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Hertz partnering with Uber, Carvana to offer Tesla rentals

Yahoo Finance’s Emily McCormick breaks down the benefits to Hertz's partnership with Uber and Carvana.

Video Transcript

JARED BLIKRE: Total purchase price of $4.2 billion, which Elon Musk says he may discount-- probably discount. But there's also up to 30% of government subsidies that could help finance the cause. Here to break it down for us is Yahoo Finance's Emily McCormick. Emily, what are the details here? There's seems to be a lot to sort through.

EMILY MCCORMICK: Absolutely, Jared. And we have to remember that earlier this week when Hertz made that announcement about that purchase of about 100,000 Teslas for delivery at the end of next year, that did send Tesla's market capitalization above the $1 trillion mark for the first time ever.

But now a number of analysts and media outlets are pointing out that this Tesla-Hertz deal that helped catapult Tesla's market capitalization is also a mutually beneficial deal for Hertz as well. Now as you mentioned, Hertz is reportedly paying Tesla a hefty $4.2 billion for those Model 3s to add to its rental fleet. That comes out to an average selling price of about $42,000 per vehicle.

But when you consider the potential cost savings that Hertz could see if the reconciliation spending bill in Congress gets passed with its electric vehicle tax credits as planned, that is something that could help offset some of these costs. And this is a detail that "The Wall Street Journal" actually pointed out in an article earlier today. The outlook estimated that the Tesla that Hertz bought would likely count as a Qualified Commercial Electric vehicle for that tax credit, and that 30% credit could save Hertz about $1.26 billion.

In addition to that, Hertz also announced earlier this week that it's planning on installing electric vehicle chargers to go alongside that expanding fleet of electric vehicles, and that House spending bill also extends a 30% tax credit for EV charging stations through 2031. So again, this is another front where Hertz is actually going to be able to see some benefits, and some offsetting of this purchasing price for this infrastructure on the EV side as well as the Model 3's themselves.

Now, we should also note that a number of other media outlets have been pointing out that the Tesla and Hertz deal is a win-win situation. We saw Nicholas Colas of DataTrek pointing out in a note earlier this week that [AUDIO OUT] 100,000 vehicles, Tesla now has about 10% of its production capacity accounted for for the next 12 months, which is helpful when it tries to plan production and find cost efficiencies in this production.

And moreover, it also serves as a sort of marketing tactic for Tesla since if-- if people with Hertz are actually renting these Teslas, it might actually incentivize them to want to buy a Tesla Model 3 or other Tesla vehicle themselves. So of course, potentially something that could be a win-win situation here, at least on the Hertz side of this. We will have to see if that reconciliation spend bill passes with those electric vehicle tax credits as planned. But if that does become the case, it is something that could be a big benefit here for this company, guys.

- And then Emily, really quickly tell me, what is in it for Uber drivers and this partnership with Carvana as well?

EMILY MCCORMICK: Well, that's right. And we actually just got some new news out from Uber this morning, the company saying that Hertz will make up to 50,000 Tesla vehicles available to Uber drivers who want to rent the cars by 2023. So Hertz has already been working with Uber to offer vehicle rentals for the past five years, but actually starting this Monday, Uber drivers are going to be able to rent Teslas through Hertz rental program [AUDIO OUT] a couple markets. So Los Angeles, San Francisco, San Diego, and Washington, DC. And then that deal's also going to be expanding nationwide in the coming months.

So again, this is potentially something that would benefit Uber. We did see that stock up earlier, though it has reversed course and is now trading lower, and also something that could be of big potential benefit to Uber drivers since there are those cost savings associated on gas and fuel prices with driving in electric vehicles. So again, a number of companies are now getting swept into this deal between Tesla and Hertz and a number of companies are going to be seeing some upside from this.

JARED BLIKRE: The orders keep pouring in. You've got to wonder, when is Tesla going to become a $2 trillion stock like Alphabet might just do today or tomorrow?