Rental giant Hertz is divesting approximately 20,000 electric vehicles, including Teslas, from its U.S. fleet, opting for gas-fueled cars instead.
Tesla car being charged in an underground parking lot. Image credit: Upgraded Points via Unsplash, free license
This move comes around two years after entering a deal with Tesla to provide its vehicles for rent. This move signifies a downturn in demand for electric vehicles (EVs), experts say.
Hertz has decided to shift its focus to gas-powered vehicles, citing increased expenses associated with collision and damage for EVs. Despite initially aiming to transition 25% of its fleet to electric by the end of 2024, the company has reassessed its strategy.
CEO Stephen Scherr last year highlighted challenges arising from elevated expenses for its EVs, particularly Teslas. To mitigate issues, Hertz even restricted torque and speed on the EVs, making them available to experienced users on the platform to enhance adaptability after certain users experienced front-end collisions.
The company’s shares, which also include vehicles from Swedish EV maker Polestar among others, experienced a decline of approximately 4%. Concurrently, Tesla’s stock saw a decrease of about 3%.
Hertz anticipates incurring approximately $245 million in charges attributed to depreciation expenses resulting from the EV sale in the fourth quarter of 2023.
While consumers appreciate the driving experience and per-mile fuel savings of an EV, there are other “hidden costs to EV ownership.” Hertz acknowledged in a regulatory filing on Thursday that expenses related to collision and damage, primarily associated with EVs, remained elevated in the quarter.
The company, which initially aimed to acquire 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years, has shifted its focus towards enhancing profitability for the remainder of its electric vehicle (EV) fleet.
Hertz’s used car website indicates the sale of certain Tesla Model 3 vehicles for approximately $20,000, nearly half the cost of the least expensive variant of the compact sedan.
The inventory includes over 700 EVs available for purchase, featuring models such as BMW’s i3, Chevrolet’s Bolt, and Tesla’s Model 3 and Model Y SUVs.
Written by Vytautas Valinskas