Elon Musk has put a stop to Tesla’s (TSLA) historic rally by saying that the Hertz deal is “not signed” and adding that he doesn’t believe it has any effect on Tesla’s economics.
Tesla’s stock (TSLA) rallied more than 55% over the last month alone.
The bulk of the increase came after Hertz’s announcement that they ordered 100,000 Tesla vehicles, then partnered with Uber to provide 50,000 of them to their drivers with an option for 100,000 more.
It sent Tesla’s stock surge significantly.
It culminated in an 8% increase yesterday alone that saw Tesla’s valuation surging to $1.2 trillion.
However, this morning, Tesla’s rally has officially stopped with the stock being down 5% in pre-market trading.
The significant decline comes after a tweet from Elon Musk in the middle of the night.
A Twitter user thanked Musk for the stock price increase, and while the CEO responded by seemingly accepting credit at first with a “you’re welcome,” he quickly poured cold water on the rally by saying that the Hertz deal shouldn’t have this kind of impact:
The CEO said that “no contract has been signed” on the Hertz deal and it shouldn’t have a strong effect on Tesla’s economics since the company is production constrained:
“If any of this is based on Hertz, I’d like to emphasize that no contract has been signed yet. Tesla has far more demand than production, therefore we will only sell cars to Hertz for the same margin as to consumers. Hertz deal has zero effect on our economics.”
When the rally first started, Musk had already pointed out that it wouldn’t accelerate Tesla’s overall deliveries as the company is
constrained by production, not demand. Electrek‘s takeThe first part of Musk’s comment is a bit concerning since Hertz made it clear that they “placed” an order with Tesla for 100,000 Model 3 vehicles.
They have already taken deliveries of some of them.
Since Hertz didn’t receive any specific discount for their order, it’s possible that they went through the regular ordering process and simply put a $100 deposit per car to claim that they “placed” the order, which might not constitute a “signed” deal.
As for the second part, it is technically true, but as we discussed on the Electrek podcast last week, I think the Hertz deal has several benefits for Tesla and the broader EV adoption beyond simply adding 100,000 vehicles to Tesla’s backlog.
Long term, once those vehicles are in operation both in Hertz and Uber’s fleets, it will help get more people to try electric cars and accelerate the market shift toward electric vehicles.
It’s also going to encourage other large fleet managers to think bigger when it comes to electrifying their fleets.
It’s just another signal that if you are thinking about buying a new car, like Hertz, you should think about buying an electric car.
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