Hertz sells off one-third of EV fleet and returns to ICE

Rental company Hertz announced that it will ditch approximately 20 000 electric cars in the US, equivalent to about one-third of its global EV fleet. Hertz names unsatisfying customer demand as one of the reasons and will reinvest in combustion-engined cars. The news smudges the company’s leading move two years ago, ordering 100 000 zero-emission cars for its fleet.

EV demand in the US isn’t strong enough to support the ambitions at Hertz. The company deploys both battery-powered models from Tesla and Polestar. It is now offloading a significant portion of them, although it was targeting a 25% zero-emission share by the end of the year. “The company expects this action to balance supply against expected demand of EVs better,” explains the press release. It will refocus on margins, as the EV switch had a stronger-than-expected cost impact.

More front-end collisions

Two years ago, Hertz wanted to position itself as an early adopter of battery-powered mobility and announced the purchase of a staggering batch of 100 000 Tesla models. After a switch at the helm, naming Stephen Scherr as the current CEO, the plan was accelerated with an agreement to buy an additional 65 000 Polestar 2 models.

Hertz believed customers would favor these cars over the higher gas prices, but Tesla subsequently drove down ticker prices, hurting residual values. The rental company also experienced increased front-end collisions as customers were less acquainted with the sudden acceleration bursts of electric cars.

The sell-off seems to be a correction of Hertz’s course on its projected road map, as it states that “it will continue to execute its strategy around EV mobility and offer customers a wide selection of vehicles”.

Customer reluctance comes from lagging charging infrastructure and insufficient knowledge about the technology and its characteristics. Hertz will, therefore, keep on investing in a charging network.

Slowdown

EVs are struggling to make their mark in the rental sector. In December last year, rival Sixt declared phasing out Tesla cars in their catalog because of those dwindling resale values and higher repair costs than combustion-engined cars. Hertz also puts these forward as an additional reason for reversing its initial plans.

Hertz expects to incur approximately $245 million in one-time expenses related to the decision, impacting its operating earnings negatively. Despite this setback, the EV market in the US experienced a record-breaking year in 2023, with sales reaching 1,2 million units. However, a notable slowdown in growth is noted compared to previous quarters.

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