Hertz, one of the leading rental car companies, has recently announced their decision to sell off a significant portion (approximately one third) of their electric vehicle fleet. This decision, which may come as a surprise to some, is primarily driven by a decrease in demand for electric vehicles and unexpected high repair costs.
The process of selling off their EVs began last month and is expected to continue through 2024. As electric vehicle-focused blogs have noted, the cars are being sold at heavily discounted prices. In a filing made on Thursday morning, Hertz disclosed that the sale is resulting in a net depreciation expense of around $245 million. This may seem like a large loss, but the company is optimistic that it will be able to recoup this amount in the coming years.
This move by Hertz to reduce their EV fleet comes amidst a slowing growth in electric vehicle sales. Additionally, the decision follows recent remarks made by Hertz’s global CEO Stephen Scherr about the company’s struggles with high repair costs. These costs were exacerbated by the fact that many of the Teslas in their fleet were being used by Uber drivers. The dramatic depreciation of Tesla’s vehicles after the company’s price cuts also contributed to Hertz’s decision.
It is worth noting that just two years ago, Hertz made headlines by announcing their plan to purchase 100,000 Teslas by the end of 2022. This news not only helped the company recover from a tumultuous bankruptcy but also boosted Tesla’s valuation to over $1 trillion for the first time. Unfortunately, this plan never came to fruition.
By October of 2023, Hertz had only managed to acquire 35,000 Teslas, and their total electric fleet consisted of only around 50,000 vehicles. Despite this, Scherr reaffirmed their commitment to buying 100,000 cars from Tesla, even as the value of their modest EV fleet continued to decrease due to the automaker’s price cuts.
However, Tesla was not the only company that Hertz had ambitious plans with. In 2022, Hertz also announced their intent to purchase up to 175,000 EVs from General Motors and an additional 65,000 from Polestar. At this point, it is unclear how the decision to sell a third of their existing EV fleet will impact these plans, and Hertz has yet to comment on this matter.
