Bumpy road ahead: Rental giant Hertz dumps electric vehicles for gas-powered counterparts

01/22/2024 / By Ava Grace

Rental giant Hertz has eschewed 20,000 electric vehicles (EVs) from its U.S. rental fleet and is set to replace them with gas-powered counterparts.

A regulatory filing disclosed this business decision by the company to sell EVs from Tesla, Chevrolet and BMW. The company cited higher repair costs following collisions as the primary decision for the move, according to Newsweek.

Hertz’s decision to sell off EVs came about two years after it made a deal with Elon Musk to offer Tesla vehicles for rent. The rental company had earlier aimed to convert a quarter of its fleet to EVs by the end of 2024. According to Reuters, this is one sign that demand for EVs has cooled.

Moreover, analysts at investment giant Morgan Stanley said it could serve as a warning for the EV market to dial down expectations for the transportation sector going electric. Adam Jones, an analyst for the bank, said that while customers enjoy the driving experience and fuel savings per mile, there are other “hidden costs to EV ownership.” (Related: Electric cars lose value TWICE as fast as gas vehicles, study finds.)

The move follows news of both Ford and GM slowing their production and delivery of their respective electric vehicles. Last year, Hertz CEO flagged headwinds from higher expenses for its EVs, particularly Teslas, at the JPMorgan Auto Conference.

Hertz selling off EVs at DISCOUNTED PRICES

Hertz’s used car website showed Tesla Model 3s for as low as $20,000 – nearly half the purchase price for the cheapest variant of the compact sedan. Aside from this, more than 700 EVs are also on sale such as the BMW i3, Chevrolet Bolt and Tesla Model Y SUV.

The company had earlier planned to order 100,000 units from Tesla by the end of 2022 and 65,000 units from the Swedish EV maker Polestar over a five-year period. Given the move, Hertz said it would focus on improving profitability for the rest of its EVs that remain with the fleet.

Hertz also expects about $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023. Its CEO Scherr said that the rental company even limited the torque and speed on the EVs and offered it to experienced users on the platform to make them easier to adapt after certain users had front-end collisions.

Meanwhile, German rental car company Sixt said in December that it was also selling its fleet of Teslas “as part of [its] regular de-fleeting process.” While it had not purchased Tesla vehicles since 2022, it remains committed to offering a range of EVs and sticking to its goal of electrifying 70 to 90 percent of its rental fleet in Europe by 2030.

Data from Cox Automotive also noted that the wholesale prices of used EVs fell for most of 2023 as prices for newer models fell and inventories of unsold units rose. Prior to Hertz’s announcement, Cox forecast that used EV prices would decline more than overall used vehicle prices in 2024.

“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,” said Karl Brauer, analyst at iSeeCars.com.

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