Tesla crosses $1 trillion market cap as Hertz orders 100,000 EVs for its rental fleet

• Tesla crossed the $1 trillion market cap for the first time after Hertz announced to buy 100,000 Model 3

• The deal came four months after Hertz emerged from bankruptcy following demand for travel and rental vehicles dropped during the COVID-19 pandemic

Tesla Inc hits the $1 trillion market cap on Monday for the first time, following news that car rental company Hertz Global Holdings Inc is ordering 100,000 vehicles ambitious plan to electrify its rental-car fleet by the end of 2022.

In crossing the milestone, Tesla joins Apple Inc, Microsoft Corp, Amazon.com Inc., and Google-parent Alphabet Inc.

The EV maker, which posted its third consecutive quarter of record sales, is valued more than the combined market cap of the following nine largest automakers, including General Motors Co, Ford Motor Co and Volkswagen DE.

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The deal

Hertz on Monday said the deal will help the company rent Tesla’s Model 3 sedans in the U.S. and parts of Europe starting in early November.

With around half-million cars and trucks worldwide, Hertz said the EVs will comprise more than 20% of its global car rental fleet, and it expects the vehicles will be available to 65 markets by the end of 2022 and more than 100 markets by the end of 2023.

The car rental company said its customers will have access to Tesla’s network of superchargers, and the company is also building its own charging infrastructure.

It is the first significant initiative since Hertz emerged out of bankruptcy barely four months ago, in June. The company filed for bankruptcy protection during the height of the pandemic due to low demand for travel and rental vehicles.

The announcement showed that Hertz’s new owners, Knighthead Capital Management and Certares Management, are planning to shake the industry up.

Hertz, which currently trades over the counter ahead of its relisting on the Nasdaq Stock Exchange, surged about 14.5% to $28.25.

Boost for Tesla

The deal is the single-largest electric vehicle purchase agreement which will add about $4.2 billion to Tesla’s revenue, Bloomberg reported, citing people familiar with the matter.

Shares of Tesla jumped about 15% to $1045 following the deal news.

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Although, the deal between the two companies isn’t exclusive, as Bloomberg reported, Hertz’s order is equivalent to about one-tenth of what Tesla currently produce in a year, which will help Hertz to box out rivals from copycatting the strategy.

Moreover, rival car-rental companies can order from Tesla only if the EV maker has increased production significantly and has available capacity.

Picture Credit: ArsTechnica