In a surprising turn of events, rental giant Hertz Global Holdings has decided to part ways with electric vehicles (EVs), including popular models like Tesla, and revert to gas-powered cars. This decision comes approximately two years after the company’s ambitious deal with Tesla to incorporate EVs into its rental fleet. The move sheds light on a potential slowdown in EV demand, prompting Hertz to make a strategic shift.
Hertz had initially set a goal to convert 25% of its fleet to electric by the end of 2024. However, citing increased expenses related to collision and damage for EVs, the company is now adjusting its course. The CEO, Stephen Scherr, had previously flagged challenges, particularly with expenses tied to Tesla vehicles.
To address some concerns, Hertz had even limited the torque and speed on EVs, making them available to experienced users on the platform. This adjustment aimed to enhance adaptability and reduce front-end collisions.
Despite its initial plans to order 100,000 Tesla vehicles by the end of 2022, Hertz has decided to focus on gas-powered vehicles, causing a 4% dip in its shares. The company expects approximately $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023.
This move by Hertz underscores the challenges faced by the EV market, with other major automakers like General Motors and Ford scaling back production plans due to slowing sales growth. Morgan Stanley analyst Adam Jonas suggests that Hertz’s decision is indicative of the need to “reset downward” expectations for EVs.
While consumers appreciate the driving experience and fuel savings of EVs, hidden costs, such as collision and damage expenses, remain a concern. The announcement also follows a trend seen with other rental companies, such as Sixt, which has not purchased Teslas since 2022 and is selling its existing fleet as part of a routine de-fleeting process.
The decision by Hertz to sell off about 20,000 EVs, including Tesla Model 3s at significantly reduced prices, could contribute to a further decline in used EV values. This comes as wholesale used EV prices experienced a drop throughout 2023, aligned with falling prices for new EVs and increased inventories of unsold electric vehicles.
Hertz reassures that it still plans to offer EVs but will prioritize improving profitability for the remaining EV fleet. The company’s strategic shift and the impact on the EV market highlight the ongoing challenges and adjustments faced by the automotive industry in the pursuit of widespread electrification.