Hertz Global Holdings Inc. plans to buy 65,000 electric vehicles from Polestar over the next five years, betting its renters are both EV curious and eager to drive brands beyond Tesla.
The vehicles from Polestar, the all-electric automaker controlled by Volvo Car AB and its owner Zhejiang Geely Holding Group Co., will join some 100,000 Teslas that Hertz has said it’s buying for more than $4 billion. The new deal delivered a boost to shares of Hertz and Gores Gugenheim Inc., the special purpose acquisition company planning to merge with Polestar.
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The Tesla and Polestar purchases give Hertz 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. It plans to produce 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,” Hertz Chief Executive Officer Stephen Scherr said. “We felt Polestar was at the right place and at the right level of maturity.”
Hertz shares rose as much as 3.2% to $21.79 shortly after the open of regular trading Monday, while Gores Guggenheim’s stock soared as much as 10% to $12.63.
Hertz’s Tesla plan fueled a more than 40% spike in the car renter’s shares in late October, though the stock swooned in early November. The two deals represent roughly a third of Hertz’s current fleet, an influx of vehicles 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 those with combustion engines.
“Electric vehicles really open up the fleet to a variety of different business cases,” Scherr said.
Traditionally, carmakers have reserved 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. The company 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,” Polestar CEO Thomas Ingenlath said. “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 didn’t share the financial terms of the planned 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 the reverse merger with Gores Gugenheim. The companies have said they expect the deal to value Polestar at about $20 billion. The company is also close to unveiling a sport utility vehicle, its third model and one of three new machines slated to roll out by 2025.
The rental business will 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. 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.
(Updates with shares trading in the second and fifth paragraphs.)