Bill Ackman’s Huge Bet on Hertz May Win a Jackpot if Trade War Drags On

Bill Ackman revealed last week that his Pershing Square has amassed a nearly 20% stake in car rental giant Hertz and a vast cohort of traders rushed in behind him, driving the company’s share price through the sunroof of the hedge fund billionaire’s Model X.

If auto tariffs don’t stay in place for a long time, they might soon find themselves in reverse gear.

Betting on a U-Turn

Hertz’s recent track record leaves much to be desired: The rental-car company lost nearly $2.9 billion last year, citing depreciation of its vehicles. An electric-vehicle shopping spree that began in 2021 — complete with a deal to acquire 100,000 Teslas — looks especially bad in the rearview mirror. Demand for the vehicles has slipped — a March survey by Cars.com found searches for used Teslas fell 16% month-over-month — and their value has fallen rapidly, with electric vehicles overall depreciating 58% in five years, according to one recent study.

The company is also saddled with more than $6 billion in debt and is being sued by bondholders for roughly $300 million related to a 2020 bankruptcy from which it emerged solvent. But Ackman explained, in a lengthy tweet, that he is confident in management’s ability to pull off an operational turnaround, including remaking Hertz’s fleet, cutting operating costs, and boosting unit revenue to “improve profit margins over the next several years.” Hertz’s ace card, he added, is the prospective auto tariffs that have roiled markets:

• Analysts expect a 25% levy on imported automobiles ordered by President Trump — whom Ackman backed during last year’s election — to jack up the prices of used cars by thousands of dollars. Hertz owns roughly 500,000 vehicles worth about $12 billion, Ackman said, noting a 10% increase in used car prices would equal a $1.2 billion gain on its vehicle holdings.
• A lot of traders were convinced: Hertz shares closed up 100% last week, with almost all the gains coming after Pershing revealed its stake. Ackman also teased a potential partnership with Uber, earning a positive response from the ride-hailing giant’s CEO Dara Khosrowshahi, who replied he was “excited to brainstorm on how we can expand on our relationship!”

Ackman’s tariff assumption, of course, has one Cyber Truck-sized caveat: Trump is already considering pausing the auto tariffs or granting exemptions to some manufacturers as they sort out their supply chains, which could significantly blunt their impact.

Bargain Hunting: Based on Ackman’s calculation about used car valuations, one might assume traders would flock to other companies that stand to benefit. That hasn’t necessarily been the case:  While rival car rental giant Avis Budget Group rose 19% last week, used car retailers saw limited movement. Carvana rose 3.8% last week, Autonation fell 0.3% and Group 1 Automotive, which sells new and used cars, dropped 2%. CarMax — which recently increased its used car inventory to get ahead of tariffs — slid 2.8%.