PERSPECTIVE HAS LEFT THE BUILDING.

By Peter M DeLorenzo

Detroit. After sorting through the giddiness, the collective huzzahs! And the gushing pronouncements, it would probably be a good idea to take a step back and consider the so-called “Hertz/Tesla Deal” from a different perspective. 

The aforementioned huzzahs have been well-documented by now. In reporting for Bloomberg, Keith Naughton and Dana Hull wrote this:

“Hertz Global Holdings Inc.’s 4.2 Billion deal with Tesla Inc. is about more than just an order for 100,000 cars. It’s about vaulting electric vehicles into the mainstream. Not only does Tesla get a huge order at a premium price, it gets a way for the EV-curious masses to test-drive its Model 3. Hertz, meanwhile, gets to tap into the growing interest in EVs while aligning itself with the industry’s leader and sexiest brand. Tesla also will benefit from exposure in a splashy Hertz ad campaign starring seven-time Super Bowl Champion Tom Brady.”

Mark Fields, Hertz’s new interim chief executive officer (and a former CEO of Ford Motor Co.), said in an interview: “This is an opportunity not only to fix the business, but also to employ a strategy that allows us to play a central role in development of the modern mobility industry… One of our objectives is to lead in the adoption of electric vehicles.”

Okay, that’s a lot to chew on, but, a couple of things: First of all, if any other automobile manufacturer announced that they were shuffling off 100,000 vehicles to the rental car companies, industry analysts would immediately pounce all over the news by saying something like, “to me, this smells like a demand problem.” And guess what? It is. You can couch it any way you want to in an attempt at glossing over what is really happening, but it doesn’t wash. This is a convenient way for Tesla to book some volume and prop up its cash flow, plain and simple. 

But did the industry analysts on Wall Street cut through the Muskian fog to get at what’s really going on? No, of course not. They have their heads (most of them, anyway) so far up Elon’s ass that perspective left the building years ago when it comes to anything having to do with Tesla. In fact, they pushed Tesla’s valuation into the stratosphere on the news of the Hertz/Tesla deal, to the point that Tesla is now a Trillion-dollar company.

How wild is that? According to The Wall Street Journal, “Tesla’s valuation has soared unusually quickly. It took less than two years for Tesla’s market value to grow from $100 billion to $1 trillion, according to Dow Jones Market Data. By contrast, it took Amazon more than eight years to cover that ground.” 

Read that statement to yourselves again. I don’t know about you, but to me that is just unbridled insanity, especially for a company that’s about to come under severe scrutiny from the National Transportation Safety Board because of the safety deficiencies in its relentlessly promoted driver assistance technologies. I would be shocked if Tesla isn’t nailed for egregious malpractice over this, as it is the only auto manufacturer in the world that has allowed its customers to be the beta-testers for a system that has never worked as advertised. Trust me on this one, folks, this is not going away, and Tesla’s liability could soar into the billions.

And what about Hertz? I read all of Mark Fields’ statements on this deal, and it’s clear that he’s pushing the altruistic angle of this all the way. It gets his company off of the mat in terms of the investment community, it projects Hertz as a forward-looking company that’s helping the consumer public’s acceptance of EVs, and it give Hertz an entry into the roster of “happening” companies’ discussion, which would go a long way toward improving its image, at least that’s the plan.

And make no mistake, Hertz – like all rental companies – has a huge image problem. It’s no secret that 2020 decimated a lot of industries, and the rental car business was no exception. No travelers translated into severely reduced revenue, which caused the rental companies to cancel orders for thousands of cars, which in turn caused a major shortage of available rental cars in 2021, which caused the rental companies to employ ruthless pricing tactics in line with the laws of supply and demand. In other words, their customers got screwed, with rental prices often soaring to three and four times “normal” rates.

Needless to say, complaints from consumers about rental car prices have been loud and pervasive. Anyone who has traveled this year has experienced this, too, including me. It was a giant bowl of Not Good.

So, on top of all the other stated reasons, Mark Fields is making a grand gesture on behalf of Hertz, hoping that it will change the discussion completely. A giant “we’ll see” as I like to say. Oh, and one more thing: It’s about that $4.2 billion number being passed around, and the idea that Hertz would be paying premium prices for premium-equipped Model 3s. Let me be very clear on this: I’m not buying this for one single minute. Anyone who knows Mark Fields knows he doesn’t pay sticker for anything, so despite St. Elon’s protestations otherwise, there is no way in hell that Hertz is paying full boat for those Tesla Model 3s.

Just a reminder: perspective is out there, you just have to dig deeper for it.

And that’s the High-Octane/High-Voltage Truth for this week.