Hertz opts for gasoline cars, selling off 20,000 electric vehicles
Hertz shifts focus, selling 20,000 electric vehicles to invest in gasoline cars The move aims to adapt to evolving market demands and enhance their vehicle fleet
Hertz, which has significantly expanded its electric vehicle fleet in recent years, has now opted to downsize. The company plans to sell off approximately 20,000 electric vehicles, or a third of its electric fleet, in order to invest in more gasoline-powered vehicles.
According to Hertz executives, the financial performance of electric vehicles has been negatively impacting the company. Despite lower maintenance costs, electric vehicles have been associated with higher expenses for damage repair and depreciation.
Hertz CEO Stephen Scherr stated in a recent analyst call that collision and damage repairs on an EV are typically double the cost of those for a comparable combustion engine vehicle. Additionally, the decrease in EV prices in the new car market has led to a decrease in the resale value of Hertz's used EV rental cars.
Scherr noted that the decrease in EVs MSRP, especially driven by Tesla, has reduced the fair market value of our EVs compared to last year, resulting in larger losses from salvage and increased burden.
Hertz anticipates a loss of approximately $245 million from EV depreciation, averaging to about $12,250 per vehicle, as outlined in their SEC filing. Though not explicitly stated, Tesla seems to be the primary culprit.
Tesla comprises approximately 80% of Hertz's EV fleet, while all EVs combined make up about 11% of Hertz's entire rental fleet. Tesla's aggressive reduction in vehicle prices has prompted other automakers to follow suit for their electric vehicles. When automakers lower the prices of new vehicles, it results in diminished value for those models in the used car market, leading to rapid depreciation.
Depreciation has a significant impact on the business of rental car companies like Hertz, especially since they sell many vehicles in the used car market. It is a key factor in determining which cars to include in their fleets.
As a newer company, Tesla lacks the extensive inventory of replacement parts and experienced technicians for repairs compared to other car manufacturers, according to Hertz executives. This results in higher costs and longer wait times for repairs.
"Hertz CEO Stephen Scherr pointed out that companies like GM have had decades to establish a nationwide supply network for parts," he said during a recent analyst call. "The aftermarket for parts is also less developed in the context of Tesla."
In addition to higher repair costs in the event of a crash, Scherr also noted that EVs are experiencing more frequent crashes. He specifically mentioned that Teslas, which comprise 80% of Hertz's EV rental fleet, are primarily responsible for these issues.
"We are collaborating with Tesla to assess the car's performance in order to reduce the risk of damage incidents," he explained. "We are actively engaged with them to address issues related to parts procurement and labor."
Hertz sells its used vehicles at auctions as well as directly to customers on its Hertz Car Sales website.
