Hertz shifts gears: Opts for gas cars over EVs, including Teslas
12 Jan 2024
Hertz Global Holdings, a car rental company, is set to sell about 20,000 electric vehicles. This number even includes cars that have been manufactured by Tesla.
The rental giant had struck a deal with Tesla in 2021, which enabled them to offer their cutting-edge electric vehicles for rent. The decision to sell such a large number of cars from their U.S. fleet comes as the demand for EVs has gone down significantly.
Hertz announced on 11 January 2023, that it has opted for gas-powered vehicles. The reason behind this decision was to tackle the higher expenses that are incurred due to the collision of EVs. Previously, Hertz had committed to converting 25% of its total cars to electric by the end of 2024.
Hertz chief executive officer Stephen Scherr announced in 2023 that they are experiencing higher expenses for their EVs, especially Teslas. This announcement was made at the JPMorgan Auto Conference.
Hertz has also activated a limiter on the torque and speed of the EVs and offered it to veteran users on the platform to make them feasible to use after some users had front-end collisions, he stated.
The company's shares, including vehicles from Swedish EV maker Polestar, dropped by approximately 4%. Meanwhile, Tesla's stock experienced a 3% decline. In the fourth quarter of 2023, Hertz anticipates around $245 million in charges linked to depreciation expenses from the EV sale.
Bumpy road ahead for EV growth
The recent decision by Hertz underscores the challenges electric vehicles are facing as their sales growth slows down, prompting major automakers like General Motors and Ford to adjust their production plans. According to Morgan Stanley analyst Adam Jonas, Hertz’s move signals a need to “reset downward” expectations for EVs.
While consumers appreciate the driving experience and fuel savings per mile with EVs, Jonas points out that there are other “hidden costs to EV ownership.” Hertz, in a regulatory filing on Thursday, 11 January 2023, highlighted that expenses related to collisions and damage, primarily associated with EVs, remained high in the quarter.
Initially planning to order 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years, Hertz has now shifted its focus to improving profitability for the rest of its EV fleet. This decision follows a trend seen with German rental car company Sixt, which announced in December 2023 that it had not purchased Tesla vehicles since 2022 and was selling its fleet of Teslas as part of its regular de-fleeting process. However, Sixt maintains its commitment to offering a range of electrified vehicles and aims to electrify 70–90% of its rental fleet in Europe by 2030.
In the used EV market, wholesale prices experienced a decline throughout most of 2023, attributed to falling prices for new EVs and increasing inventories of unsold electric vehicles, according to Cox Automotive data. Cox had forecasted a further decline in used EV prices for 2024 even before Hertz’s decision. iSeeCars.com analyst Karl Brauer noted that while 20,000 might not significantly impact the total used vehicle market, Hertz’s decision would result in major losses on each sale, contributing to the broader trend of falling used EV values.
Hertz’s used car website reveals significant discounts, with some Tesla Model 3 listed for as low as about $20,000, nearly half the purchase price for the cheapest variant of the compact sedan. The inventory also includes over 700 EVs for sale, featuring models such as BMW’s i3, Chevrolet’s Bolt, and Tesla’s Model 3 and Model Y SUVs. This development raises questions about the resilience of the EV market and the strategies companies may need to adapt to navigate the evolving landscape.
