FYI: Hertz’s ambitious EV investment has hit a major roadblock, with large-scale fleet sales signaling a strategic pivot amidst financial losses.
Hertz’s EV Strategy Falters
Rental titan Hertz had high hopes in 2021 when it launched an extensive electrification initiative, primarily purchasing approximately 100,000 Tesla vehicles and expanding its fleet with other electric vehicle (EV) brands. The strategy aimed to outperform competitors by capitalizing on the anticipated value of EVs, as suggested by industry voices including Elon Musk. However, soaring maintenance costs and significant depreciation have led to substantial financial setbacks.
Mass Fleet Reduction
Hertz is now decommissioning a significant portion of its EV collection. By the end of 2024, about 30,000 EVs, including models from Tesla, Polestar, and others, are expected to leave their fleet. The move comes as part of an effort to mitigate ongoing financial losses, attributed largely to depreciations and the impact of Tesla’s product price cuts.
The Financial Toll
Hertz’s decision to acquire $4.2 billion worth of EVs has resulted in continuous financial strain. During its recent earnings call, the company reported enduring challenges due to the depreciating value of these electric assets. The difficulties were further exacerbated by Tesla’s strategic price reductions, which diminished the resale value of Hertz’s fleet, contributing to the financial hemorrhage.
Limiting the Financial Impact
To curb losses, Hertz initiated large-scale EV sales in early 2024, with projections indicating the process will extend into 2025. Unlike traditional combustion vehicles, where Hertz found profitability in reselling used cars after reaching specified mileage, the EV segment did not offer similar financial benefits. Hertz’s financial statement revealed a GAAP net loss of $1.3 billion in the third quarter of 2024.
Opportunities for EV Buyers
For potential EV buyers, Hertz’s strategic retreat presents an opportunity. A variety of discounted EVs, such as the 2023 Tesla Model 3 priced at $21,344, signal advantageous deals for consumers exploring the second-hand market. Other available models include Chevrolet Bolt EVs, Mercedes EQBs, Ford’s Mustang Mach-E, and Volvo’s C40 Recharge.
Conclusion
Hertz’s ambitious foray into the EV market underscores the volatility and challenges faced by large-scale fleet investments in evolving automotive technologies. As the company recalibrates its strategies, this phase marks a pivotal moment for both Hertz and the broader rental and automotive industries.
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Donald Smith, Editor of Automotive.fyi
