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Challenges and Achievements in the Electric Vehicle Market: A Detailed Analysis of Tesla and Hertz

GOOVER DAILY REPORT July 4, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Significant Orders and Market Impacts
  3. Adoption and Expansion of EVs in Rental Fleets
  4. Market Trends and Pricing Dynamics
  5. Technical Challenges in EV Manufacturing
  6. Tesla's Market Position and Product Features
  7. Used Tesla Models in the Market
  8. Conclusion

1. Summary

  • This report explores the dynamic landscape of the electric vehicle market, focusing on Tesla and its interactions with Hertz. Central to the discussion is Hertz's substantial order of 100,000 Tesla vehicles, valued at $4.2 billion, which significantly boosted Tesla's market capitalization beyond $1 trillion. The report outlines the broader adoption of Tesla's Model Y in Hertz's rental fleet and the mixed consumer experiences associated with renting these EVs. It also highlights the declining prices of used electric vehicles, notably Tesla models, alongside a consumer shift towards hybrid alternatives. Additionally, the report examines ongoing technical challenges faced by Tesla and Rivian, such as recalls and software update failures, and provides a SWOT analysis of Tesla, covering its strengths, weaknesses, opportunities, and threats. Finally, the availability and pricing of used Tesla Model Ys in various Hertz locations are discussed, emphasizing the growing accessibility of EVs in secondary markets.

2. Significant Orders and Market Impacts

  • 2-1. Tesla's 100,000 vehicle order by Hertz and the resultant market capitalization boost

  • In a groundbreaking development, Hertz Global Holdings Inc. announced an order to purchase 100,000 electric cars from Tesla. This sizable order, valued at $4.2 billion, was notable because Hertz paid full price for each vehicle, a rarity in large-scale car rental agreements that typically benefit from economies of scale. This significant order pushed Tesla's market capitalization over $1 trillion for the first time, adding an additional $100 billion to its value. The market reaction to this deal was overwhelmingly positive, and it played a crucial role in catapulting Tesla CEO Elon Musk to the top of the list of the world's richest people, with his net worth nearing $300 billion. The valuation of Tesla at that point surpassed the combined market capitalization of its five largest rivals.

  • 2-2. Market reaction and stock movements in response to the order

  • Following the announcement of the 100,000 vehicle order by Hertz, Tesla's stock experienced a meteoric rally. This rally was significant enough to help Tesla surpass the $1 trillion market value mark. However, Tesla CEO Elon Musk later clarified that the company had not signed a formal contract with Hertz, despite the news of the agreement. Nonetheless, the addition of Tesla's Model Y, along with the previously announced Model 3 vehicles, to Hertz's electric vehicle fleet indicates a strong push by the car rental company towards electrification. The overall positive market reaction underscored investor confidence in Tesla's future growth and innovation in the electric vehicle market.

3. Adoption and Expansion of EVs in Rental Fleets

  • 3-1. Hertz's addition of Tesla Model Y to its fleet

  • On March 23, 2022, Hertz Global Holdings Inc. announced the addition of Tesla’s Model Y to its electric vehicle fleet, as per a report by Reuters. This move followed Hertz's previously announced order to purchase 100,000 electric cars from Tesla, primarily Model 3 vehicles. The order had significantly impacted Tesla’s stock, pushing it above the $1 trillion market value, even though Tesla's CEO Elon Musk stated no contract had been signed. Additionally, Hertz had recently experienced a leadership change with Stephen Scherr, formerly of Goldman Sachs, taking over as the new CEO.

  • 3-2. Consumer experience and challenges with renting Teslas from Hertz

  • Customers renting Teslas from Hertz have faced notable challenges, as described in a firsthand account from January 12, 2024. The rental process included issues such as incomplete vehicle preparation—one Tesla Model 3 was provided with only 53% battery and was out of wiper fluid. These inconveniences compounded the rental experience, especially given the hassles of charging and dealing with inclement weather. Despite these challenges, customers found the overall rental process, including charging arrangements at Tesla Superchargers and the use of online instructional videos, manageable once the initial problems were resolved. These experiences highlighted the operational challenges Hertz faces in maintaining its electric vehicle fleet, particularly in ensuring vehicle readiness and customer friendliness. However, customers generally expressed willingness to rent EVs again despite these hurdles.

4. Market Trends and Pricing Dynamics

  • 4-1. Decline in Used Electric Vehicle Prices

  • Recent data indicates a sharp decline in the prices of used electric vehicles (EVs). According to the iSeeCars report, prices for used EVs are now lower than those for used gas cars for the first time, having fallen significantly over the past year. For instance, the average price of used Teslas has dropped by 28.9% in a single year, with consumers increasingly rejecting the premium pricing of electric cars. Various factors contribute to this trend, including concerns about battery degradation, insufficient charging infrastructure, and high interest rates. Moreover, Tesla's frequent price cuts and the reduced reputation of the brand have also impacted the market.

  • 4-2. Shift in Consumer Preference Towards Hybrid Vehicles

  • As consumers move away from used EVs, there has been a noticeable shift towards hybrid vehicles. This trend is supported by a June AAA survey, where only 18% of respondents expressed a likelihood to purchase an EV, while one-third indicated a preference for hybrid models. Hybrids offer a combination of gas and electric motors, providing both fuel savings and convenience, which makes them more attractive to consumers. This shift is also reflected in the broader auto industry, where there is a noticeable return to internal combustion engine programs and the introduction of new hybrid models.

  • 4-3. Market Trends and Consumer Behavior Changes

  • The overall electric vehicle market is experiencing significant changes. Improved post-pandemic supply chains have led to decreasing prices across the auto industry, but EVs face additional challenges, including hesitations about their higher costs, limited access to charging stations, and range anxiety. These issues have contributed to a broader acceptance of cheaper alternatives and have impacted the production and market strategies of companies like Tesla and Rivian. The decline in interest for EVs has resulted in below-estimate deliveries, workforce reductions, and even bankruptcy filings for companies like Fisker. Despite these challenges, some industry analysts believe that US emissions regulations will ensure continued production and a gradual transition to alternative powertrains.

5. Technical Challenges in EV Manufacturing

  • 5-1. Technical issues in Tesla vehicles including recalls and safety concerns

  • Tesla has faced several technical challenges with its vehicles, leading to multiple recalls that impact customer safety and satisfaction. One prominent example is the repeated recalls of the Tesla Cybertruck. According to documents from the National Highway Traffic Safety Administration, more than 11,000 Cybertrucks were affected by issues such as trim pieces falling off while driving and windshield wipers that were inadequate for the vehicle's large windshield. These issues have necessitated that owners return the vehicles to service centers, as they cannot be fixed with over-the-air software updates. Tesla has communicated that it will replace the windshield wiper motor at no cost to the owners. However, these persisting problems highlight the ongoing technical difficulties faced by Tesla in maintaining vehicle quality and safety.

  • 5-2. Rivian's software update failure and its impacts

  • Rivian experienced significant technical setbacks due to a software update that negatively impacted the infotainment system. According to a report, a recent software update from Rivian resulted in the bricking of the infotainment system, rendering it unusable. This incident underscores the complexities involved in remote software updates for embedded systems in vehicles. Unlike conventional server updates, vehicle updates must contend with hardware limitations and the need for reliable fallback mechanisms to prevent total system failure. The failure of Rivian’s update caused disruptions and required manual interventions to rectify, reflecting broader challenges in the automotive industry's adoption of new technologies.

6. Tesla's Market Position and Product Features

  • 6-1. SWOT Analysis of Tesla

  • The SWOT analysis of Tesla highlights key strengths, weaknesses, opportunities, and threats affecting its market position. Strengths include Tesla's brand reputation, advanced technology, and strong sales performance of its models, especially the Model 3. Weaknesses encompass high production costs and ongoing quality control issues, such as the technical challenges faced by competitors like Rivian. Opportunities for Tesla involve expanding its market presence and innovations in self-driving technologies. However, threats include intense competition in the EV market, fluctuating prices, and legal and regulatory challenges related to Autopilot and Full Self-Driving capabilities.

  • 6-2. Features and Market Performance of Tesla Model 3

  • The Tesla Model 3 is the most affordable vehicle in Tesla's lineup, aimed at reducing the entry price for electric vehicles without compromising range and performance. Initially priced at $35,000, the Model 3 has become the best-selling electric vehicle globally since its launch in 2017. It offers three trims: Standard Range Plus, Long Range, and Performance, with varying battery capacities, ranges, and top speeds. The starting price for the Model 3 has since increased to $44,990. The Model 3's success has significantly contributed to Tesla's market dominance in the EV sector.

  • 6-3. Autopilot and Full Self-Driving Capabilities

  • Tesla's Autopilot is an advanced driver-assistance system that provides partial vehicle automation (Level 2). All Tesla vehicles include Base Autopilot, featuring lane centering and traffic-aware cruise control. Enhanced Autopilot adds functions such as self-parking and semi-autonomous navigation. Full Self-Driving (FSD) Capability is available as an upgrade but is controversial due to its naming, as it still requires active driver supervision. Despite the controversies, Tesla continues to develop these features, which are a key part of its market strategy, though full autonomy has not yet been achieved.

7. Used Tesla Models in the Market

  • 7-1. Availability and Pricing of Used Tesla Model Ys in Various Locations

  • In Baltimore, Hertz Car Sales offers a range of used Tesla Model Y electric vehicles (EVs) for purchase. The dealership is located on Belair Road and provides a convenient and affordable way for consumers to upgrade to a high-end Tesla Model Y. The prices at Hertz Car Sales Baltimore are low and no-haggle, making it an attractive option for buyers. Similarly, Hertz Car Sales in Riverside, CA, located on Indiana Avenue, also features low-mileage, high-quality used Tesla Model Ys for sale. Both locations highlight the growing availability of Tesla Model Y EVs at Hertz Car Sales, allowing consumers to choose from a selection of premium electric vehicles with varying editions and long driving ranges exceeding 300 miles between charges. The increasing presence of charging infrastructure in both Baltimore and Riverside makes it easier for EV drivers to power up their vehicles.

  • 7-2. Consumer Buying Process and Financing Options

  • Hertz Car Sales in both Baltimore and Riverside facilitates a straightforward and affordable buying process for used Tesla Model Ys. Consumers can begin the process online by browsing the available inventory and completing a simple finance application. This process enables buyers to secure used car loans tailored to their budget and specific vehicle preferences. At both locations, consumers can visit the dealership in person for a test drive to experience the vehicle's performance and features. The advertised prices for these used Tesla Model Ys exclude taxes, registration fees, finance charges, and other government-mandated fees. Additionally, Hertz Car Sales ensures the accuracy of information related to vehicle price, mileage, and options, advising customers to verify details with the local location before making a purchase.

8. Conclusion

  • The electric vehicle market is in a state of flux, underscored by significant transactions and evolving consumer preferences. Tesla's partnership with Hertz has underscored the value and market potential of substantial EV orders, bolstering Tesla’s stock and market appeal. However, the sharp decline in used EV prices and the shift towards hybrid vehicles reflect ongoing consumer hesitations and the market's volatile nature. Technical issues, including recalls affecting Tesla and software failures impacting Rivian, pose persistent challenges to reliability and consumer trust. Despite these barriers, Tesla remains a market leader due to its innovative technology and strategic positioning. The growing presence of used Tesla models in the rental and secondary markets indicates a broader acceptance and the practical applicability of EVs, though manufacturers must address operational hurdles comprehensively. Future developments in the EV market will hinge on technological advancements, regulatory shifts, and improved consumer education and infrastructure, ensuring a balanced transition to sustainable transportation solutions.

9. Glossary

  • 9-1. Tesla [Company]

  • A leading electric vehicle and renewable energy company led by Elon Musk, known for its innovative automotive technology, market dominance, and strategic partnerships with companies like Hertz.

  • 9-2. Hertz [Company]

  • A global vehicle rental company that has recently invested heavily in integrating electric vehicles, particularly Tesla models, into its rental fleet, influencing market dynamics and consumer perceptions.

  • 9-3. Model Y [Product]

  • A versatile SUV from Tesla's electric vehicle lineup, known for its long range, advanced technology features, and inclusion in Hertz's rental fleet as part of their EV adoption strategy.

  • 9-4. Rivian [Company]

  • An electric vehicle manufacturer that faced challenges with a recent software update, highlighting the technical difficulties in EV production and software management.

  • 9-5. Autopilot [Technology]

  • Tesla's advanced driver-assistance system designed to enable autonomous driving capabilities. It's known for features like lane centering and autonomous driving on limited access roadways, but has faced scrutiny and challenges in implementation.

10. Source Documents