Hertz leaving behind EVs for petrol cars

Rental giant Hertz Global Holdings is divesting approximately 20,000 electric vehicles (EVs), including Teslas, from its U.S. fleet, signaling a shift away from EVs amid softened demand. This move comes about two years after a deal with Tesla to offer its vehicles for rent. Hertz will now favor petrol-powered vehicles, citing higher expenses related to collision and damage for EVs. Despite an initial goal to convert 25% of its fleet to electric by the end of 2024, CEO Stephen Scherr highlighted challenges, particularly with Tesla EVs, and even adjusted torque and speed to prevent front-end collisions.

Shares of Hertz fell around 4%, while Tesla’s stock was down about 3%. Hertz anticipates about $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023. This decision underscores the challenges EVs face as sales growth slows, prompting automakers like General Motors and Ford to adjust production plans.

Morgan Stanley analyst Adam Jonas sees Hertz’s move as a sign that EV expectations need to be “reset downward.” While consumers appreciate the driving experience and fuel savings of EVs, there are “hidden costs to EV ownership,” Jonas noted.

Hertz had initially planned to order 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years. The company will now focus on improving profitability for the remaining EVs in its fleet.

Other rental companies, such as Germany’s Sixt, have also made adjustments. Sixt revealed it hadn’t purchased Teslas since 2022 and was selling its Tesla fleet as part of a routine de-fleeting process. Despite this, Sixt remains committed to electrifying 70-90% of its rental fleet in Europe by 2030.

Hertz’s decision to sell EVs, including Tesla Model 3s for as low as $20,000, reflects challenges in the used-EV market. Wholesale used-EV prices declined throughout 2023, influenced by falling new EV prices and rising unsold EV inventories. This trend is expected to continue, with Hertz facing significant losses on each sale, contributing to the broader decline in used EV values.