Hertz Reveals How It Will Fund Polestar EV Purchase

Hertz Global (HTZ) has agreed to purchase as many as 65,000 electric cars from Polestar over the next five years as it works towards expanding its electric vehicle (EV) fleet in Hertz Corporation, which is a subsidiary of HTZ and an American car rental company based in Estero, Florida. HTZ stock rose nearly 11% to close at $23.38 on April 4. 

The Swedish automaker Polestar was founded by Volvo Cars and Geely Holding. It is gearing up to go public in the U.S. through a special purpose acquisition company (SPAC) merger expected to close in Q2 2022.

Hertz Corporation, a subsidiary of HTZ, is an American car rental company based in Estero, Florida.

Hertz to Finance Polestar Car Purchase with Asset-Backed Securities 

Polestar makes premium electric cars, which are currently produced in China. Hertz says it will initially order the Polestar 2 sedan. It plans to start making the Polestar cars available to customers in Europe in the spring and bring them to North America and Australia later in the year. 

The company plans to raise funds for the purchase of the Polestar cars through asset-based securities, according to a Wall Street Journal report. In March, the company announced it would issue asset-backed notes to private investors to raise more than $1.4 billion.

Hertz Switching to an Electric Fleet

The Polestar deal follows Hertz’s order of 100,000 electric cars for its fleet from Tesla (TSLA) last October. It ordered the Model 3 type and expected the cars to be fully delivered by the end of 2022. Hertz said the Tesla order would see electric vehicles account for 20% of its fleet. Hertz offers its rental car service around the world. The global rental car market is forecast to grow to $132.6 billion by 2028 from $87.4 billion in 2021.

Wall Street’s Take

The Street is cautiously optimistic about Hertz stock with a Moderate Buy consensus rating. That’s based on four Buys versus two Holds. The average Hertz price target of $29.17 implies 30.92% upside potential to current levels. Shares have declined 5.5% year-to-date.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 80% Bullish on HTZ, compared to a sector average of 70%.

The Takeaway for Investors

Shifting to electric vehicles would allow Hertz to reduce its carbon footprint. That could make Hertz’s service more attractive to climate-conscious drivers and its stock more attractive to climate-conscious investors. Additionally, as electric vehicles have lower operating expenses than gas-powered cars, the shift could benefit the company’s profit margins.

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