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Tesla (TSLA) Enters $1 Trillion Club on Hertz Deal, Shares Up 12.6%
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Tesla (TSLA - Free Report) recently secured a purchase order for 100,000 vehicles from car rental giant Hertz. The order, to be delivered by the end of 2022, is the largest single purchase of electric vehicles (EVs) ever.
The deal announcement resulted in Tesla’s market capitalization propelling beyond $1 trillion for the first time. It also sent Tesla's share price rallying 12.6% yesterday to end the day at $1,024.86.
The latest agreement is a win-win deal for both companies.
Florida-based Hertz has a wide range of luxury, sports, and hybrid vehicles available to meet every car rental need. Last year, Hertz filed for bankruptcy amid mounting debt and sinking rental demand due to the coronavirus pandemic. Nonetheless, the sustained economic recovery buoyed by the accelerated vaccination drive provided relief to the company, which came out from bankruptcy four months ago. It was rescued by a group of investors, including Knighthead Capital Management, Certares Opportunities and Apollo Capital Management, allowing it to shed off much of its debt, thereby enhancing the ability to invest in modernizing the company’s fleet.
Amid the heightening climate change concerns, EVs are now considered mainstream. Thus, the deal with Tesla will enable Hertz to differentiate itself from other rental car companies by converting more than 20% of its global rental fleet to Tesla’s electric cars by the end of next year. Though Hertz failed to reveal the value of the deal, reportedly the transaction is estimated to generate $4.2 billion of revenues for Tesla. This indicates that Hertz will be paying the same price for the vehicles as other consumers and not garner any significant discount from Tesla for the large vehicle order.
Tesla Model 3 vehicles will enter the Hertz rental inventory starting this November in major U.S. markets and select cities in Europe. Hertz also announced plans to install 3,000 chargers in 65 markets by the end of 2022 and develop 4,000 chargers in 100 markets by end of 2023. This charger network will support the company in its quest to increase the adoption of EVs. Additionally, customers who rent a Tesla Model 3 will also have access to Tesla’s supercharging stations across the country.
For Tesla, the Hertz order is a victorious deal because it will make the EVs of the former available to a much wider array of consumers. It would also represent a notable portion of the company’s vehicles manufactured and delivered over the next 14 months. In fact, the deal, which has helped Tesla attain a trillion-dollar valuation, is the latest sign of how capable the EV giant is of disrupting the auto industry. Tesla is now worth as much as the combined market cap of the nine largest carmakers around the world, including automotive giants like General Motors (GM - Free Report) , Volkswagen (VWAGY - Free Report) and Toyota (TM - Free Report) .
Only few American publicly-traded companies like Apple, Microsoft and Google-owned Alphabet have managed to reach $1 trillion or more in market capitalization, and these are all technology companies. The deal is a historic moment for Tesla as it marks the auto giant’s entry in the elite club of the highly valued tech companies that rule the American markets. What makes Tesla's achievement all the more praiseworthy is that it is the first automaker to hit this milestone.
While Tesla is a car company, Wall Street undoubtedly treats it like a tech company. This definitely gives Tesla CEO Elon Musk all the rights to brag about his company.
Image: Bigstock
Tesla (TSLA) Enters $1 Trillion Club on Hertz Deal, Shares Up 12.6%
Tesla (TSLA - Free Report) recently secured a purchase order for 100,000 vehicles from car rental giant Hertz. The order, to be delivered by the end of 2022, is the largest single purchase of electric vehicles (EVs) ever.
The deal announcement resulted in Tesla’s market capitalization propelling beyond $1 trillion for the first time. It also sent Tesla's share price rallying 12.6% yesterday to end the day at $1,024.86.
The latest agreement is a win-win deal for both companies.
Florida-based Hertz has a wide range of luxury, sports, and hybrid vehicles available to meet every car rental need. Last year, Hertz filed for bankruptcy amid mounting debt and sinking rental demand due to the coronavirus pandemic. Nonetheless, the sustained economic recovery buoyed by the accelerated vaccination drive provided relief to the company, which came out from bankruptcy four months ago. It was rescued by a group of investors, including Knighthead Capital Management, Certares Opportunities and Apollo Capital Management, allowing it to shed off much of its debt, thereby enhancing the ability to invest in modernizing the company’s fleet.
Amid the heightening climate change concerns, EVs are now considered mainstream. Thus, the deal with Tesla will enable Hertz to differentiate itself from other rental car companies by converting more than 20% of its global rental fleet to Tesla’s electric cars by the end of next year. Though Hertz failed to reveal the value of the deal, reportedly the transaction is estimated to generate $4.2 billion of revenues for Tesla. This indicates that Hertz will be paying the same price for the vehicles as other consumers and not garner any significant discount from Tesla for the large vehicle order.
Tesla Model 3 vehicles will enter the Hertz rental inventory starting this November in major U.S. markets and select cities in Europe. Hertz also announced plans to install 3,000 chargers in 65 markets by the end of 2022 and develop 4,000 chargers in 100 markets by end of 2023. This charger network will support the company in its quest to increase the adoption of EVs. Additionally, customers who rent a Tesla Model 3 will also have access to Tesla’s supercharging stations across the country.
For Tesla, the Hertz order is a victorious deal because it will make the EVs of the former available to a much wider array of consumers. It would also represent a notable portion of the company’s vehicles manufactured and delivered over the next 14 months. In fact, the deal, which has helped Tesla attain a trillion-dollar valuation, is the latest sign of how capable the EV giant is of disrupting the auto industry. Tesla is now worth as much as the combined market cap of the nine largest carmakers around the world, including automotive giants like General Motors (GM - Free Report) , Volkswagen (VWAGY - Free Report) and Toyota (TM - Free Report) .
Only few American publicly-traded companies like Apple, Microsoft and Google-owned Alphabet have managed to reach $1 trillion or more in market capitalization, and these are all technology companies. The deal is a historic moment for Tesla as it marks the auto giant’s entry in the elite club of the highly valued tech companies that rule the American markets. What makes Tesla's achievement all the more praiseworthy is that it is the first automaker to hit this milestone.
While Tesla is a car company, Wall Street undoubtedly treats it like a tech company. This definitely gives Tesla CEO Elon Musk all the rights to brag about his company.
Tesla currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.