EV acceptance suffered a new blow this week in the USA as the car rental giant says it will slash its EV fleet by a third citing high crash repair cost, depreciation…and customer preference
Hertz, which has made a big push into electric vehicles in recent years has decided it’s time to slow down. The company says it will sell off a third of its electric fleet, totaling roughly 20,000 vehicles, and use the money they bring to purchase more petrol-powered vehicles.
Around 600 ex-rental Teslas are already on sale and the company says the sell-off will probably cost it US$245m, about $12,250 a vehicle. The majority of its electric fleet is Teslas, though it also operates Polestar, and its initial deal with Elon Musk’s company sent share prices soaring.
Electric vehicles have been hurting Hertz’s financials, executives have said, because, despite costing less to maintain, they have higher damage-repair costs and it turns out, higher depreciation. Depreciation is being partly blamed on a price-cutting battle between the big EV makers, led by Tesla in the US.
“Collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle,” Hertz CEO Stephen Scherr said in a recent analyst call, reported by
And EV price declines in the new car market have pushed down the resale value of Hertz’s used EV rental cars.
“The MSRP declines in EVs over the course of 2023, driven primarily by Tesla, have driven the fair market value of our EVs lower as compared to last year, such that a salvage creates a larger loss and, therefore, greater burden,” Scherr said.
Tesla makes up about 80% of Hertz’s EV fleet, and, altogether, EVs make up about 11% of Hertz’s total rental fleet. Tesla has been aggressively cutting its vehicle prices leading other automakers to do the same for their electric vehicles. When automakers reduce the prices of new vehicles, that pushes down the value of those models in the used car market, causing rapid depreciation.
“Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter,” Hertz said in a regulatory filing on last week.
The company, which had earlier planned to order 100,000 Tesla vehicles by 2022 end and 65,000 units from Polestar over five years, said it would focus on improving profitability for the rest of its EV fleet.
For comarison German rental car company Sixt said in December it had not purchased Tesla vehicles since 2022 and was selling its fleet of Teslas “as part of our regular de-fleeting process”.
It still plans to offer a range of electrified vehicles and “stick to our goal to electrify 70-90 percent of our rental fleet in Europe by 2030”, it said on Thursday.
