by Fred Lambert
October 26, 2021
Elon Musk has confirmed that Tesla didn’t give Hertz a discount on its order of 100,000 electric cars. The CEO also questions Tesla’s incredible stock price surge following the news. As we reported yesterday, rental car company Hertz announced that it placed an order of 100,000 Model 3 electric vehicles with Tesla.
The order is part of the rental car company’s effort to electrify and modernize its fleet. Yesterday, a source told Bloomberg that the deal was valued at $4.2 billion, which could mean that Hertz is not getting a deep discount on the cars like it usually does. Rental car companies have been known to get deep discounts when placing large fleet orders.
For some of them, it’s part of their business model to get discounts on large fleet orders and sell the vehicles for close to the same price they bought it after it’s been used as a rental for a while. Now Tesla CEO Elon Musk has confirmed on Twitter that Tesla didn’t give Hertz a discount on the order: To be clear, cars sold to Hertz have no discount. Same price as to consumers.
If the rental car company placed the order last week, it could have indeed paid $42,000, the same price as customers placing new orders at that time, and only ordered Standard Range Plus Model 3 vehicles.
Tesla now estimates that people placing new orders now for the Model 3 Standard Range Plus in the US would get their cars in June 2022. Hertz said that it plans to take delivery of all 100,000 Model 3s it ordered by the end of next year. As we reported yesterday, Tesla’s stock price surged following the news and it pushed the automaker’s valuation past $1 trillion.
In another tweet, Musk questioned the surge following the news of the Hertz order: Strange that moved valuation, as Tesla is very much a production ramp problem, not a demand problem. Musk has often said that he believes Tesla’s valuation was too high, even before this most recent surge. However, he also recently said that he believes Tesla is worth $3,000 per share (3x as much as now) by 2025 “if they execute well.”
Electrek’s Take I guess Elon has a good point: The order doesn’t change much for Tesla. It basically just increases its already big backlog of orders by a few months and 100,000 more vehicles. Tesla won’t be able to produce or deliver more cars because of it. It is still production constrained, as he mentions.
But the Hertz news itself is positive for Tesla, not just because of the actual order. It will encourage more rental companies and other large fleet managers to secure more EV orders, which is going to be good for the space and for consumer perception of EVs. It will also enable more people to try Tesla vehicles when they get a rental, and we know the effect Tesla has on people during test drives.
Finally, Hertz is also launching a marketing campaign featuring Tom Brady around the integration of the Model 3 in their fleet. While the focus is on Hertz, the Model 3 is primarily featured and that is basically a lot of free marketing for Tesla. More mindshare for the automaker.