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Is it just me that see that something funky is going on there? Hertz is just out of bankruptcy, and immediately they order 100,000 Tesla to be delivered, and s

Is it just me that see that something funky is going on there? Hertz is just out of bankruptcy, and immediately they order 100,000 Tesla to be delivered, and so paid I guess, in just 1 year! Let's imagine that they have the Tesla with a very good discount: 30000$ a piece. That would cost them: 100 000 x 30 000 = 3 000 000 000 $ I have hard time to believe that they have that cash in hand, or that they can borrow that much! In my opinion, this might be the long awaited event that will finally blow the bubble: Like for Evergrande, market will discover that Hertz can't afford that, then the stock of Tesla will tank, then panic and crazy stock crash will follow. What do you think about that?

JeffL 5y ago
Supposedly rental car companies keep their cars an average of 13 months and are constantly turning over their fleet. This order is over at least a year, so I imagined it's just that they will be buying Model 3's instead of whatever else. The advantage is their service costs and depreciation will be greatly reduced and they can keep the Tesla's 2-3x longer before needing to replace them. This should be a huge reduction in their costs. I would guess they buy their cars with debt anyway, so not like they need to plunk down $4b all at once.
- pavon 5y ago
  In addition, the rental car companies sold more of their fleet than typical during the pandemic to help ride-out the large decrease in business. As travel continues to pick up they need to replenish their fleets anyway. Finally it isn't a great time to be buying cars in general, so the penalty of buying a Tesla vs another car is lower now than it typically would be.
ethagknight 5y ago
I think you are thinking about it wrong. A lender will happily lend $3B discounted slightly because the loan is secured by… $4B worth of Teslas thanks to that bulk purchase discount. Now, imagine if that lender is Tesla Financing Arm N.A. It’s not a bet concerning whether or not Hertz has $3B cash on hand, it’s a bet if the lender thinks Hertz branding is good enough to pay the note. I would bet so. Finally, there may well be a cross-collateralization with the Hertz family to make this deal pencil out.
- greatgib 5y ago
  This is close to what I think could be a possibility. In financial reports of Tesla, there are more and more cars that are "leased" by Tesla, and maybe they are thinking of "outsourcing" that to Hertz. But still, Hertz is not so financially solid, and one has to remember that a car, as an asset, loose value very fast on the after market.
  - ethagknight 5y ago
    If you've tried to rent a car lately, prices are sky high. I'm renting a very rough Nissan Frontier with 50,000 miles from Enterprise at the moment, that was the only car they had available. At some point in the last year, the rental car market made a binary flip going from Can't make money because no one is renting cars to Can't make money because we have no cars to rent! Tesla's risk here, even if they are lender as well, is very modest because the rental market is in a massive supply pit that may take 5 years to get out of. Details will come forth but I would not be surprised if Tesla's terms were pretty harsh to Hertz, as in a profit sharing from Tesla rentals in exchange for ongoing tech support for making Teslas work on the rental market. So Tesla's upside could even far exceed the value of the car sold + financing terms.
TheDudeMan 5y ago
Maybe they are financing through Tesla. Seems reasonable.
anyfactor 5y ago
To me this entirely seems like a marketing stunt and a last ditch effort. Looking at recent major wholesale orders of Tesla cars, Las Vegas' Tesla loop comes to mind. A fleet of Tesla cars in a glorified cave taking tourists from point A to point B which was marketed to be a Boring company project with that concept video that blew everyone's mind off. It may as well be an underwhelming private transport facility that resembles a lazy river [0] being marketed as revolutionary public transport system [1]. [0] https://techcrunch.com/2020/10/16/elon-musks-las-vegas-loop-might-only-carry-a-fraction-of-the-passengers-it-promised/ https://techcrunch.com/2020/10/16/elon-musks-las-vegas-loop-... [1] https://electrek.co/2021/06/09/boring-companys-las-vegas-loop-goes-into-operations-expand-strip-beyond/ https://electrek.co/2021/06/09/boring-companys-las-vegas-loo...
- fastball 5y ago
  I guess you missed the news that they're expanding it? https://www.theverge.com/2021/10/20/22737228/elon-musk-boring-company-las-vegas-loop-strip https://www.theverge.com/2021/10/20/22737228/elon-musk-borin...
  - anyfactor 5y ago
    That news was in my second link. I enjoyed this video which reflects my pessimism of Las Vegas Loop: https://www.youtube.com/watch?v=QvK2i9Jxy5c https://www.youtube.com/watch?v=QvK2i9Jxy5c I think there are better options for public transport.
judge2020 5y ago
> Let's imagine that they have the Tesla with a very good discount: 30000$ a piece. "To be clear, cars sold to Hertz have no discount. Same price as to consumers." https://twitter.com/elonmusk/status/1452794619410927625?s=20 https://twitter.com/elonmusk/status/1452794619410927625?s=20
- CamperBob2 5y ago
  That's crazy. Who pays the single-unit retail price for 100,000 units of something?! That doesn't happen in business, ever, unless something weird is going on.
  - kjksf 5y ago
    That weird thing is called supply & demand. Econ 101 Traditionally car makers offer volume discounts because they have excess capacity i.e. they can make more cars that they can sell. Currently Tesla is sold out 6 months in advance on Model 3 SR (the one that Hertz is buying). Currently Tesla doesn't care if Hertz buys cars from them or not because they are sold out for the foreseeable future either way. So if Hertz wants 100k EV to be delivered within a year, their only option is Tesla, because no other company can even make that many EV cars. And if Tesla doesn't want to give them discount, they have to pay full price.
    - beachy 5y ago
      Things are never that black and white. Knowing you have a 100k order gives you more confidence to increase production for the medium term, even if it's not that useful in the short term.
  - cdash 5y ago
    Well I don't know why Hertz did it but as for Tesla, that is what happens when you are production limited and not demand limited.
bonestamp2 5y ago
> or that they can borrow that much! What if the loan is secured by $5 billion in assets from their current fleet?
cblconfederate 5y ago
I dont think market wants to discover anything. For the bubble to deflate, they 'd have to find something better to invest in

JeffL 5y ago

Supposedly rental car companies keep their cars an average of 13 months and are constantly turning over their fleet. This order is over at least a year, so I imagined it's just that they will be buying Model 3's instead of whatever else. The advantage is their service costs and depreciation will be greatly reduced and they can keep the Tesla's 2-3x longer before needing to replace them. This should be a huge reduction in their costs. I would guess they buy their cars with debt anyway, so not like they need to plunk down $4b all at once.

pavon 5y ago
In addition, the rental car companies sold more of their fleet than typical during the pandemic to help ride-out the large decrease in business. As travel continues to pick up they need to replenish their fleets anyway. Finally it isn't a great time to be buying cars in general, so the penalty of buying a Tesla vs another car is lower now than it typically would be.

ethagknight 5y ago

I think you are thinking about it wrong. A lender will happily lend $3B discounted slightly because the loan is secured by… $4B worth of Teslas thanks to that bulk purchase discount. Now, imagine if that lender is Tesla Financing Arm N.A. It’s not a bet concerning whether or not Hertz has $3B cash on hand, it’s a bet if the lender thinks Hertz branding is good enough to pay the note. I would bet so. Finally, there may well be a cross-collateralization with the Hertz family to make this deal pencil out.

greatgib 5y ago
This is close to what I think could be a possibility. In financial reports of Tesla, there are more and more cars that are "leased" by Tesla, and maybe they are thinking of "outsourcing" that to Hertz. But still, Hertz is not so financially solid, and one has to remember that a car, as an asset, loose value very fast on the after market.
- ethagknight 5y ago
  If you've tried to rent a car lately, prices are sky high. I'm renting a very rough Nissan Frontier with 50,000 miles from Enterprise at the moment, that was the only car they had available. At some point in the last year, the rental car market made a binary flip going from Can't make money because no one is renting cars to Can't make money because we have no cars to rent! Tesla's risk here, even if they are lender as well, is very modest because the rental market is in a massive supply pit that may take 5 years to get out of. Details will come forth but I would not be surprised if Tesla's terms were pretty harsh to Hertz, as in a profit sharing from Tesla rentals in exchange for ongoing tech support for making Teslas work on the rental market. So Tesla's upside could even far exceed the value of the car sold + financing terms.

TheDudeMan 5y ago

Maybe they are financing through Tesla. Seems reasonable.

anyfactor 5y ago

To me this entirely seems like a marketing stunt and a last ditch effort. Looking at recent major wholesale orders of Tesla cars, Las Vegas' Tesla loop comes to mind. A fleet of Tesla cars in a glorified cave taking tourists from point A to point B which was marketed to be a Boring company project with that concept video that blew everyone's mind off. It may as well be an underwhelming private transport facility that resembles a lazy river [0] being marketed as revolutionary public transport system [1]. [0] https://techcrunch.com/2020/10/16/elon-musks-las-vegas-loop-might-only-carry-a-fraction-of-the-passengers-it-promised/ https://techcrunch.com/2020/10/16/elon-musks-las-vegas-loop-... [1] https://electrek.co/2021/06/09/boring-companys-las-vegas-loop-goes-into-operations-expand-strip-beyond/ https://electrek.co/2021/06/09/boring-companys-las-vegas-loo...

fastball 5y ago
I guess you missed the news that they're expanding it? https://www.theverge.com/2021/10/20/22737228/elon-musk-boring-company-las-vegas-loop-strip https://www.theverge.com/2021/10/20/22737228/elon-musk-borin...
- anyfactor 5y ago
  That news was in my second link. I enjoyed this video which reflects my pessimism of Las Vegas Loop: https://www.youtube.com/watch?v=QvK2i9Jxy5c https://www.youtube.com/watch?v=QvK2i9Jxy5c I think there are better options for public transport.

judge2020 5y ago

> Let's imagine that they have the Tesla with a very good discount: 30000$ a piece. "To be clear, cars sold to Hertz have no discount. Same price as to consumers." https://twitter.com/elonmusk/status/1452794619410927625?s=20 https://twitter.com/elonmusk/status/1452794619410927625?s=20

CamperBob2 5y ago
That's crazy. Who pays the single-unit retail price for 100,000 units of something?! That doesn't happen in business, ever, unless something weird is going on.
- kjksf 5y ago
  That weird thing is called supply & demand. Econ 101 Traditionally car makers offer volume discounts because they have excess capacity i.e. they can make more cars that they can sell. Currently Tesla is sold out 6 months in advance on Model 3 SR (the one that Hertz is buying). Currently Tesla doesn't care if Hertz buys cars from them or not because they are sold out for the foreseeable future either way. So if Hertz wants 100k EV to be delivered within a year, their only option is Tesla, because no other company can even make that many EV cars. And if Tesla doesn't want to give them discount, they have to pay full price.
  - beachy 5y ago
    Things are never that black and white. Knowing you have a 100k order gives you more confidence to increase production for the medium term, even if it's not that useful in the short term.
- cdash 5y ago
  Well I don't know why Hertz did it but as for Tesla, that is what happens when you are production limited and not demand limited.

bonestamp2 5y ago

> or that they can borrow that much! What if the loan is secured by $5 billion in assets from their current fleet?

cblconfederate 5y ago

I dont think market wants to discover anything. For the bubble to deflate, they 'd have to find something better to invest in