Skip to Content

Musk’s tweet raises doubt about Hertz’s order for 100,000 Teslas

By Chris Isidore, CNN Business

When Hertz announced plans to buy 100,000 Teslas last week — the largest-ever single order for electric vehicles — it was hailed as a breakthrough moment for the shift to EVs.

But maybe it wasn’t.

Or maybe it still is.

The “order” was thrown into doubt late Monday by — you guessed it — a tweet from Tesla CEO Elon Musk, who appeared to question the certainty of the deal.

“If any of this is based on Hertz, I’d like to emphasize that no contract has been signed yet,” Musk tweeted, referring to the recent surge in Tesla shares following the rental car company’s announcement.

Shares of Tesla fell around 2% Tuesday morning, improving on a drop of as much as 5% earlier in the day, but still well above where the stock was trading before Hertz announced its purchase plans.

After Hertz announced the deal last week, Tesla did not respond to a request for comment. The company has a pattern of not responding to queries from mainstream media outlets in recent years, and did not respond to a further request for comment Tuesday, either.

For its part, Hertz is standing by its statement that it has a deal in place to buy 100,000 Tesla Model 3’s.

“We can only speak for Hertz, and we remain on plan with what we announced last week,” said Lauren Luster, director of communications for Hertz. “Deliveries of the Teslas already have started. We are seeing very strong early demand for Teslas in our rental fleet, which reflects market demand for Tesla vehicles.”

It is possible that Musk is using his tweet to put pressure on Hertz to finalize the purchase at terms the automaker prefers, said Dan Ives, tech analyst at Wedbush Securities.

“We view the Hertz tweet as a game of high stakes poker, with likely legal wrangling going on in the background between Hertz and Tesla,” he said. “Hertz has already announced the deal and it’s a matter of procedure with getting the deal signed. Musk’s tweet this morning will likely force pen to paper for Hertz.”

Hertz has a lot more at stake in this transaction than Tesla does. The rental car giant emerged from bankrutpcy earlier this summer, and has plans for a new initial public offering for its shares. Hertz and other car rental companies currently are experiencing record car rental rates far above pre-pandemic levels. Rival Avis Budget reported record earnings Monday.

Musk is operating under an order from the Securities and Exchange Commission requiring him to get approval from other executives at Tesla before he tweets any material news about the company. He agreed to the order after the SEC found that a 2018 tweet in which he claimed to have “funding secured” to take the company private was misleading to investors.

Musk’s comment about the Hertz order also repeated a statement from an earlier tweet that Hertz was not getting a discount for the large number of cars it said it was buying.

Rental fleet buyers typically pay less for car purchases than do individual consumers, but Musk said that because Hertz wasn’t getting a discount, the deal “has zero effect on our economics.”

Of course, that claim — that an order for 100,000 cars would have no impact on economics — isn’t accurate, even if Hertz is paying full price for the cars.

An agreement to sell an additional 100,000 cars would clearly be good news for Tesla, in that it would help the company meet its ambitious goals of increasing sales by at least 50% a year for the foreseeable future.

Tesla sold 500,000 cars worldwide last year, a record for the company. Investors’ expectations for global sales this year is just under 900,000. And Tesla’s plans to open two new factories, one near Austin, Texas, and one near Berlin, will increase its global capacity significantly. Finding buyers for all those additional cars is crucial for Tesla.

The Hertz deal could also introduce millions of drivers to their first electric vehicle, another potential boon for Tesla sales.

Those growth projections are precisely what have made Tesla shares so valuable. The EV maker’s market cap is roughly equal to the combined worth of the world’s 12 largest automakers by sales volume.

Tesla was the best performing US stock last year, with a 743% rise in value. Its shares already were up nearly 30% so far this year even before Hertz’s announcement. But the news sent the automaker’s stock up another 12.5% that day alone, helping to lift the company’s overall value above the $1 trillion mark for the first time.

That made Tesla only the sixth US company to ever achieve a market cap above $1 trillion. The run started by the Hertz news lifted Tesla shares another 31% through Monday’s close.

The-CNN-Wire
™ & © 2021 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

Article Topic Follows: CNN - Business/Consumer

Jump to comments ↓

CNN Newsource

BE PART OF THE CONVERSATION

ABC 17 News is committed to providing a forum for civil and constructive conversation.

Please keep your comments respectful and relevant. You can review our Community Guidelines by clicking here

If you would like to share a story idea, please submit it here.

Skip to content