Car rental giant Hertz is making a significant change in its vehicle lineup, opting to sell 20,000 electric vehicles (EVs) and reinvest the proceeds in gasoline-powered cars.
This move comes as a departure from Hertz’s recent emphasis on expanding its electric fleet.
The decision stems from financial challenges associated with EVs, according to Hertz executives.
While EVs generally have lower maintenance costs, the company has faced higher expenses for collision repairs and increased depreciation.
Hertz CEO Stephen Scherr explained, “[C]ollision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle.”
Additionally, the declining prices of new EVs, notably influenced by Tesla, have diminished the resale value of Hertz’s used EV rental cars, leading to a substantial financial burden.
Scherr acknowledged the impact of Tesla’s dominant presence in Hertz’s EV fleet, constituting about 80% of it.
The ripple effect of Tesla’s aggressive pricing strategy has led to an industry-wide reduction in EV prices, contributing to the devaluation of used EVs in the market.
The financial repercussions for Hertz are substantial, with an anticipated loss of approximately $245 million due to depreciation on the EVs, averaging around $12,250 per vehicle, as disclosed in an SEC filing.
Hertz also highlighted challenges related to repairing EVs, particularly those from Tesla, citing a lack of replacement parts and trained technicians compared to more established automakers.
Scherr emphasized, “In the likes of GM and other [automakers], there are decades of establishment of a broad national parts supply network.”
Furthermore, Hertz noted that EVs, especially Teslas, are more prone to accidents, adding to the overall repair costs.
Scherr stated, “Our work with Tesla is to look at the performance of the car, so as to lower the risk of incidence of damage.”
As Hertz adapts its fleet composition to align with market dynamics and financial considerations, the shift away from electric towards gasoline-powered vehicles reflects the evolving landscape of the automotive rental industry.