Tesla's market value hits $1 trillion after Hertz agrees to buy 100,000 of its cars

By Camila Domonoske

Published October 25, 2021 at 11:31 AM EDT

A sign hangs above a Hertz rental car office on Aug. 4, 2020, in Chicago. The company said it's buying 100,000 Teslas in a bold move to diversify into electric vehicles.

The car-rental giant Hertz is making an audacious bet on electric vehicles, purchasing 100,000 battery-powered vehicles from Tesla.

By the end of next year, electric vehicles would make up more than 20% of Hertz's global fleet. That's a huge percentage, considering that in most of the world, electric vehicles represent less than 3% of new car sales.

The purchases will be made up of the Tesla Model 3, a sedan that is the cheapest vehicle currently available from the electric carmaker.

The Teslas will be available for rent at airports in major U.S. markets, Hertz said in a statement, as well as in some European cities. (Electric vehicle adoption is increasingly rapidly in Europe, and electric rental cars are more common there.)

But electric vehicle sales are increasingly rapidly. And there is growing pressure from companies and governments to accelerate the switch away from gas and diesel, in order to reduce the impact on human-caused climate change.

Meanwhile, Hertz also notes that battery-powered cars have lower maintenance and operating costs.

"Electric vehicles are now mainstream, and we've only just begun to see rising global demand and interest," Hertz interim CEO Mark Fields said in a statement.

Hertz has hired Tom Brady, winner of seven Super Bowls, to promote the availability of Teslas in ads.

A Tesla Model 3 is seen during the 19th Shanghai International Automobile Industry Exhibition in Shanghai, China, on April 19. Hertz said it was hiring quarterback Tom Brady to promote the Tesla Model 3s it's buying to diversify the rental car company's fleet.

Bloomberg reported that Hertz would be paying approximately full price for the Teslas, citing descriptions of the total value of transaction from sources familiar with the matter. The Tesla Model 3 is currently listed starting at around $40,000 in Tesla's website.

Hertz would not comment on the price of the vehicles, and Tesla did not return a request for comment.

Hertz went through bankruptcy last year, as high levels of debt collided with a drop in demand triggered by the pandemic. But after emerging from bankruptcy, it's been on stronger financial footing — including a big boost from selling off part of its rental fleet while used car prices have been sky-high.

However, a global shortage of semiconductors has cut sharply into new vehicle production, which has made it challenging for all rental car companies to buy new vehicles to update their fleet.

Tesla, while still affected by the shortage, has done a better job than many of its rivals at managing the supply chain challenges. In fact, Tesla has increased its production, setting new records for itself, every quarter so far this year.