dealt an apparent hammer blow by the onset of COVID and its effects on the travel industry.
But Hertz re-emerged from bankruptcy in June this year, with demand for its services now surging as COVID-weary Americans get back to traveling with a vengeance.
Tesla’s stock price soared to close to $1,000-a-share on Monday morning, with the car marker joining a small band of super-corporations with a $1 trillion market cap
American car rental company Hertz announced on Monday that they are set to buy 100,000 electronic vehicles from Tesla
Fields refused to confirm the exact amount, but said of the deal: ‘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.’
It will be promoted in new TV spots starring Tom Brady, with customers able to start booking the electric cars on Hertz’s website now.
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.
The deal is said to be worth $4.2 billion as each vehicle is worth about $40,000 each
The stock for Tesla CEO Elon Musk soared this morning after hitting a $1 trillion market cap
Hertz also said it will establish its own electric vehicle charging network as it strives to produce the largest rental fleet of electric vehicles in North America.
The change in the company’s direction comes after Hertz acquired new owners Knighthead Capital Management and Certares Management in May.
‘How do we democratize access to electric vehicles? That’s a very important part of our strategy,’ Fields said in an interview earlier this month, according to Bloomberg.
‘Tesla is the only manufacturer that can produce EVs at scale,’ he added.
In 2019, Amazon ordered 100,000 electric delivery vans from Rivian, a startup manufacturer of electric van, pickup trucks and SUVs. Amazon is an investor in Rivian.
Hertz interim CEO Mark Fields also announced that the purchase of the Tesla vehicles is part of the company’s new ‘electronification’
Shares of Tesla hit an intraday record Monday before pulling back slightly. They were up 7% to $973.85 by mid-morning.
The share price increase boosted the market value of Tesla to over a trillion dollars, although it has currently dropped again slightly.
In his interview with the AP, Fields made clear his belief that electric vehicles are increasingly moving into the mainstream and that Hertz intends to be a leading provider of EVs to rental customers.
He pointed to surveys showing that over the past five years, consumer interest in electric vehicles has grown dramatically.
‘More are willing to try and buy,’ he said. ‘It’s pretty stunning.’
Fields said that Hertz, which is based in Estero, Florida, is in discussions with other automakers, too, about buying additional electric vehicles as it expands its EV fleet as more models enter the marketplace.
Fields said it has plans for 3,000 chargers in 65 locations across the United States by the end of 2022 and 4,000 by the end of 2023.
Hertz had previously filed for bankruptcy protection during the pandemic but was later bought in May by Knighthead Capital Management and Certares Management
Many of the sites will be at Hertz locations such as airports, he said, while others will be in suburban areas.
Customers also would be able to use Tesla’s own large charging network for a fee, Fields said. The company has a network of about 25,000 chargers worldwide.
Fields declined to say how much Hertz will charge to rent the Teslas or whether they would be more expensive for customers than gas-powered vehicles.
Daniel Ives, a technology analyst at Wedbush Securities, wrote in a note Monday to investors that Hertz´s order represents a ‘major feather in the cap’ for Tesla and shows that a broad adoption of electric vehicles is under way ‘as part of this oncoming green tidal wave hitting the U.S.’
China and Europe have been ahead of the U.S. on vehicle electrification.
But demand in the United States is accelerating, Ives noted, with Tesla leading the way, followed by startup Lucid Motors, General Motors, Ford and others that are chasing a potential $5 trillion market opportunity over the next decade.
Hertz Global Holdings Inc. filed for bankruptcy protection in May 2020, two months after the coronavirus erupted across the country.
It was among the first major corporations to be felled by the pandemic as infections surged and shut down travel on a global scale for both companies and vacationers.
The change in ownership and electronification of the company, however, has led Hertz to successfully start anew.
The company was reported to have $1.8 billion in cash with its debt-to-equity radio improving from 10 in 2019 to 2.4, according to a filing from October 15.
Hertz now has a market value of $11.6 billion in over-the-counter trading.
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