In a surprising twist, rental giant Hertz announced its intention to part ways with approximately 20,000 electric vehicles (EVs) from its fleet, while redirecting its focus towards gas-powered cars. This shift comes as a stark reversal, especially after enlisting NFL legend Tom Brady to champion its transition to EVs.
Hertz, once seen as a pioneer in the electrification of its rental fleet, cited a combination of factors for this unexpected change of direction. High repair costs associated with electric vehicles and a lack of demand among renters have played a significant role in their decision.
The company’s decision to feature Tom Brady in a series of high-profile Hertz commercials in 2021 was meant to signal their commitment to EVs. They even pledged to acquire a staggering 100,000 Tesla vehicles by the end of 2022. However, Thursday’s announcement has left many scratching their heads.
In a regulatory filing, Hertz explained their rationale, stating, “The company expects this action to better align supply with the expected demand for EVs. This will allow us to reduce the number of lower-margin rentals and minimize damage expenses associated with EVs.”
Hertz anticipates completing the sale of its electric vehicles by 2025, a timeline that has sent shockwaves through the industry. As a result of this unexpected move, the company’s stock experienced a sharp decline, dropping by over 4%, and Tesla shares also suffered, falling approximately 3%.
The partnership with Tesla was just one aspect of Hertz’s grand plan to “electrify” its rental fleet. In 2022, the company had announced its intentions to purchase 175,000 EVs from General Motors and as many as 65,000 electric vehicles from Swedish automaker Polestar.
However, the pivot to gas-powered cars comes at a cost, with Hertz expecting to incur around $245 million in “incremental net depreciation expense” related to this change. These expenses will be reflected in the company’s fourth fiscal quarter of 2023.
The decision to scale back on electric vehicles is not without its critics. Hertz CEO Stephen Scherr had previously emphasized the company’s commitment to a “long-term strategy to electrify the fleet.” Currently, Hertz’s used car website lists over 700 EVs for sale, including popular models like BMW’s i3, Chevrolet’s Bolt, and Tesla’s Model 3 and Model Y SUVs.
The Hertz saga serves as a reminder of the challenges and uncertainties surrounding the electric vehicle market. While the future of transportation undoubtedly involves a shift towards cleaner and more sustainable options, the road to widespread EV adoption remains a complex one.
As Hertz reevaluates its strategy, it’s clear that the dynamics of the electric vehicle landscape are constantly evolving, and industry players must adapt to meet the ever-changing demands of their customers.