Rental car giant, Hertz, is selling 20,000 vehicles from its EV fleet, including Teslas. Hertz made a big move in favor of electric vehicles more than two years ago, partnering with companies like Tesla to offer their vehicles for rent.
The shift away from EVs has come as a shock to some since the 20,000 vehicles they are selling represent one-third of Hertz’s overall US electric fleet. High repair costs and weak demand were noted as a few of the company’s deciding factors.
Reasons for Hertz’s Decision
Weak Demand
The road to all-electric driving has been bumpy, to say the least. The recent slowing in demand would suggest consumers aren’t as ready for the product as forecasters once predicted. High upfront costs, limited charging infrastructure, and range anxiety are still proving to be major hurdles on the consumer side.
Wholesale used EV prices fell for most of 2023. Studies estimate the average EV sticker price fell somewhere between 20-30% throughout the last year.
Rental car companies battle consumer demand issues from a profitability standpoint. Forecasters have shown that used EV prices will likely continue to decline at a faster rate than gas-powered cars, hence Hertz’s decision to shift focus.
Similarly, Sixt, a German rental car company, is now prioritizing selling off Teslas and other EVs “as a part of (their) regular de-fleeting process.”
High Repair Costs
High repair costs have been perhaps the biggest drawdown to rental companies like Hertz. Expenses related to collision and damage are now being seen as the hidden cost of owning an EV.
Hertz will begin by offloading older Tesla models at a significant discount. Besides collision and damage, rental car companies also have to navigate battery replacement, another costly expense, especially when it comes to older EVs.
The depreciation expenses associated with Hertz’s EV fleet are expected to eclipse $245 million for Q4 of 2023 alone.
Implications for the EV Market
Many analysts are combining the actions of rental car giants like Hertz with declining consumer sentiment, forecasting a further fall in EV demand.
Customers still note driving experience and fuel savings as big positives for EVs, but issues such as high repair costs may hinder the long-term viability of EVs in totality.
With that being said, rental car companies such as Hertz, will always cycle in and out parts of their fleet to accommodate for present demand. Future improvements in vehicle manufacturing and charging infrastructure could go miles in terms of increasing consumer sentiment and overall demand.
Looking Ahead
Like most companies in the retail space, Hertz is actively looking for ways to better the EV options they can offer customers. With improved infrastructure being developed each day, it’s likely only a matter of time before EVs make up the majority of rental cars on the market.
While Hertz’s decision certainly raises questions, it’s far too early to write off EVs entirely. The future of EVs depends on overcoming current challenges and adapting to changing market needs.
