A Tesla Model 3 electric vehicles at a Hertz neighborhood location.
Courtesy of Hertz
Envisioning the future of driving usually zeroes in on names like Uber Technologies , Tesla , and Alphabet ’s Waymo. Add Hertz Global Holdings to the list of prospective automotive revolutionaries.
That’s saying something quite ambitious about a company that over its 103-year history has at times been seen as an accessory for its past owners: big auto makers, conglomerates, and private-equity firms. Not to mention that this is a company still fresh out of bankruptcy.
Yet the revamped Hertz (ticker: HTZZ) has now signaled that it intends to be a player in the automotive future.
First was the announcement on Monday that it would make 20% of its fleet electric, agreeing to buy 100,000 Teslas by the end of next year.
Then on Wednesday, Hertz said that it would supply 50,000 of its Tesla (TSLA) cars to Uber (UBER) drivers—possibly increasing to 150,000 vehicles over the next three years. Hertz is also teaming up with Carvana (CVNA), the online used-car dealer, to sell its older vehicles directly to consumers rather than through auctions. That is a deal that Barron’s flagged as a possibility back in June, when we recommended Hertz shares before its bankruptcy exit.
The Hertz/Uber alliance is intriguing, as it points to a future of autonomous driving and the potential for robotaxi networks. A critical element will be the logistical platform: matching riders to vehicles. Hertz has said it wants “to play a central role in the modern mobility ecosystem.”
With their experience managing and maintaining fleets and forming relationships with customers, rental-car companies are arguably well positioned to fill that role.
“Car rental already has many of the capabilities and skills you will need for the mobility platform,” Volkswagen (VWAGY) CEO Herbert Diess said, in discussing a deal for rental-car company Europcar this past summer. The rental-car business, he said, “is the best starting point to build mobility platforms.”
For similar reasons, Hertz may also attract auto suitors one day. With a total enterprise value of roughly $12 billion, excluding asset-backed debt, it would be harder to digest than Europcar, which cost Volkswagen some $2 billion. Hertz could also interest a big tech company, or even Uber.
For investors, the potential that rental-car companies have as mobility platforms could put Hertz, and rival Avis Budget Group (CAR), back in the driver’s seat.
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