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The Street
The Street
Vidhi Choudhary

Rent This Tesla Rival Amid Rental Car Shortage

Renting is relative to ownership—it’s how you live if you can’t afford, or aren’t yet ready, to own.

Americans are not new to the concept of renting cars. However, if the ongoing surge in car rental prices and car insurance is any indication, this demand is unlikely to let up anytime soon.

Surging fuel prices are prompting more people to consider greener cars as well. More potential buyers are looking for energy efficient vehicles, including hybrids, since Russia's invasion of Ukraine, according to car shopping website Edmunds.

But there’s also an ongoing semiconductor shortage and congestion at ports, leading to supply issues and longer wait times for EVs. To add to this perfect storm, EV makers are raising prices of their EVs in response to rising inflation that has pushed the price of nickel, a key component in EV batteries, to record high levels.

Car rental companies flush with cash from the pandemic boom see that happening, and they are reacting in kind by using their funds to electrify their fleets ahead of the peak summer travel season. 

U.S. rental car major Hertz (HTZ), which ordered 100,000 Tesla (TSLA) EVs last year, is next to make that move. But rather than add more Teslas, it's turning to a new company instead.

Who is This Tesla Competitor?

The company Hertz is buying its newest additions from is a Swedish premium electric car maker called Polestar. Hertz said Monday it will buy 65,000 of Polestar's EVs over the next five years.

The Estero, Fla., company expects to roll out Polestar EVs starting with Polestar 2, a Tesla Model 3 sedan rival, in Europe this spring and later this year in North America and Australia.

"Today's partnership with Polestar further builds on our ambition to become a leading participant in the modern mobility ecosystem and doing so as an environmentally-forward company," said Hertz Chief Executive Stephen Scherr in a statement.

"By working with EV industry leaders like Polestar, we can help accelerate the adoption of electrification while providing renters, corporate customers and rideshare partners a premium EV product, exceptional experience and lower carbon footprint," added Scherr.

Polestar, which sold 29,000 cars in 2021, says that the Hertz deal will bring the amazing experience of driving an electric car to a wider audience.

How Much Does a Polestar Cost?

The Polestar 2 comes for a starting price of $47,200, according to car shopping website Edmunds. If you want to try one though, expect to pay a bit more to do so, as renters will likely have to pay a premium to get the electric vehicles from Hertz. Hertz charges $100 a day for Tesla rentals, according to a Barron's report from December 2021.

Americans have started trading filling up for plugging-in more often, although EV sales still constitute low single digits in terms of total cars sold in the overall U.S. auto market. More than 1.1 million EVs were sold in 2020, according to Pew Research Center.

Hertz Says Tesla Vehicles are "Flowing"

Hertz placed an initial order of 100,000 Tesla cars last year to be delivered by the end of 2022. The company said it will offer the largest EV rental fleet in North America and one of the largest in the world.

Tesla Chief Executive Elon Musk later tweeted that a contract for the Hertz order was yet to be signed, but turns out eventually it was all business as usual.

Hertz said its Tesla deal has seen strong interest from Uber drivers in its latest earnings call, and that it's also ahead of plan in building out its charging infrastructure.

"As we've explained, a significant number of our Tesla electric vehicles are dedicated to our strategic initiative with Uber. We're seeing strong driver interest, and participating drivers are generating higher earnings," said Hertz Interim Chief Executive and Director Mark Fields on the company's earnings call in February.

"We're in over 30 markets now with what we call our TNC business, which is basically our business offering the Tesla vehicles to Uber drivers," Fields said.

Fields also added that the Tesla launch was going very well without disclosing the exact number of Tesla cars delivered so far but added that vehicles were flowing.

"I mentioned we were in nine markets here in the U.S. where -- for retail rental. We're in a couple of markets like Germany, Italy and France in Europe. And the demand is good," said Fields.

"There is a premium that customers are paying versus, as I mentioned, a comparably sized ICE vehicle, and the satisfaction is really good. Combine that with the demand we're seeing from the Uber drivers and the fact that they're making more money, we're very bullish on our ability to grow this business as the vehicles are delivered to us. And the bottom line is vehicles are flowing," Fields added.

Hertz customers can now rent Teslas in major markets across the United States including, but not limited to, Atlanta, Fort Lauderdale, Los Angeles, Orlando, San Francisco and Washington, D.C. 

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