Hertz early terminates 20,000 EVs from US fleet
Car rental giant Hertz is prematurely terminating 20,000 electric vehicles from its US fleet due to a combination of lower than expected customer demand and high operating costs. The strategic move will cost the company about $245 million in increased depreciation expenses.
Sales of the EVs have already started and will continue throughout 2024. In total, the disposals represent about one third of the company’s global EV fleet, which accounts for about 11% of its overall fleet.
In a filing to the US Securities and Exchange Commission, Hertz Global Holdings Inc said the disposals will cover multiple makes and models, although Tesla accounts for about 80% of Hertz’s EV fleet.
EVs are "mainstream"
In October 2021, Hertz announced that it was intending to order 100,000 Teslas by the end of 2022. At the time, Hertz interim CEO Mark Fields said: "Electric vehicles are now mainstream, and we've only just begun to see rising global demand and interest. The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America and a commitment to grow our EV fleet and provide the best rental and recharging experience for leisure and business customers around the world."
Six months later, in April 2022, Hertz announced a global partnership with Polestar to source up to 65,000 battery-powered cars over five years.
Quarter of fleet to be EV by 2024
Hertz had set a target of 25% of its fleet being electric by 2024, but customer demand has lagged behind the rental company’s appetite for zero emission cars. The company has now moved away from EV targets and deadlines.
Hertz said the disposal of 20,000 EVs would better balance supply against expected demand.
“This will position the Company to eliminate a disproportionate number of lower margin rentals and reduce damage expense associated with EVs,” it said.
Hertz has pledged to continue to offer customers a wide selection of EVs, and is expanding its EV charging infrastructure and developing its relationships with EV manufacturers.
EVs twice as expsensive to repair
Sourcing more affordable parts and labour for crash repairs are key priorities, with “expenses related to collision and damage,” proving to be a particular challenge for EVs, according to Hertz’s SEC filing.
This echoed comments made last October, by Stephen M. Scherr, CEO & Chairman, Hertz Global Holdings, Inc. who said in the company’s Q3 2023 earnings call that: “while conventional maintenance on electric vehicles remained lower relative to comparable ICE vehicles in Q3, higher collision and damage repairs on EVs continue to weigh on our results.”
Accident repair costs for an EV were about twice as expensive as for an equivalent ICE vehicle, he said, with the lack of replacement parts being a problem. Welcoming EVs made by GM onto the Hertz fleet, Scherr said the zero emission cars not only had an appreciably lower price point than Tesla, but also benefited from a well established national parts supply network.
Looking ahead, by the end of 2025 Hertz expects to offset its additional $245 million depreciation hit through the financial benefits of achieving higher revenue per day as well as lower depreciation and operating expenses from its remaining fleet.
Rental industry remains committed to EVs
Other major rental companies declined to comment on Hertz’s strategic decision, but did reiterate their commitment to electric vehicles.
A spokesperson for Enterprise said: “We embrace the transition to electrification as part of a more sustainable mobility future, and we’ve always believed, the best path to that future is one that maintains a long-term perspective and puts the customer at the centre of the transition. We have several thousand EVs available today in select locations throughout the US, Canada and Europe. Our fleet mix throughout our mobility lines will continue to evolve with the broader market. Key for us is the ability to offer a wide range of vehicle categories.”
In 2021, Enterprise Fleet Management conducted an analysis of over 90,000 of its leased vehicles with Geotab and found that 13% could have been economically replaced by EVs.
SIXT has already started its programme to buy 100,000 electric vehicles from BYD before 2028, and back in December 2023 a SIXT spokesperson said: “We continue to offer our customers an attractive range of electrified vehicles and stick to our goal to electrify 70-90 percent of our rental fleet in Europe by 2030. The specific path to this goal will be influenced by numerous framework conditions."
Europcar also confirmed to Global Fleet that it has no reason to delay or downsize its EV commitments.
Images: Hertz and Polestar