International Business Writer
The electric car manufacturing giant Tesla reached a trillion-dollar market value last week.
Following the announcement that the car rental company Hertz would purchase 100,000 Tesla Model 3s, Tesla’s stock price rose 12.7%, raising the company’s market cap past the trillion-dollar mark. The auto manufacturer now joins Microsoft, Amazon, and Alphabet in American companies that have broken the trillion-dollar mark since Apple in 2018.
Tesla stands to gain more than attractive stock market numbers through the deal with Hertz. For instance, according to TechCrunch, having Tesla Model 3s available for rent would give more people access to drive an electric vehicle, an opportunity that may have previously been hard to come by. It would also seal the deal for many prospective electric vehicle buyers, whose final determinant in taking home a Tesla may be driving it personally. TechCrunch also reported that a survey from Enterprise Holdings revealed that 62% of rental car drivers think about buying a specific car model after a pleasant driving experience.
The greater exposure to these vehicles will be free marketing for Tesla. Instead of Tesla advertising their vehicles, Hertz will market for their rental services. Tesla will simply sit back and let Hertz customers try the vehicles for themselves, expanding Tesla’s audience and prospective buyers, all without spending a dollar on marketing.
This deal sprouted concerns regarding its effects on Tesla’s stock price. It is estimated that Tesla’s profit after taxes from the deal will be near $930 million, about 123 times less than the increase in Tesla’s market cap from the deal, which was around $115 billion. However, it was also reported that while some believe that the stock is severely overpriced, others are still confident that this deal will give Tesla vehicles a wider audience. This will bring them an influx of demand in the long run.
The bottom line of the Tesla-Hertz deal is that electric vehicles are a force with which to be reckoned. In addition to their rapid increase in popularity over the past decade, they are now becoming easier to access and gaining broader exposure to prospective buyers. That is not to mention that Tesla, the staple electric car manufacturer of the US, now has a higher market capitalization than the nine automakers beneath it put together. The effects of the addition of 100,000 Tesla Model 3s to Hertz’s rental lineup are uncertain at the moment, but the results are already visible on Tesla’s stock market performance. It will be interesting to see where the deal takes the auto industry moving forward.
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