FYI: Hertz restructures its EV strategy, planning extensive Tesla offload to mitigate recent financial losses.
Hertz Unveils Bold Tesla EV Sales Strategy Following Disheartening Quarter
After reporting another disappointing quarter marked by significant depreciation and management issues around its electric vehicle (EV) fleet, Hertz Corporation has announced a more aggressive plan to offload a substantial portion of its Tesla inventory. This move aims to stabilize the company’s financial health and correct the course from its faltering EV venture.
Background on Hertz’s Tesla Acquisition
In 2021, Hertz made headlines with its ambitious decision to purchase 100,000 EVs from Tesla. This announcement not only sent Tesla’s stock soaring, helping the company reach a $1 trillion market cap but also fueled expectations of a transformative shift in Hertz’s rental fleet. However, the excitement quickly wore off as Hertz struggled with the operational and maintenance complexities of managing a large fleet of Teslas. These challenges began to carve significant losses into the company’s financial statements.
Depreciation Woes and Strategic Shifts
Despite initial commitment to expanding its EV fleet, Hertz’s plans encountered further hurdles. Tesla’s subsequent cuts to vehicle prices depreciated the value of Hertz’s existing EV inventory. Faced with mounting financial strains, Hertz strategically decided to scale back the number of Teslas available for rent, opting instead to sell them—sometimes for as little as $25,000.
Leadership Changes and Continuing Financial Challenges
The adverse impact of these operational issues was significant enough to cost former CEO Stephen Scherr his position. However, Hertz’s troubles persisted beyond his tenure. In Q1, the company reported a hefty $195 million charge tied to the depreciation of EVs designated for sale. Additionally, vehicle depreciation soared by $588 million compared to Q4 2023.
Q2 Earnings Report: Deeper Losses and Strategic Response
The struggle seemed unabated as Hertz disclosed its Q2 earnings report today, revealing a loss of $1.44 per share. The report highlighted how fleet refreshment efforts expanded per-unit depreciation costs to $600 per month—more than three times the figure from a year ago.
New Leadership and EV Offloading Plan
Under the stewardship of new CEO Gil West, Hertz is ramping up efforts to divest tens of thousands of Teslas by year-end, with complete fleet overhaul expected by the end of next year. This strategic offloading aims to normalize monthly depreciation to the low $300s range, a significant reduction from current figures.
Market Reaction and Future Outlook
Hertz’s stock has plummeted by 60 percent this year, reflecting investor concerns over the company’s EV strategy and broader financial health. However, Gil West remains optimistic that more effective fleet management and streamlined business practices will eventually reverse these losses and stabilize the company’s future.
Conclusion
Hertz’s aggressive strategy to sell off a large part of its Tesla fleet represents a critical pivot in its EV journey. As the company seeks to correct course and mitigate substantial losses, all eyes are on how effectively its new management can implement these changes.
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William Kouch, Editor of Automotive.fyi
