Car rental companies have been thinking about going electric for some time, but outside of Norway and California, there’s been little real action—until now. Rental giant Hertz theoretically began introducing EVs to its fleet in 2011, and competitors soon followed. However, they were offered only in select markets, sometimes at super-premium prices. Meanwhile, Teslas became popular on the peer-to-peer rental network Turo.
Now Florida-based Hertz, which rents cars at some 12,000 locations in 160 countries, says it will place “an initial order of 100,000 Teslas by the end of 2022,” and will install “thousands of chargers throughout its location network.” Naturally, Hertz customers will also have access to Tesla’s Supercharger network.
“EVs will comprise more than 20 percent of Hertz’s global fleet and [are] expected to be supported by a combination of Level 2 and DC fast charging in approximately 65 markets by the end of 2022, and more than 100 markets by the end of 2023,” says the company. “Beginning in early November, customers will be able to rent a Tesla Model 3 at Hertz airport and neighborhood locations in US major markets and select cities in Europe.”
Bloomberg reported that Tesla is expected to earn around $4.2 billion of revenue from the deal. Doing the math implies that Hertz is paying something near the list price for the cars, which would be highly unusual for an order of this size—rental agencies and other fleet buyers usually secure substantial discounts from automakers.
We know that Tesla is allergic to discounts of any kind, but why did Hertz opt to lay out such a large sum on pricey Teslas, instead of buying a much cheaper American-made EV such as the Chevy Bolt? One obvious reason is that Tesla’s prestige, in addition to allowing Hertz to charge a premium price, may mitigate customers’ reluctance to try driving electric. Another sweetener is the Supercharger network, a superior charging experience that no other automaker can offer. In the words of EV journalist John Voelcker, “the Tesla Supercharger network made the sale.”
However, there’s another big reason that a Tesla is superior to any other EV for rental applications. One of the reasons the legacy rental agencies have been losing business to Turo is the latter’s far more convenient user experience. Depending on the airport, renting a car the old-fashioned way can involve waiting for a shuttle bus to an off-site lot, filling out paper forms and waiting in line to pick up your keys. When you rent a Tesla on Turo, you go directly to the airport parking garage, open the car with an app, get in and go—and all this is enabled by Tesla’s unique connectivity features.
For years, car rental firms have been working to streamline the pick-up and drop-off experience, but their efforts are often constrained by the logistics at America’s aging airports. If Hertz can take full advantage of Tesla’s features, it could offer superlatively seamless service. A Tesla could drive itself directly to baggage claim, with the AC already on and the seats already adjusted to your personal preferences. (Unfortunately, the obligatory sales pitch for expensive, unwanted insurance products is sure to remain part of the rental experience.)
It sounds like Hertz does indeed plan to take full advantage of Tesla’s autonomy and connectivity features. It will offer “a premium and differentiated rental experience for the Tesla EVs. This includes digitized guidance to educate customers about the electric vehicle to get them on their way quickly, and coming soon, an expedited EV rental booking process through the Hertz mobile app.” However, you can bet that, like the vehicles themselves, this service will not be cheap.
Will Tesla be able to deliver all these cars in a timely manner? Hertz says they will be delivered over the next 14 months. Tesla is already dealing with a supply crunch—it’s been raising prices on a regular basis, there’s a months-long waiting list, and used Teslas are selling for more than new ones. The Austin and Berlin Gigafactories are supposed to start production soon, so we’ll see.
“Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest,” said Hertz Interim CEO Mark Fields (who, ironically, stepped down as CEO of Ford in 2017 amid accusations that he wasn’t taking EVs seriously enough). “The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America.”