What does Hertz’s decision to buy 100,000 Tesla Model 3 mean?

The announcement that car rental giant Hertz is to buy 100,000 Tesla Model 3s was yesterday’s big financial story, sending both companies share price upwards, and Tesla’s market capitalization above the mythical trillion dollars. An interesting piece of news for the doomsayers who said the company was financially unviable, that it was a bubble or that its value would evaporate as soon as traditional manufacturers started making electric vehicles.

What are the implications of an acquisition of 100,000 Teslas by one of the world’s leading car rental companies? Hertz has had a turbulent year: the pandemic hit a highly leveraged sector very hard, dependent as it is on cash flows; Hertz at one point was technically bankrupt and filed for Chapter 11, although it soon righted itself. Now, with this decision, the company is back where it belongs: a leader that tells the rest of its industry which strategies to follow.

And which strategies are they? First, a clear commitment to decarbonization, above profitability or other financial considerations. Either that, or nothing. Electrifying 20% of your vehicle fleet at a stroke and installing chargers at its locations is a very important decision, and one that recognizes that electric vehicles, with fewer moving parts, are cheaper to maintain in general and thus have higher…