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Hertz’s Big Move Into EVs Turns Out To Be A Dud

The Hertz car rental company is selling roughly one-third of its electric vehicle fleet, the company said in a Thursday regulatory filing to the SEC, according to the Wall Street Journal—highlighting the risk of its first-mover strategy when it comes to EVs.

The proceeds from the sale of some 20,000 of its EVs will be used to purchase ICE vehicles, the company said.

Hertz made the decision to sell off a large portion of the EV inventory it holds due to weaker demand for EVs from its rental customers.

Hertz purchased a sizeable Tesla fleet of 100,000 back in 2021—for delivery by the end of 2022—in anticipation of robust demand for electric vehicles. At the time, the announcement of such a large deal between Hertz and Tesla sent Tesla’s valuation soaring past $1 trillion.

In November 2023, Hertz’s Q3 performance was lackluster, with adjusted EBITDA margin of 13% missing analyst expectations due to increased costs of its EV fleet. This includes higher collision/damage repairs and depreciation of EVs. Hertz said that damage costs of EVs had run twice as high as that of ICE vehicles.

The depreciation issue is also critical, with Tesla dropping its prices for new vehicles, lowering the current value of Hertz’s Tesla fleet.

As of Q2023, Hertz actually only had 50,000 EVs in service, with 11% of the entire Hertz fleet being comprised of EVs. Tesla made up 80% of its EV fleet.

Hertz said at the time that the company’s integration of electric vehicles would go forward at a slower pace than it had originally planned,

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Hertz said in November that it expects its EV economics to improve as it diversifies OEMs and the used market matures.

By Julianne Geiger for Oilprice.com

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