Tesla shares took a dip on Tuesday after Tesla CEO Elon Musk tweeted that its deal to provide Hertz with 100,000 electric vehicles had not been ratified with the signing of a contract. While this normally means the deal had not been finalized, the language used by Musk almost makes it sound like whatever Hertz had been claiming previously didn’t even matter.
“You’re welcome! If any of this is based on Hertz, I’d like to emphasize that no contract has been signed yet,” the CEO said in reference to Tesla’s share price pitching upwards by over 8 percent. “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.”
Meanwhile, Hertz stated that its plan to purchase 100,000 Tesla Model 3s by the end of 2022 was still on. Most had presumed the rental agency had entered into an agreement to buy the vehicles at feet discount. But there were no official details pertaining to the deal’s finances released at the time of the original announcement.
Interim Hertz CEO Mark Fields has said that Tesla products are already arriving at locations around the country. The company is obviously committed to buying up EVs as a way to pad out its fleet after selling off more cars than normal during a trying 2020 that included Hertz filing for Chapter 11 bankruptcy. As a byproduct, it also gets social brownie points by pretending that buying a bunch of zero-emission vehicles means its actively saving the environment while helping to spur on the electric revolution. This may likewise help future proof its fleet from governments interested in applying incentives to companies prioritizing EVs and punishing those that retain internal combustion.
Tesla’s goals are a little harder to pin down. Musks’ chatter kind of jeopardizes what Hertz is trying to do by making it seem as though there never was a deal in the first place. If no contract was signed, maybe there never was any agreement and Hertz is simply trying to capture some of Tesla’s buzz while putting it in a position where it felt obligated to offer a bulk discount. One could even argue it would have been in the automaker’s best interest to play along so it could ride the wave on the stock market.
But the deal would have been worth a few billion and it arguably harms Hertz more to abandon the plan than Tesla. The automaker has repeatedly stated that it wants to raise capacity to it can cope with demand, so there’s not much reason for it to pursue fleet sales at this juncture. Our best guess is that Elon was publicly trying to negotiate a better deal with Hertz prior to the contract being finalized or simply called the rental agency’s bluff about an agreement that never officially existed. The only other avenue to go down with this is Musk attempting to game the market by depositing a bit of news that would momentarily spike its previous gains into the dirt.
Listen, it would be wrong to outright say that Elon Musk has figured out how to use his status and platform to manipulate the market. But I would be a moron to not heavily imply that was the case after watching how his often-unnecessary comments impact the valuation of stocks and crypto currencies. Then again, perhaps I’ve found myself entertaining ridiculous theories and it only seems like the richest person on the planet’s skillset includes influencing finances on a macro level.
Regardless, it’s impossible to say whether or not that’s what happened here. Tesla’s stock price resumed an upward trajectory after taking a nearly 2-percent dip early on Tuesday, immediately after Elon Musk’s statements on twitter gained traction in the media. Assuming he was looking to move the market, this represents one of his lesser showings. Hertz shares also dipped slightly. But the company’s valuation is still riding high after last week’s announcement that it would be buying up 100,000 EVs.
[Image: Hertz]
Become a TTAC insider. Get the latest news, features, TTAC takes, and everything else that gets to the truth about cars first by subscribing to our newsletter.
It was reported to be a $4.2 billion deal. Did someone in the media just make that up?
An alternate theory about this story: Maybe Hertz wants to diversify its EV offerings.
“An alternate theory about this story: Maybe Hertz wants to diversify its EV offerings.”
I think Hertz actually did state that at some point.
SCE,
“Did someone in the media just make that up?” That could never happen.
Hertz never gave any financial information and technically only said it would be ordering 100,000 vehicles from Tesla. The $4.2 billion expenditure was an estimation based on the volume, though several mainstream outlets did report it as a $4-billion deal” between the two companies (e.g. NBC News headline from Oct 27th: “After $4 billion deal with Tesla, Hertz says it will rent out half those cars to Uber drivers”)
why would anyone with a working car that is currently driving for a service add another expense? gotta blow all those fat stacks?
“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.”
That is some funny stuff as they will sell a LR AWD Model y to my state or any gov’t agency in my state for about $4k less than list price. For some reason they didn’t bid the Model 3 for the 22MY but for the 21MY the contract rate was again about $4k less than the base price and in both cases that is a delivered to the door.
@scoutdude…
Can you think of any reason – any ulterior motive – that Musk might have to want to play footsie with state and federal government officials?
Can we please have articles about electric cars written by someone besides Matt Posky?
It’s like having a vegan report on McDonald’s, Wendy’s, and Taco Bell.
It would be more like having someone who prefers hamburgers but has tried a bunch of vegan food report on the vegan options at those chain restaurants.
But hey, you guys keep on misrepresenting me if it enriches your life.
“Can we please have articles about electric cars written by someone besides Matt Posky?”
Truth bother you much?
How about we just send Matt Posky to a “re-education camp”?!?
“…therefore we will only sell cars to Hertz for the same margin as to consumers.”
Musk gets away with saying things that would get any middle manager at Tesla fired instantly.
Well, seeing as he’s not a middle manager, he can probably say whatever he wants. He may or may not be telling the truth but that’s between him and Hertz.
“he can probably say whatever he wants…”
No, he can’t. Per the SEC, forward looking financial statements are regulated. He’s gotten in trouble for this in the past.
@Master Baiter
Yes he can. Trump has said all kinds of shit and has gotten away with it. You think he’s scared of the SEC? Do you think he’s ever suffered any serious, lasting repercussions from anything he’s ever said? If anything, SEC actions and inactions have proven to Musk that there are no real consequences…
EM says what he wants, discloses what he shouldn’t, breaks product promises, hypes concepts as real, and releases dangerous unfinished product upon consumers.
And those actions have proved to him over and over there is absolutely no consequence for anything he says or does, so he may as well keep at it.
Yea, kinda like politicians getting a pass on fomenting insurrections- it just encourages them to keep it up…
Kinda like politicians supporting riots and destruction and then it being memory holed by State Media.
Any middle manager with the chutzpah, the business acumen, and the promotion and self-promotion skills of Elon Musk would not be stuck in middle-management.
Somewhere in an anonymous building about half a mile away from central Washington, DC, a very tired SEC lawyer is tinkering with words in what has to be the 87th request for documents to Tesla in connection with a Musk tweet.
“People play games, my friend”
– Jim Jones, Jonestown, Guyana
Now Hertz saying they have already started getting the cars in – contract or no contract – the plot thickens! OR… more likely, I never think about it again.
https://www.cnbc.com/2021/11/02/hertz-says-teslas-already-started-delivering-cars-despite-musk-tweet.html
But hey, I’m not upset about how TSLA has done in the last month. If it keeps going at this pace, forever, without a correction, until I die, I could quit working!
Maybe Hertz came to their senses and decided not to buy horribly cheap and problematic appliances.
So they’ll buy more Fords instead?
That’s why I do not read newspapers, do not watch TV, ignore Twitter and Facebook. If Trump is banned from Twitter why Musk is not? I am tired of all that noise.
Ban Biden too. Sick and tired of his lies.
Biden is a comedy show. The show must go on for the amusement of the world. French make fun of him.
Hertz was on deaths door 12 months ago, fire-sale’d inventory and laid off staff and closed locations. So, where does the money come from to by 4 billion dollars of cars? Was Elon going to finance the purchase, effectively becoming Tesla’s version of GMAC which, even today, are a asset that depreciated heavily? Was private equity involved? Seems like a pretty risky deal for investors who typically prefer real estate or technology, not business services like rental cars. As with most everything else, following the money will lead to the truth, is anyone investigating the financing?
I don’t know for sure, but under the circumstances it would not surprise me if Hertz qualified for a large government pandemic loan. Seams like a textbook case
Tesla is not going to walk away from this sale. I think this is just more of Musk being Musk.
First year law school: An agreement to agree is NOT a contract, just happy talk over drinks.
Also, a co-signer is a schumuck with a pen.
Tell that to all the whining schmucks throwing tantrums over dealer markups on their Broncos when they never signed a purchase agreement.
https://jalopnik.com/a-bronco-reservation-holder-tried-to-go-up-against-a-fo-1847904601
This smart ass should just keep his big yap shut – unless he’s gunning for another hefty fine from the SEC. I’m sure his lawyers have advised him to watch his mouth but he’s likely told them to bugger off since he’s so much brighter than they are…
As a lawyer who occasionally represents very wealthy clients, I can tell you that they don’t want to hear “no” from us, they just want an assessment of risks. Sometimes they are told “that’s risky” and they do it anyway.