| By Barry Yao |

A Strategic Maneuver in a Shifting Market

Tesla is launching a new program where customers can rent a vehicle for sixty dollars a day. The program comes as EV demand shifts in the United States, potentially helping offset the company’s burgeoning inventory. Tesla’s new rental program is a strategic maneuver designed to boost demand in a challenging economic climate. Its once-uncontested lead is slowly eroding due to increasing competition, the expiration of the federal tax credit, and high auto interest rates; the company aims to lower the barrier to entry for its vehicles. The rental price, one of the cheapest in the country, allows customers, particularly those hesitant to commit, those between cars, or anyone wanting an extended “test drive,” to experience the vehicle. Currently, the company is testing the program in its California locations, and renters cannot drive the vehicles out of state.

Rental Revenue as Inventory Solution

The program is a smart way for Tesla to manage its assets and inventory, as rentals can offload older models and less popular configurations that might otherwise require price cuts to sell. Whereas before these models generated little revenue, Tesla hopes that cheaper prices will incentivize more customers to rent these vehicles. After rental, these vehicles can serve as affordable entry points for new customers, whose purchases will extend the lifecycle of these cars.

Disrupting Legacy Rental Models

A cheaper rental price also allows Tesla to differentiate itself from traditional rental companies such as Alamo and Hertz. While rental companies may offer Tesla vehicles, they often provide an unfamiliar EV experience due to their business model being optimized for traditional internal-combustion vehicles: customer service, logistics, and maintenance. Tesla’s new program directly challenges these legacy rental companies. By internalizing the rental process, Tesla can provide a more seamless, brand-native experience, giving the company an advantage over other automakers who cannot afford to offer such a program. This new business model suggests that Tesla’s rental program may not be just a side business, but a “booster” to enhance sales, promote brand loyalty, and ensure Tesla’s leadership in the ever-evolving automotive industry.

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