Car Rental Giant Hertz Ditches EVs, Including Tesla, for gas-powered cars

Hertz, the major rental company, is divesting itself of approximately 20,000 electric vehicles (EVs), including those from Tesla, in its U.S. fleet. This move comes around two years after entering into a deal with Tesla to include its vehicles in the rental offering. The decision to part ways with EVs in favor of gas-powered vehicles signals a potential slowdown in EV demand.

Hertz announced on Thursday that it will be shifting its focus to gas-powered vehicles due to higher expenses associated with collision and damage for EVs. This comes despite Hertz’s initial goal to convert 25% of its fleet to electric by the end of 2024. CEO Stephen Scherr had previously highlighted challenges related to increased expenses for EVs, particularly Tesla models, during the JPMorgan Auto Conference last year.

Hertz had taken measures such as limiting torque and speed on EVs, making them available to experienced users, to address adaptability concerns following front-end collisions. Despite these efforts, the company has decided to move away from EVs.

The company’s shares, which also includes vehicles from Swedish EV maker Polestar in its fleet, experienced a 4% decline, while Tesla’s stock dropped approximately 3%. Hertz anticipates around $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023.

This decision by Hertz reflects the challenges faced by the EV industry as sales growth slows down, prompting major automakers like General Motors and Ford to revise their production plans. Analysts, including Adam Jonas from Morgan Stanley, view Hertz’s move as an indication that expectations for EVs may need to be adjusted downward.

While consumers appreciate the driving experience and fuel savings of EVs per mile, Hertz cited “hidden costs to EV ownership,” specifically mentioning high expenses related to collision and damage. The company had initially planned to order 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years. However, it now aims to enhance profitability for the remaining EVs in its fleet.

Other rental companies, such as Sixt, have also made adjustments, revealing in December that it had not purchased Tesla vehicles since 2022 and was selling its existing fleet of Teslas as part of its regular fleet management process. Sixt remains committed to offering a variety of electrified vehicles and aims to electrify 70-90% of its rental fleet in Europe by 2030.

The decision by Hertz to sell its used EVs, including Tesla Model 3s, at significantly reduced prices, such as around $20,000, reflects the challenges faced by the used EV market. Wholesale used EV prices declined throughout 2023, influenced by falling prices for new EVs and an increase in unsold electric vehicle inventories, according to Cox Automotive data. Analysts predict a further decline in used EV prices in 2024.

While the sale of 20,000 cars might not significantly impact the total used vehicle market, it implies significant losses for Hertz on each sale and contributes to the overall trend of declining used EV values, as noted by analyst Karl Brauer. Hertz’s used car website lists over 700 EVs for sale, including models from BMW, Chevrolet, and Tesla. XD XD XD XD XD XD XD XD

In conclusion, Hertz’s decision to part ways with a significant portion of its EV fleet underscores the challenges faced by the EV industry, raising questions about the broader trajectory of EV adoption in the market.