The car rental giant Hertz freezes its mega-deal with Polestar. After deciding to sell off one-third of its existing EV fleet (mostly Teslas) in January, the company now puts a temporary hold on the agreement to purchase 65 000 Polestar 2 vehicles.
That’s another big blow for Geely’s daughter Polestar, which recently announced the dismissal of 15% of its personnel and the departure of Volvo as one of its major shareholders.
3 billion deal
Two years ago, Hertz ordered 65 000 Polestar 2 sedans to be delivered in the next five years, a deal valuing around $3 billion. At the time, this was a major boost for a small company that had just produced 30 000 cars in one year.
“We intend to resume the deliveries to Hertz on a big scale at a certain moment in time,” Polestar CEO Thomas Ingenlath told the Financial Times. However, it’s not at all certain if that will already be in 2025. The CEO asked Hertz not to sell its already delivered Polestars too early because that would completely destroy Polestar’s financial trustworthiness.
Ingenlath is urgently searching for $ 1,3 billion of fresh capital, and just now, Volvo (shareholder in Polestar for 48%) withdraws. The value of a Polestar share has already decreased by 40% since the beginning of this year. Mother Geely will undoubtedly be obliged to come to the rescue.
It’s been a while since Hertz reversed its ambitious plans to electrify one-fourth of its fleet of over 500,000 cars by the end of this year. That was one of the reasons it also ordered 100 000 Tesla vehicles in 2021.
The deal gave Hertz a serious headache. Tesla went into a price battle in a more competitive EV market, which is also slowing down recently, and that was very bad for the residual value of Hertz’s Tesla cars when they were at the end of their contract.
Hertz was also complaining about more accidents with its EV cars because customers weren’t used to the quite impressive acceleration from a standstill an EV can provide. The company also claims that maintenance costs for EVs are higher than those for ICE cars. Last but not least, Hertz customers don’t seem to be very eager to hire an electric car from Hertz yet.
According to Hertz, customer reluctance comes from lagging charging infrastructure (especially in the States) and insufficient knowledge about the technology and its characteristics. Therefore, Hertz will continue to invest in a charging network.
Hertz’s business model puts the company at high risk while car prices are volatile because it owns its vehicles outright. The car rental company bought Tesla’s vehicles close to their peak prices. Tesla’s price cuts last year led to lower resale values, further straining Hertz’s margins.
Hertz emerged from bankruptcy after the pandemic halted travel, hitting rental and vacation companies especially hard. The rental giant is set to report earnings on Tuesday. We’ll learn more about Hertz’s financial situation following the release.