Shares of
Tesla
TSLA
tumbled approximately 3% during yesterday’s trading session after CEO Elon Musk took to Twitter to raise doubts about the potential deal with car rental giant Hertz.
The deal was announced last week by Hertz via a press release, which consisted of supplying 100,000 Tesla Model 3 electric vehicles (EVs) to the rental company. The order, to be delivered by the end of 2022, marked the biggest ever rental car order for electric vehicles (EVs). It was estimated Hertz would pay $4.2 billion for 100,000 Model 3s over the next 14 months, converting more than 20% of its global rental fleet to Tesla’s electric cars by the end of next year. Hertz had also announced plans to install 3,000 chargers in 65 markets by the end of 2022 and develop 4,000 chargers in 100 markets by end of 2023. This charging network would support the company in its quest to increase the adoption of EVs.
Though Tesla never responded to the initial news, the announcement of the deal had sent its shares rallying in the Wall Street and also resulted in the EV behemoth’s market capitalization propelling beyond $1 trillion for the first time.
However, this Monday, when Musk responded to a fan club account tweet (that thanked him for the recent surge in Tesla shares) stating that no contract has been signed yet with Hertz, shares of the automaker slid in the trading session. In fact, Musk also went on to clarify that demand for Tesla vehicles still overshoots supply, hence Hertz would not garner any discount on its large vehicle order. Thus, the deal will have zero impact on the company’s economics.
Meanwhile, on Tuesday, Hertz followed up on Musk’s tweet by reiterating that it is still moving ahead with the purchase order and has already started receiving deliveries of Tesla vehicles. However, Hertz failed to confirm if a contract had or had not been signed with Tesla in light of Musk’s tweet.
Though Musk’s latest tweet has raised questions about the deal with Hertz, if materialized, the deal will prove to be significantly beneficial for the automaker as it would make its EVs available to a much wider array of consumers. It would also represent a notable portion of the company’s vehicles manufactured and delivered over the next 14 months. The deal, in fact, which has helped Tesla attain a trillion-dollar valuation, is the latest sign of how capable the EV giant is of disrupting the auto industry. Tesla is now worth as much as the combined market cap of the nine largest carmakers around the world, including automotive giants like
General Motors
GM
,
Volkswagen
VWAGY
and
Toyota
TM
.
Tesla Recalls Vehicles Over Software Error
Tesla is voluntarily recalling 11,704 U.S. vehicles over a software error that could cause a false forward-collision warning and/or automatic activation of emergency brakes. The recall consists of certain Model S, Model X and Model 3 cars that were manufactured between 2017 and 2021, and certain Model Y models that were manufactured between 2020 and 2021.
All of the affected vehicles had early access to the automaker’s advanced driver assistance system called Full Self-Driving (FSD) Beta. The recall was prompted by a software update done on Oct 23 to the vehicles which introduced “a software communication disconnect” between two on-board chips. This was followed by Tesla receiving reports from customers of inadvertent activation of the automatic emergency braking system.
Tesla has conducted a separate over-the-air software update to release the FSD version 10.3.1 to the vehicles affected in order to resolve the problem.
Tesla currently flaunts a Zacks Rank of 1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
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