- Hertz just paid Tesla $4.2 billion to advertise its cars.
- Having 100,000 Tesla Model 3s in the Hertz fleet will expose countless people to Tesla’s cars.
- Time behind the wheel of an electric car greatly boosts the likelihood that someone will buy one.
Have you ever seen a Tesla commercial during the Super Bowl? A Model 3 billboard? An intrusive online banner ad touting the newest Model S sedan?
No, you haven’t. That’s because the electric-car company famously doesn’t spend a dime on traditional advertising. Its blockbuster deal with Hertz announced this week shows exactly why.
The car-rental firm’s deal to buy 100,000 Tesla Model 3 sedans for its fleet will ensure people get to try out a Tesla for themselves, even without a formal showroom test drive. A subsequent deal to provide 50,000 of those cars to Uber drivers will show even more people what it’s like to ride in one, just like the many who’ve already ridden in Teslas through tunnels beneath Las Vegas thanks to Musk’s tunneling venture.
This kind of “butts-in-seats” marketing is a tried-and-tested strategy in the auto industry. And research shows it’s especially crucial for getting buyers to switch from familiar gas-fueled cars to novel electric ones.
In a recent JD Power survey of people shopping for a new vehicle, just 7% of respondents who had never been in an electric car said they were “very likely” to buy one as their next vehicle. That figure jumps to 20% for people who have ridden in an EV. The proportion increases to 46% when you consider only respondents who have owned or leased an EV in the past.
Half of the respondents had never been in a battery-powered car before, showing there’s a huge untapped market of buyers who might consider an electric car if they had the chance to get behind the wheel and see what they’re all about. In that sense, the Hertz deal is like a gigantic, coast-to-coast marketing campaign for Tesla — one that happened to earn it around $4.2 billion in sales over the next year.
Rejecting conventional advertising in favor of more organic, word-of-mouth, and word-of-tweet marketing (incentivized by referral bonuses for owners) is working out great for Tesla. The company is selling vehicles as quickly as it can produce them, and the wait for some Model 3 sedans now stretches to almost a year.
Elon Musk even wondered why news of the deal sent Tesla’s share price surging, given that “Tesla is very much a production ramp problem, not a demand problem.”
As long as appetite remains higher than output — and companies and owners continue to get more butts in more seats — Tesla may never need to take out a traditional ad.