The EVolution #15: Tesla-Hertz so good

The mega-deal could also become a big green move for Uber

A certain yellow-clad rental car company, which emerged from bankruptcy less than four months ago, made big news this week. Hertz is purchasing 100,000 new Tesla vehicles for its rental fleet, of which 50,000 are earmarked for Uber drivers. Based on Uber demand, an additional 100,000 Teslas could be acquired over the following three years.

And I was just questioning when Uber would take a bolder step toward electrification! Below are my main thoughts about these developments—but first, a shoutout to new readers: sign up to receive The EVolution in your inbox, free, when I publish updates (typically a couple times a month).

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(1) A trilli

Tesla has reached a valuation of over $1 trillion dollars (source: YCharts)

Tesla’s stock market fans just updated the Justin Timberlake-as-Sean Parker line: “A billion dollars isn’t cool. You know what’s cool? A trillion dollars.” Following a huge surge this week, that’s the new market cap of $TSLA, making it the sixth-largest publicly traded company in the world.

Leaving aside the intractable debate over the (in)sanity of Tesla's share price, Elon Musk himself noted that the ~$4 billion boost to revenue from this sale shouldn’t affect the company’s valuation on its own. Tesla is production-constrained, not demand-constrained—they have already been selling all the cars they can make!

(2) If you want a discount for buying in bulk, go to Costco

Elon Musk @elonmusk

@GerberKawasaki To be clear, cars sold to Hertz have no discount. Same price as to consumers.

You can’t get a clearer signal of scorching-hot demand for your product than selling 100,000 units at sticker price!

(3) Yellow turns green

A year ago, retail investors might have given a then-bankrupt Hertz $500 million, had the SEC not intervened. Now, Hertz 2.0 intends to “re-IPO” before the end of 2021—and its newly elevated profile should help it raise more money (now or in future secondary offerings).

There’s also a significant boost to brand perception. When I think of rental car fleets, drab Ford Fusions and Chevy Cruzes come to mind, maybe with a limited selection of “premium” models. Many splurging vacationers and slowly-returning business travelers are going to be far more curious and/or excited about Model 3s.

(4) Uber has entered the chat

I previously joked about my being recently mistaken for an Uber driver in my Tesla. With 50,000 Uber Teslas potentially hitting the road over the next year or so, that won’t seem so strange:

Starting November 1, drivers can rent Teslas through Hertz’s rental program in Los Angeles, San Francisco, San Diego and Washington, DC, with a nationwide expansion in the following weeks... Tesla rentals will start out at $334 a week and fall to $299 or lower as the program gets underway. This includes insurance and maintenance and is the best deal available in the market today for drivers looking to rent a Tesla.

For Uber to hit its zero-emissions goal, facilitating a greater share of electric cars in its fleet without having to purchase those vehicles is a big win. But I’m most enthusiastic about what this means from an EV exposure standpoint—thousands of drivers and hundreds of thousands of riders may get their first electric vehicle experience this way!

(5) Who got the plug?

Source: Hertz

All these new Teslas will have to recharge somewhere. Aside from drivers charging at home, public fast-charging will be available on Tesla’s Supercharger network and on certain compatible EVgo chargers, while Hertz apparently also plans to build thousands of chargers.

Additionally, L2 (“top up”) charging will be available from other public charging networks, including those run by my employer which offer free charging at a variety of retail establishments.

(6) Ex games

Mark Fields being asked if he considered the Mustang Mach-E instead

Hertz’s interim CEO is Mark Fields, who previously had a 28-year career at Ford, including as CEO from 2014-2017. Why was he pushed out?

Mr. Fields had failed to persuade investors and his own board that the company was moving fast enough to develop the vehicles of the future, like battery-powered cars that drive themselves.

Fields didn’t sufficiently embrace the future in his old gig, but now will get the credit for doing so in his new gig. (I say “the credit” because while he’s the face of this deal, he only became CEO earlier this month, after joining Hertz’s board in June.)

Why isn’t he going with his old employer, or the much cheaper Chevy Bolt? The former skeptic now says “Tesla is the only manufacturer that can produce EVs at scale.”

(7) Before you go

As Reilly Brennan discovered while clicking around Hertz’s Australian website, “return with at least a 20% battery charge” is the new “return with a full tank”.

(8) Let’s G.O.A.T.!

Politics may make strange bedfellows, but apparently so does the fight against climate change. While I’d never say this about a football game, here I am on the same side as Tom Brady. He’s starring in a new series of Hertz commercials.

These ads are as much promotions for Tesla as they are for Hertz. Given that Tesla doesn’t spend any money on traditional advertising, getting associated with the celebrity quarterback for free is a nice bonus—a chance to reach an audience who doesn’t follow Elon Musk on Twitter or see the news stories that his tweets generate.

(9) If you build it, will they come?

This could be a Big Freaking Deal. Hertz and Uber are making the cars available. Is the demand from the public there? Stay tuned.