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Uber is collaborating with Hertz to supply Tesla electric vehicles to drivers ahead of an entire electric ride-hail fleet by 2023.
Uber (NYSE: UBER) announced on Wednesday a partnership with American car rental company Hertz (NYSE: HTZ) to offer 50,000 Tesla (NASDAQ: TSLA) vehicles to ride-hailing drivers by 2023. This is part of a monumental agenda by Uber to switch its entire fleet to electric vehicles. Meanwhile, Hertz agreed to this partnership with the ride-hailing company following the $4.2 billion order of 100,000 Tesla cars it recently made. This represents the single biggest Tesla order in history and also caused a rise in the automaker’s shares.
Furthermore, as a result of this, Tesla’s current market valuation now sits over $1 trillion. Meanwhile, Hertz enlisted Carvana Co. to dispose of rental cars it no longer needed from its lineup.
The deal between Uber and Hertz means that US Uber drivers can now rent Teslas through Hertz, starting on November 1st. The rentals will primarily comprise the electric vehicle company’s Model 3 sedan and will be available exclusively to Uber drivers. In addition, the rental rate will start out at $334 per week and will also cover insurance and maintenance.
Uber explains that this rental cost will drop to $299 per week or lower as the program gets underway. However, this initiative will only be available in a few select states for its initial rollout. They are Los Angeles, Washington DC, San Francisco, and San Diego, with planned expansion to other cities nationwide.
Uber, Hertz, and Tesla Initiative Indicative of Global Pressure to Go Green
The move comes as car companies and transportation providers across the globe are facing increasing regulatory pressure to discontinue gas-powered vehicles. Electric vehicles (EVs) that produce zero emissions are increasingly becoming the vehicles of choice and rising in popularity and mainstream acceptance. For instance, California mandated greener-fuel rules for Uber and Lyft (NASDAQ: LYFT), concerning their fleet by 2030. The West Coast state, the largest auto market in the US, now requires 90% of the aforementioned companies’ fleets to be EVs by 2030.
Wednesday’s deal represents Uber’s most significant effort so far in expanding the use of EVs on its platform. However, there are some concerns that its drivers may struggle with the prescribed weekly payment. Only a few ride-hail drivers can afford the higher EV sticker prices. Furthermore, in 2019, Uber miles logged by drivers in the US and Canada with electric vehicles amounted to only 0.15%. Despite these less-than-stellar optics, Uber remains confident that drivers will benefit from fuel savings and less maintenance. In addition, the ride-hailing company is offering added-on incentives to encourage and spur its drivers. For instance, drivers who pick up passengers in hybrids or EVs receive an additional 50 cents per ride. Furthermore, drivers who use specific battery-electric vehicles receive another dollar on top of that. This means the total amount for any driver who adheres to these recommendations gets $1.50 extra per ride.
To attain Tesla-renting eligibility, drivers must have no less than a 4.7-star rating and complete at least 150 trips.