Tesla’s new deals with Hertz and Uber look like blockbusters

Tesla became one trillion-dollar company this week after announcing a big deal with Hertz. The car rental company said it would do so buying 100,000 Tesla Model 3 sedans by the end of 2022, and that sends Tesla stock price north of $ 1,000 a share. Two days later, Hertz revealed that Uber had promised to lease up to half of these electric vehicles of its ride-share drivers. Hertz though recruited Tom Brady to promote its new fleet.

These developments are clearly good for Tesla, and they are good for the EV industry as a whole. But other companies involved are making more risky bets. Hertz spends and estimated at $ 4.2 billion under the assumption that, if Tesla’s leases become available next month, the cars will be so desirable that its customers will pay higher prices for what the company says is a “premium and unique rental experience. ” Hertz says the cost of renting a Tesla could be “Similarly”To premium and luxury car fees, which vary based on the pick-up location and the date of reservation. For reference, rent a Jaguar XF sedan, which is worth it ALMOST like a new Tesla Model 3, at New York’s LaGuardia Airport cost more than $ 300 the day before. taxes and fees.

Meanwhile, Uber is offering drivers a small subsidy and discounts at some charging stations if they agrees to pay $ 334 per week to rent a Tesla from Hertz. The ride-share company thinks this new way of leasing could lay the foundation for a future, more environmentally conscious business model, despite the fact that the company has a mixed track record when it comes to renting. rent cars to drivers.

To find out how each of these companies will approach Tesla’s new rental market, we looked at the math. Hertz’s deal with Tesla is worth billions, while Uber will spend millions on perks to entice drivers to rent EVs instead of less expensive cars. Of course, customers will decide whether these investments pay off for individual companies.

Tesla makes more than money

Tesla only stands to win if these bets are paid. All the company has to do is make it happen largest order since. The deal price is even higher because Tesla charges sticker price of all Model 3s – currently, a Model 3 starting at $ 43,990 – even if discounts on multiple orders are more common than car rental industry.

There’s more than money on the table, too. Making Tesla’s cars widely available as rental and for Uber riders will also introduce the company’s brand to many more potential customers. For example, Tesla famously without a marketing department, but it got a lot of attention with Hertz’s latest ad campaign, which featured Tom Brady surrounded by Model 3s.

Hertz is betting billions on a greener future

Many more are riding on this deal for Hertz. The car rental giant filed for bankruptcy last year after the pandemic sidelined the travel industry, and it just started coming back when two investment firms bought a majority stake in the company in March. Now, Hertz seems to be hoping that a pivot to rent electric cars could give a century-old company a second life. In fact, Hertz plans to launch one dedicated portal for EV rental, and says more than 20 percent of its fleet will be electric by the end of next year.

This calculation expects Tesla to deliver the promised cars on time, which will not happen. The company has failed production goals formerly and still sailing on semiconductor shortages worldwide, which ruined the making of the car.

Potential customers may not want to pay a markup to rent a Tesla, especially since the price of the rental car is still higher than them before the pandemic. Once again, the innovation of driving a Tesla may be enough to attract customers. Many people don’t have the opportunity to drive an electric car, so a rental experience can give them an introduction to doing it at no cost yet. than $ 40,000 on a Model 3.

Uber’s business model is shifting

Even if Hertz sells Teslas as a premium product, the cars it leases to Uber are available to all levels of riders, including UberX’s budget -friendly service. While Uber drivers with Teslas can too suitable to list their vehicles on the higher Uber Comfort Ride platform and Uber Green’s environmentally-focused service levels, there is no dedicated way for an Uber customer to book a ride of a Tesla.

The success of Uber’s new deal with Hertz obviously depends on whether or not it convinces drivers to sign up for the rental program. Uber drivers can now rent other cars through an existing partnership with Hertz, announcing a weekly base rate of rent which is $ 214 per week, excluding fees. While renting a Tesla is more expensive, Uber has promised that the cost will eventually fall from the current $ 334 per week to $ 299 and possibly even lower. Uber also offers Tesla drivers an extra dollar per trip (up to $ 4,000 per year), and any Uber driver with an electric car can get discounts at EVgo electric vehicle charging stations .

“It’s clear that EVs and self-driving cars are the future of the auto industry, and [Uber wants] with a seat in front of their impact on the big move, ”said Gad Allon, a operations, information, and decisions professor at Wharton. “This collaboration allows them to start and imagine the future of their model.”

However, this plan has limitations. Less than 10 percent of Uber drivers now rent their cars, so the Hertz deal doesn’t affect most drivers. The company also has a sketchy history when it comes to supplying drivers with cars. In 2017, Uber shutting the Xchange Leasing business, which provides cars to drivers who cannot find other financing; lost the program excess money. Xchange Leasing has also been criticized saddling drivers with abusive financial agreements. Some believe Uber’s latest rental collaboration will also make it worse for drivers.

“Whether they rent Teslas or Toyotas, drivers that Uber has trapped in car rental plans will still be caught up in cycles of endless debt,” a Gig Workers Rising spokesperson, a advocacy group, Recode told.

But even if Hertz and Uber cash in their bets, Tesla is still the company with the most to celebrate. Hertz said Wednesday that if the partnership with Uber is successful, the company could expand the program to include 150,000 cars across the board. next three years, which will require Hertz to purchase at least 50,000 more Model 3s. That, of course, is good news for Tesla.

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