Tesla, which previously enjoyed unopposed domination in the electric vehicle revolution, is experiencing a threat in its domestic market. As the U.S. demand collapses due to the expiration of the federal tax credit on electric vehicles, the company has unveiled a new, unexpected type of strategy: short-term car rentals. The step is a considerable change in a company that has traditionally depended on direct sales and leasing as its main sources of revenue.
The new rental service will enable customers to rent Tesla cars at certain retail locations in a more lenient manner to experience the brand. The move emerges at a time when Tesla experiences increased inventory and a competitive market of electric vehicles (EVs).
Tesla Rental Program
This rental service is now being offered at some of the Southern California Tesla locations, such as Costa Mesa. Customers are allowed to rent cars for a minimum of three days up to seven days, with prices starting at $60 per day on Model 3 and Model Y, $90 per day on Model S and Model X, and $75 a day on the Cybertruck.
Tesla is offering at no charge Supercharging and Full Self-Driving (Supervised) functions where renters can get an opportunity to have the full capability of the Tesla technology. Tesla is even offering the first 48 hours free so that it can attract more participants, i.e., the customer will only pay for days three to seven.
Moreover, all people ordering a Tesla within one week after their rent gets a credit of $250 to buy. According to Tesla, the program gives potential buyers a chance to experience the comfort of owning a Tesla before they make a purchase.
The Demand Issue Owing to the Relocation
This rent program is announced when Tesla and several other EV manufacturers struggle to meet the declining demand in the American market. The transfer of the federal tax credit on electric vehicles at the beginning of the year caused the situation to decrease drastically in the industry-wide sales.
The incentive spurred many consumers to purchase an EV sooner than they had originally intended in 2025, essentially drawing forward demand that would have otherwise been fulfilled later in the quarter, leaving the market quieter in the following quarters. It has especially impacted Tesla, Rivian, and Lucid, which are the companies that market only electric cars, as they do not have a hybrid or gasoline-powered vehicle to offset sales.
The outcome: unsold inventory has piled up in Tesla stores nationwide, and the automaker has to get creative to get its vehicles rolling and continue to make some short-term cash. They even sold thousands of Cybertrucks to SpaceX and xAI.
Lessons of the Hertz Painful Experience
The move by Tesla into rentals is not completely new. In 2021, a car rental giant, Hertz, hit the news after ordering tens of thousands of Tesla vehicles as part of its strategy to electrify its fleet. What began as a daring action became sour.
Declining resale prices, most of which were caused by Tesla price reductions, negatively affected the bottom line of Hertz. It was because of this that the company had started to sell off its Tesla fleet in the past two years. The experience highlights how unstable the EV market is and the difficulties involved with dealing with the high depreciation rate of electric vehicles.
The new rental model that has been introduced by Tesla is, however, smaller in scope and more controlled. The internal operation of the program will also allow Tesla to control the expenses, preserve its brand image, and convert the rentals into a promotional instrument instead of yet another source of revenue.
