The rental car company Hertz said on Monday that it would buy 100,000 vehicles from Tesla, sending the electric vehicle company’s stock surging and boosting founder and chief executive Elon Musk’s fortunes by billions.Tesla chief executive Elon Musk dances onstage during a delivery event for Tesla China-made Model 3 cars in Shanghai in January 2020.
The order, which Hertz said it would complete by the end of 2022, is part of its “significant investment to offer the largest EV (electric vehicle) rental fleet in North America,” the company said in a statement.
Tesla shares rose by more than 12 percent after the announcement, past $1,000 per share, and pushed the company’s valuation to more than $1 trillion. Only a handful of other companies- Apple, Microsoft, Google-owner Alphabet and Amazon are worth more than $1 trillion.
Musk celebrated the news on Twitter, writing: “Wild $T1mes!”
Musk said it was “strange” that the news of the Hertz order boosted the company’s valuation, tweeting that “Tesla is very much a production ramp problem, not a demand problem.” Tesla has been plagued by production issues and reports of delays in delivering cars to customers.
Musk acknowledged the shortcomings in February in an interview with industry analyst Sandy Munro, saying that “it took us a while to kind of iron out the production process, especially during a production ramp.” Paint quality, namely, had suffered because the paint wasn’t drying fast enough, Musk said. “If you go faster, you just discover these things,” he said.
Yet continued demand and optimism over Tesla’s future have kept Musk’s fortune ballooning. The bump in the company’s shares increased Musk’s wealth by more than $36 billion, solidifying his place as the world’s richest person with a total net worth of $289 billion, according to Bloomberg’s Billionaires Index..
Hertz’s shares rose 10 percent on the announcement, which said that the company “will offer a premium and differentiated rental experience for the Tesla EVs.” Starting early next month, Hertz will have Tesla Model 3s, the company’s entry-level sedan available to rent in the United States and Europe, the company said. The new order will expand its EV offerings such that one in five cars in the Hertz fleet will be electric.
Musk said Tesla was not offering Hertz a discount on its order, noting that the company would pay the “same price as to consumers.” A Model 3 starts at $43,990 with an estimated June delivery, according to Tesla’s website.
The move by Hertz comes as the company rebuilds itself after filing for bankruptcy last year, citing the sudden drop in demand because of the pandemic. Hertz said in June that it had completed its Chapter 11 restructuring process and “has emerged as a financially and operationally stronger company that is well-positioned for the future.”