For automakers, fleet sales are like free newspapers and are kept in hotel entrances. Sure, you’ve shipped an item, but not in a way that any half-financed advocate would value. Elon Musk seems to have changed everything.
Car rental giants like Hertz Global Holdings Inc. and Avis Budget Group Inc. saw a spike in their market share over the past week after news of their purchase or plans to buy certain types of electric vehicles was posted in the news. Then Hertz said that they would buy about 100,000 cars, and that’s when Tesla’s value rose to $1 trillion. Musk was quick to clarify via a tweet that they haven’t signed any contracts with Hertz. This has led to a pullback in Tesla shares. However, the tech giant’s market capitalization is still much higher, about $260 billion more than it was at the time of the news.
An innovative business model
Fleet sales have now become a self-funded business model. All a car rental company has to do is announce that it will or can buy thousands of electric cars. What was once considered a “cost” is now a one-way street to meme-hood. Once this is done, the car rental company must win the trust of the investors and sell them more shares. Once this funding has been secured, the company can then actually buy those new electric cars. It sounds funny, but this model actually works with stocks of companies that hit much higher than their initial valuation.
Tesla leads the way
Tesla took the lead when its stock price hit a record high in 2020. It quickly raised more money from selling its shares. Now, Musk’s company can easily fund itself, at least for a short time. One area to watch out for is the oil industry, which only promises to pay but never raises capital. This new but scary trend not only allows Tesla to create their currency, but can also franchise the concept to their customers.
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