The WSJ writes, Hertz is selling about a third of its global EV fleet, citing weaker demand for its electrified rentals. The car-rental company said it would use part of the proceeds from selling about 20,000 EVs in the US to purchase internal-combustion-engine vehicles.
The move represents another setback for the auto industry, which has been moving aggressively to boost sales of EVs in part to meet stiffening environmental regulations. It also marks a reversal for Hertz, which in 2021 bet on EVs with a 100,000-vehicle order from Tesla and plans to better stock its fleet with battery-powered vehicles.
Hertz said the sell-down would help it better balance supply against anticipated EV demand from customers. The company will cut out an outsize portion of lower-margin rentals and cut down on high expenses associated with EVs. It's website highlights models made by Tesla and Polestar as among those in its EV fleet. The firm also offers BEVs made by Kia, Chevrolet and Volkswagen Group.
Hertz had initially set a goal to electrify a quarter of its fleet by the end of 2024, but pulled back and said it would focus on matching supply with demand and focus on margins. Hertz also faced higher repair costs on its EVs, and price cuts for Tesla cars have dented the value of its electrified fleet.
The car industry’s effort to sell consumers more broadly on EVs has run into resistance as automakers have largely exhausted the pool of early adopters. EV sales in the US grew last year but the pace has slowed, prompting many car companies to pull back on investments. Buyers remain hesitant to make the switch, worried there won’t be enough places to plug in or their travel will be too limited by range.
Hertz said it would log a $245MM incremental net depreciation expense related to the sale. The company said it would still offer EVs to customers and was working to improve profitability on its remaining fleet, including by expanding charging infrastructure and working with EV makers to access more affordable parts.
Our Take 1: This is no small development. About 11%... or 50,000 vehicles... of Hertz's fleet is comprised of EVs. If a company that specializes in managing vehicles and transportation logistics can't make EVs work as they hoped, is it realistic to expect the general public to be able to do so en masse? And remember, this is occurring against a backdrop of a Biden admin ambition to expand BEV market share by as much as 6x... to 60%... by 2030 or 2035. If that goal was overly ambitious before this announcement, it's doubly so now.
Our Take 2: Note to Wall Street analysts, the sands are shifting under the "EVs for all" narrative. Ergo, this would be a good time to cut projections for 2024/25 EV sales, while bumping up sales forecasts for traditional ICE and hybrid vehicles. You might want also to consider tweaking upward your outlook for domestic gasoline consumption as well. Just saying.
EVs make no sense for rentals. Where are tourists and business travelers going to recharge? In their hotels? Drive to a charging station and walk back to their hotel?
Good article, thank you. The cost to "repair" EVs, elevated insurance premiums and costly tows and rescues have hurt the bottom line as well.