In recent news, General Motors and Ford made headlines by postponing their investments in electric vehicles (EVs), attributing this shift to waning demand for battery electric vehicles (BEVs) and the ongoing price battle instigated by Tesla earlier this year. However, this cautious stance towards EVs isn’t limited to Detroit’s automotive giants. Hertz, a renowned player in the car rental industry, also struck a cautious chord during its Q3 earnings call, announcing a slowdown in the integration of EVs into its extensive fleet.
Two years ago, Hertz boldly committed to procuring a staggering 100,000 Tesla EVs by the close of 2022. Fast forward to today, they have only managed to amass roughly 35,000 Tesla vehicles in their fleet, a far cry from their initial ambitious target. It appears that Hertz has no immediate intentions of reaching that milestone any time soon, as articulated by CEO Stephen Scherr, who stated, “our in-fleeting of EVs will be slower than our prior expectations.”
The past quarter witnessed Hertz grappling with lower-than-anticipated profit margins, primarily attributed to the expenses related to EV repairs and the Tesla-induced price reductions, which resulted in a 33% depreciation in the resale value of their EVs.
It’s worth noting that the decline in the Manufacturer’s Suggested Retail Price (MSRP) of EVs throughout 2023, predominantly led by Tesla, further exerted downward pressure on the fair market value of Hertz’s EV inventory. This phenomenon translates to increased salvage losses, placing a substantial burden on the company.
Scherr added, “On a unit basis, we achieved productivity gains across most categories of auto. The exception remained vehicle damage costs, particularly those on our EVs.” This underscores the financial challenges Hertz faces in maintaining and repairing their electric fleet.
Nevertheless, Hertz’s commitment to purchasing 100,000 cars from Tesla and 175,000 EVs from GM remains unwavering. However, their previous goal of having EVs constitute a quarter of their fleet by the end of 2024 is no longer feasible. To mitigate this situation, Hertz is collaborating with Tesla to enhance their EV’s performance and reduce the risk of damages. The company also anticipates that EVs from other automakers, including GM, will exhibit a lower incidence of damage and entail reduced parts and labor costs.
Currently, approximately 80% of the EVs in Hertz’s fleet are Tesla vehicles, and EVs account for approximately 11% of their entire fleet. Out of the 50,000 EVs currently in Hertz’s inventory, roughly 35,000 are Teslas.
Hertz is not alone in slowing down its EV adoption; Enterprise Holdings, the world’s largest rental car company, made a similar announcement in October 2023, delaying its electrification plans. This collective restraint within the rental car industry could be seen as an indicator of a maturing EV market. As more consumers embrace EVs, the demand for rental EVs may naturally taper off.
However, contrasting opinions suggest that this deceleration is temporary, positing that rental car companies will inevitably return to their EV adoption initiatives. Advocates argue that EVs are poised to become the standard in the rental car sector due to their cost-effectiveness and environmental friendliness when compared to traditional gasoline-powered vehicles.
