Tesla shares jump more than 12% on report that Hertz is ordering 100,000 Teslas to overhaul its rental business

October 25, 2021, 3:15 PM UTC
Updated October 26, 2021, 12:51 PM UTC

Hertz Global Holdings said on Monday it has placed an order for 100,000 Tesla cars in a move that will help it modernize its rental car business model and provide more mainstream validation to the makers of electric vehicles.

The order is worth about $4 billion, Bloomberg News reported, citing unnamed sources, and sent Tesla’s shares up more than 12% by the end of trading Monday to $1,024.86 per share, and sending the market cap to over $1 trillion.

Hertz, which emerged from bankruptcy protection only four months ago, said in a press release that electric vehicles, including those from other carmakers, would represent 20% of its 500,000 vehicle global rental fleet. This order appears to be a big bet on EVs as a way to stand out against rivals such as Avis Budget Group and Enterprise Holdings. The bulk of the vehicles will be delivered to select Hertz locations by the end of 2022, but some Model 3 sedans will be available at a few U.S. locations starting next month.

“Electric vehicles are now mainstream,” Hertz interim CEO Mark Fields, a former Ford CEO, said in a statement. “The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America.” The aggressive electrification campaign stands in contrast to the often glacial pace of change in practices in the car rental industry.

The pandemic ground the car rental industry nearly to a halt last year with a decline in business and leisure travel and a stalled market for used rental cars essential to these companies’ cash flow. Hertz had been hurting even before the pandemic with net losses for several years before the pandemic. The company, which also operates the Dollar and Thrifty discount rental agencies, filed for Chapter 11 bankruptcy protection in May 2020.

But Hertz’s new owners, Knighthead Capital Management and Certares Management, are making clear with this move that they want post-bankruptcy Hertz to have a modern business model in tune with where customer preferences are heading. To support its EV push, Hertz will build up its own charging infrastructure, while customers who rent Teslas will also be able to use that company’s network of 3,000 supercharging stations. Another reason EVs hold appeal for Hertz: They lose value in the secondhand market less quickly and are less expensive to maintain and refuel.

Hertz shares ended the day up 10% on the over-the-counter market, giving it a market capitalization of $12.8 billion, more than double what Knighthead and Certares agreed to pay for it in May.

Tesla’s capacity has increased significantly. It made 237,823 cars in the period ending Sept. 30, 2021, but the Hertz order represents a big chunk of its business, roughly 10% of annual production, making it harder for rivals to imitate Hertz’s move quickly if they so desire or can. “Tesla getting an order of this magnitude highlights the broader EV adoption underway in our opinion as part of this oncoming green tidal wave now hitting the U.S.,” Wedbush analyst Dan Ives wrote in a research note.

To add some star power to the move, Hertz hired star NFL quarterback Tom Brady to be part of an ad campaign promoting the Tesla partnership.

Update, Oct. 25, 2021: This article has been updated with Tesla’s stock price.

Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.