Tesla's $4 Billion Deal With Hertz Is In Doubt

Electric Vehicles / Comments

Elon Musk says no contract with Herz has been signed yet.

Last month, Hertz announced a landmark order of 100,000 Tesla Model 3 cars for its rental car fleet valued at around $4.4 billion dollars - the largest electric car order ever made by a rental car company. The deal was announced just a few weeks after new CEO Mark Fields rescued the company from bankruptcy. Half of the 100,000 vehicles would be used for standard car rentals, while the others would be used for Uber rentals.

After the deal was announced, Hertz said its order could even double to 200,000 Tesla cars. There's just one problem, however: a contract between Tesla and Hertz hasn't been signed yet.

https://twitter.com/elonmusk/status/1455351085170823169
2017-2022 Tesla Model 3 Front View Driving Tesla
2017-2022 Tesla Model 3 Forward View Tesla

"I'd like to emphasize that no contract has been signed yet," Elon Musk wrote on Twitter. This doesn't mean a deal won't happen, but it contradicts Hertz's announcement confirming 100,000 Model 3s are on order.

Musk added that the Hertz deal has "zero effect on our economics." If a deal is made, Musk emphasized that Hertz will need to pay the same price for its cars as customers, so the rental company won't be getting any special treatment. It doesn't sound like a good deal for Hertz when most rental companies buy cars at a discount, but it will generate publicity. "Tesla has far more demand than production, therefore we will only sell cars to Hertz for the same margin as to consumers," Musk wrote.

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https://twitter.com/elonmusk/status/1452727731452588041
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When Hertz made the announcement, the company said the 100,000 vehicles on order will be delivered by the end of 2022. Currently, customer deliveries for the Model 3 Rear-Wheel Drive (which replaces the Model 3 Standard Range Plus) are delayed until late 2022, so Tesla could be reluctant to commit to a large order when it's already struggling to meet the huge demand for the Model 3.

Following the announcement, Tesla's market value surpassed a staggering $1 trillion. Musk found the surge "strange" because "Tesla is very much a production ramp problem, not a demand problem." After that Tweet was posted, Tesla's market valuation fell by around 4 percent.

2017-2022 Tesla Model 3 Driving Back View Tesla
2017-2022 Tesla Model 3 Front Angle View Tesla
2017-2022 Tesla Model 3 Rear Angle View Tesla

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