Key Points
- Hertz is selling off about 20,000 EVs, including Teslas, switching back to gas-powered vehicles due to higher maintenance costs.
- The decision reflects broader market trends, with slowing EV sales growth prompting companies like GM and Ford to adjust production.
- Hertz’s move impacts the used EV market, with falling prices for vehicles like the Tesla Model 3, now sold at nearly half the original price.
In a surprising turn of events, Hertz Global Holdings, a renowned rental firm, is steering away from its electric vehicle (EV) commitment, selling off approximately 20,000 EVs from its U.S. fleet. This move includes parting with its Teslas, signaling a significant shift in the company’s strategy towards EVs.
Just two years after Hertz’s high-profile deal to incorporate Teslas into its rental fleet, the company has decided to revert to gasoline-powered vehicles. Citing higher expenses linked to collision and damage repairs for EVs, Hertz is taking a step back from its ambitious goal to convert 25% of its fleet to electric by the end of 2024.
Stephen Scherr, Hertz’s CEO, had previously highlighted the financial challenges associated with maintaining its EV fleet at last year’s JPMorgan Auto Conference, particularly focusing on the costs related to Teslas. Hertz had even taken measures to mitigate these issues by limiting torque and speed on their EVs and restricting their use to more experienced renters, especially after a series of front-end collisions.
The company’s shift has sent ripples through the stock market, with its shares dropping around 4%, and Tesla’s stock falling by about 3%. Adding to its financial challenges, Hertz anticipates roughly $245 million in charges due to depreciation expenses from the sale of these EVs in the fourth quarter of 2023.
This decision by Hertz underscores the broader challenges facing the EV market. Slowing sales growth has led manufacturers like General Motors and Ford to reevaluate their production plans. Adam Jonas, a Morgan Stanley analyst, suggests that this is a clear sign that expectations around EVs need a downward reset.
Despite the benefits of EVs, such as an enjoyable driving experience and fuel savings per mile, hidden costs like those related to collision and damage remain high. Hertz, which had initially planned to order 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years, is now refocusing on improving the profitability of its remaining EV fleet.
In a similar vein, German rental car company Sixt has stopped purchasing Teslas since 2022 and is in the process of selling off its Tesla fleet. However, Sixt remains committed to electrifying a significant portion of its rental fleet in Europe by 2030.
The used EV market is also feeling the impact, with wholesale prices for used EVs declining throughout 2023, as new EV prices dropped and unsold inventories increased. Hertz’s decision is expected to further depress these values, with Karl Brauer from iSeeCars.com noting that Hertz will likely incur major losses on each sale, exacerbating the trend of falling used EV values. Some Tesla Model 3s are being sold for as low as $20,000 on Hertz’s used car website, almost half their original purchase price.
As Hertz navigates through these changes, the automotive industry watches closely to see how this significant shift will impact the future trajectory of electric vehicle adoption and the rental car market.
Sources:
https://www.reuters.com/business/autos-transportation/hertz-sell-about-20000-evs-us-fleet-2024-01-11/
