Hertz Global Holdings plans to buy 65,000 electric vehicles from Polestar over the next five years, a bet that its renters are both EV curious and eager to drive brands beyond Tesla.
The cars from Polestar, an all-electric automaker controlled by Volvo Car and its owner Zhejiang Geely Holding Group, will join some 100,000 Tesla vehicles that Hertz said it’s buying in a $4.2 billion purchase announced in the fall. Mark Fields, Hertz’s interim chief executive officer at the time, said Tesla was the only company that could produce EVs at scale.
Both deals give the rental giant a steady stream of some of the most coveted battery-powered cars, even as manufacturers scurry to keep up with swelling order books. Polestar expects to double sales this year, delivering 65,000 vehicles globally. Its production goals only call for output of 290,000 EVs a year by 2025, a tally Tesla now reaches in less than three months.
“It is our objective to build the largest fleet of electric vehicles, certainly in North America,” said Hertz Chief Executive Officer Stephen Scherr. “We felt Polestar was at the right place and at the right level of maturity. … There’s no preordained sequence to this.”
Hertz shares were up 10% on the news Monday, closing at $22.38 in trading on the Nasdaq.
Hertz’s Tesla partnership fueled a more than 40% spike in the car renter’s shares in late October before the stock swooned in early November. The two deals represent roughly one-third of the Hertz fleet, a tide of vehicles that Scherr says will help win business from corporate clients with environmental objectives and ride-share drivers keen to spend less on gas. What’s more, Hertz is expecting the cars to require less maintenance and stay in the fleet longer than its combustion-engine machines.
“Electric vehicles really open up the fleet to a variety of different business cases,” Scherr said.
Traditionally, carmakers reserve some of their least-popular models for rental customers. Rental companies typically make the bulk purchases at steep discounts, which can hurt resale values and tarnish brands if the auto companies aren’t careful. For Polestar, however, the Hertz order provides a sizable, dependable stream of revenue while it’s still pushing to open dealerships. Polestar has just 125 showrooms around the world.
“Let’s face it, a new brand like us to gain access and visibility in the broader market … it’s a great opportunity,” said Polestar CEO Thomas Ingenlath. “Customers will be experiencing Polestar in different situations than an ordinary test-drive can offer,” he added. “You will have a much longer period in the car; your family might be with you.”
Hertz and Polestar did not share the financial terms of the planned rental-car purchase. The starting sticker price of the Polestar 2 sedan is $45,900, meaning the deal would generate almost $3 billion of revenue if Hertz pays at or close to that price.
The announcement bolsters Polestar as it prepares to debut on the public markets this quarter via a reverse merger with Gores Gugenheim, a special purpose acquisition company, or SPAC. Ingenlath said the deal will likely value the company well above $20 billion. The company is also close to unveiling a sport utility vehicle, its third model and one of three new machines scheduled to roll out by 2025.
The rental business will also provide a tide of de facto test drives to customers who may not otherwise have considered a Polestar — or any EV. Polestar has positioned itself as a Tesla alternative, albeit one with less brand baggage. Its recent Super Bowl ad trolled Elon Musk’s cosmic ambitions with a pledge: “No conquering Mars.” Musk responded with the rolling-on-the-floor-laughing emoji.
Hertz has said that, in time, its global fleet of cars — roughly half a million vehicles –will be electric and it intends to work with every EV maker on the market to make that happen.