In a blow to President Biden’s EV agenda, Hertz is selling about 20,000 electric vehicles it had purchased under a 2021 plan to electrify its rental fleet.
Executives at the company pointed to higher costs and difficulty associated with repair and maintenance as reasons for the sale.
Hertz will reinvest a portion of the money from the sale of its electric vehicles into lower cost conventional vehicles.
Hertz is cutting its losses in its adoption of electric vehicles and has decided to sell about 20,000 electric vehicles, one-third of its global fleet, and reinvest a portion of the proceeds in internal combustion engine vehicles. The sale is expected to cost the company about $245 million of net depreciation in addition to the depreciation expense Hertz will report in the fourth quarter 2023. The change is due to the disappointing results that the car rental company reported last quarter. Hertz CEO, Stephen Scherr acknowledged the difficulty — and cost — of maintaining the EV fleet, recognizing that collision repairs to electric vehicles “can often run about twice that of a comparable combustion engine vehicle.” With the remaining electric vehicles available for rental, Hertz will implement initiatives to improve their profitability by making more charging stations available, growing relationships with EV manufacturers, and making it easier for customers to acclimate to an EV rental. The company plans for the EV sales to be completed by 2025.
The sale will include Teslas, Chevrolet Bolts, Volvos, many of which are already up for sale online — some at a steep discount. The car rental company made its EV announcement in 2021, with grand plans to help EVs go mainstream. It placed a $4.2 billion order for 100,000 Teslas–the largest ever single purchase of electric vehicles. But the auto market has changed dramatically in the years since, as early adopters of electric vehicles dried up, leaving consumers with skyrocketing interest rates and stuck with a few expensive models to choose from and virtually no used market as an alternative. Due to signs of growing EV inventory and slowing sales, auto industry executives have admitted that their ambitious electric vehicle plans are in jeopardy, at least in the near term, and have cut back on their EV investments and rollout timelines.
Electric vehicles sales have slowed as they have an affordability problem, costing more on average than internal combustion engine vehicles. A moderately optioned Ford Mustang Mach-E SUV costs at least $50,000, while an electric F-150 pickup with the larger battery pack costs $70,000. Toyota’s lone electric model, the $42,000 bZ4X SUV, costs some $14,000 more than a RAV4. The average price paid for an electric vehicle in September was $50,683, according to Kelley Blue Book. Further, a large portion of battery-powered models available in the United States are sold by luxury brands like Audi, Porsche, and Mercedes-Benz. Many people cannot justify the extra upfront cost of going fully electric, particularly since they would be taking a gamble on an emerging technology with bugs yet to be worked out.
Variety in electric vehicle models is also lacking as there is not a single full-size electric SUV with three rows on offer from a mainstream brand. On top of that, inflated interest rates are driving monthly loan payments out of reach.
The shift back to more conventional cars marks a reversal of a strategy centered on electric vehicles, which Hertz hoped would provide higher rental prices and hold the vehicles’ value. Tesla’s price cuts over the past year, however, lowered the value of the cars in Hertz’s fleet and with EV sales growth slowing, it is not clear if consumers will even want them in the used-car market. Hertz had initially set a goal to electrify a quarter of its fleet by the end of 2024.
Hertz plans to sell a third of its U.S. electric vehicle fleet and reinvest in gas-powered cars due to weak demand and high repair costs for its battery-powered options. EV sales have slowed sharply over the course of 2023, rising just 1.3 percent in the final quarter. Hertz will use some of the money raised by selling off electric vehicles to buy gas-powered vehicles. This will put a dent in President Biden’s plans of having 50 percent of all new vehicle sales be electric by 2030 and his climate agenda.