Tesla skids 4% on Musk tweet that Hertz deal not signed

A Tesla electric vehicle, left, sits in a charging station at a dealership, Thursday, Feb. 18, 2021, in Dedham, Mass. Shares of Tesla tumbled around 4% in premarket trading, Tuesday, Nov. 2, after its CEO and founder Elon Musk tweeted that a deal to sell 100,000 cars to Hertz had not been signed, suggesting it was not final. . (AP Photo/Steven Senne)

SILVER SPRING, Md. (AP) — Shares of Tesla Inc. tumbled around 4% in premarket trading after its CEO and founder Elon Musk tweeted that a deal to sell 100,000 cars to Hertz had not been signed, suggesting it was not final.

Shortly after the market close yesterday, an account called “Tesla Silicon Valley Club” tweeted an image of a graph showing Tesla's 8.5% gain Monday and thanked Musk. Musk replied “You're welcome! If any of this is based on Hertz, I’d like to emphasize that no contract has been signed yet.”

Last Monday, Hertz announced that it was buying 100,000 electric vehicles from Tesla, one of the largest purchases of battery-powered cars in history. Financial details of the deal — such as how much Hertz was paying per car or the total price — were not revealed at the time.

News of the deal triggered a rally in Tesla’s stock, driving the the world’s most valuable automaker’s market value over the $1 trillion mark for the first time. Before Tuesday's dip, shares had risen about 33% in the week since the deal was announced.

Musk also suggested in the same reply that Hertz would not be getting a discount and that the deal was inconsequential to his company's bottom line.

“Tesla has far more demand than production, therefore we will only sell cars to Hertz for the same margin as to consumers,” Musk's tweet continued. “Hertz deal has zero effect on our economics.”

In an interview with The Associated Press last week, Mark Fields, Hertz’ interim CEO, said that Teslas were already arriving at the company’s sites and should be available for rental starting in November.

Hertz said in its announcement that it will complete its purchases of the Tesla Model 3 small cars by the end of 2022. If Hertz were to pay the full $40,000 retail price for each Model 3, it would make the deal worth around $4 billion to the automaker.

Though it's not entirely clear why Musk would complicate or potentially sabotage the Hertz deal, but public comments on negotiations tend to be about leverage.

Bill Selesky, a senior analyst with Argus Research, suggests Musk understands his brand's value as a leader in electric vehicles and is trying to wring as much as he can out of Hertz.

“Hertz, if they do a deal with Tesla, will instantly be recognized as part of the EV revolution, not the problem,” Selesky said.

Shares of Tesla fell 4.6% in off-hours trading Tuesday, to $1,153 per share.