- Hertz and Polestar (GGPI) stock enter a strategic partnership with the former buying 65,000 vehicles
- In the US alone Hertz has close to 500,000 vehicles
- The other company to win such a deal was Tesla
Polestar (NASDAQ:GGPI) stock has managed to stay within a tight trading range despite all the market turmoil against high-growth stocks. There is little reason to bet against the future of electric vehicles. Many governments around the world and major corporations have acknowledged the importance of switching to EVs.
This switching toward an EV-driven future is a powerful secular trend that will continue for years to come. Within the EV industry, we know that Tesla currently reigns supreme — at least in the Western markets. There are though many start-ups that are vying for the number two slot. I believe that the moves that Polestar is making position it well.
Hertz Partnership Is a Game Changer
Polestar recently just got a huge win. The Swedish company inked a new global partnership with Hertz (NASDAQ:HTZ), a major car rental company. The agreement includes Hertz purchasing 65,000 Polestar vehicles over the next five years. These vehicles are expected to be available as early as Spring 2022 in Europe.
This partnership could propel Polestar to the very top of the EV industry. Hertz is arguably one of the largest vehicle rental companies in the world. They service multiple countries globally. In the U.S. alone, Hertz has close to 500,000 vehicles in its car rental division.
This partnership is a vote of confidence in Polestar. Remember the company is still fairly new and untested. In 2021 the company sold an estimated 29,000 units in total. This initial purchase with Hertz is already more than twice the amount of vehicles sold in 2021.
I believe that this is just the beginning of what could be a long partnership with the company. Hertz is committed to building the largest EV rental fleet in North America. Therefore if the Polestar performs well there could be the possibility of multiple repeat orders for vehicles.
GGPI Stock Could Rival Tesla
The partnership with Hertz in my opinion is the first step to propelling Polestar to the big leagues when it comes to EV. As mentioned by Hertz CEO Stephen Scherr, “By working with EV industry leaders like Polestar, we can help accelerate the adoption of electrification […]”
The other major company to win a purchase order from Hertz was Tesla (NASDAQ:TSLA). The car rental company ordered 100,000 Model 3 back in October 2021. This move actually caused TSLA stock to reach a market cap of almost $1 trillion. Unfortunately, the market conditions aren’t as favorable for GGPI stock.
After popping by more than 10% during the announcement, GGPI stock retreated back to its trading range of $11 to $12. But if you actually scale the announcement, a partnership with Hertz is actually bigger for Polestar than it is for Tesla.
At the time, Tesla was already valued in the hundreds of billions. This deal is 65% of Tesla’s purchase order. However post-merger Polestar is set to be valued at only $20 billion. Hertz is potentially signaling here that it believes Polestar could be a company that could rival Tesla.
As usual, the main risk with Polestar is execution risk. Would the company be able to properly scale up its manufacturing to meet the expected demand? Other EV manufacturers recently have had difficulty with such a scale-up and meeting production targets.
I believe though that Polestar’s relationship with parent companies Volvo and Geely put it at an advantage. The Hertz partnership signals as well the belief in Polestar’s ability to execute. While still speculative, GGPI stock should be one to consider.
On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.