Hertz Shifts Strategy: Selling 20,000 Electric Vehicles Amidst EV Demand Slowdown
Hertz Global Holdings (HTZ.O) is divesting approximately 20,000 electric vehicles, including Teslas, from its U.S. fleet, marking a shift away from its previous collaboration with the automaker for rentals. This move indicates a slowdown in electric vehicle (EV) demand.
In a Thursday announcement, Hertz revealed its decision to favor gas-powered vehicles due to higher expenses associated with collision and damage for EVs. Despite initially aiming to convert 25% of its fleet to electric by the end of 2024, CEO Stephen Scherr acknowledged challenges, especially with expenses related to Teslas, as mentioned during the JPMorgan Auto Conference last year.
To address issues like front-end collisions, Hertz implemented measures such as limiting torque and speed on EVs, making them available to experienced platform users for easier adaptation.
The company’s stock experienced a 4% decline, while Tesla’s (TSLA.O) stock saw a 3% decrease. Hertz anticipates approximately $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023.
EV Market Dynamics
This decision reflects the challenges in the EV market as growth slows, aligning with the scaling back of production plans by major car manufacturers like General Motors (GM.N) and Ford (F.N).
Morgan Stanley analyst Adam Jonas commented that Hertz’s move signals the need to “reset downward” EV expectations. He pointed out the hidden costs of EV ownership, particularly expenses associated with collision and damage, which remained high for Hertz in the last quarter.
Hertz, initially planning to order 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years, now intends to enhance profitability for the remaining EV fleet.
In a similar trend, German rental car company Sixt disclosed in December that it ceased purchasing Tesla vehicles in 2022, selling its Teslas as part of regular fleet management. However, Sixt remains committed to electrifying 70-90% of its rental fleet in Europe by 2030.
Used EV prices have experienced a decline, influenced by falling prices for new EVs and an increase in unsold EV inventories, according to Cox Automotive data. Hertz’s decision to sell approximately 20,000 EVs, including some Tesla Model 3s priced as low as $20,000, contributes to the broader trend of declining used EV values. The company lists over 700 EVs for sale, including models from BMW, Chevrolet, and Tesla.
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