Car rental company Hertz sells EVs, chooses gas-powered fleet
Car rental company Hertz sells EVs, chooses gas-powered fleet (Getty Images)
Car rental company Hertz is selling around 20,000 electric vehicles, Teslas included, from its U.S. stock. Hertz is choosing to stick with gas-powered vehicles due to higher expenses for repairs and damages associated with EVs, according to Reuters and CBC.
This comes about two years after a deal with Tesla to rent out their cars, indicating a slowdown in electric vehicle (EV) demand. The company initially aimed to convert 25% of its fleet to electric by the end of 2024 but is facing challenges, especially with the costs linked to EVs, particularly Teslas.
"Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter," Hertz said in a statement.
Car rental company Hertz sells EVs, including Teslas (Getty Images)
As a consequence of this decision, Hertz anticipates about $245 million in charges related to depreciation expenses in the fourth quarter of 2023.
Hertz's CEO, Stephen Scherr, had previously mentioned difficulties with higher expenses for their EVs, including Teslas, at a conference. To make EVs more user-friendly and prevent collisions, Hertz limited the torque and speed on these vehicles, offering them mainly to experienced users. Despite these efforts, the company is now shifting its focus back to gas-powered vehicles.
This move reflects the challenges faced by EVs in the current market, with sales growth slowing down. Analysts suggest that Hertz's decision is a sign that expectations for EVs need to be adjusted downward.
"While 20,000 cars isn't a large number in the total used vehicle market, it does mean Hertz will be taking a major loss on each of these sales while further contributing to the trend of falling used EV values," analyst Karl Brauer notes.
While consumers enjoy the driving experience and cost savings of EVs, there are hidden costs associated with ownership, such as collision and damage expenses. The company, which initially planned to order a significant number of Tesla and Polestar vehicles, will now concentrate on improving the profitability of its remaining EV fleet.
Hertz is selling some Tesla Model 3 vehicles for as low as $20,000, which is almost half the price of the cheapest new variant of the compact sedan. The company has listed over 700 EVs for sale, including models from BMW, Chevrolet, and Tesla.
Other companies facing challenges in the EV market
This shift in strategy aligns with a broader trend in the industry, as other companies like General Motors and Ford also scale back their EV production plans due to the challenges faced by the EV market. German rental car company Sixt, for instance, stopped purchasing Teslas in 2022 and is selling its existing fleet as part of its regular de-fleeting process.
Additionally, the decision by Hertz to sell a large number of used EVs is contributing to a trend of falling used EV values in the market. Wholesale used EV prices decreased throughout 2023, and analysts predict a further decline in 2024.
Recently, we reported that Tesla lost its position as the world's leading electric vehicle manufacturer for the first time, with China's BYD, Build Your Dreams, surpassing Tesla in sales.
