Hertz, the renowned rental car company, is set to sell off 30% of its electric vehicle (EV) fleet, as disclosed in a Securities and Exchange Commission filing. This strategic move reflects Hertz’s response to align supply with demand and address cost challenges associated with EVs, according to Hertz CEO Stephen Scherr.
The 20,000 EVs, representing various makes and models, will be gradually sold from Hertz’s U.S. fleet throughout 2024. This decision follows Hertz’s ambitious move to purchase 100,000 Tesla Model 3s in 2021, marking the largest single order for electric vehicles. Some of these Tesla models are currently being offered on the Hertz website at reduced prices, starting from $18,000 or $14,000 after applying the $4,000 federal tax credit for used EVs.
Scherr clarified that the decision to reduce the EV fleet is based on operational performance and higher rates of depreciation compared to gas-powered vehicles. Despite this adjustment, Hertz remains optimistic about the long-term potential of electric vehicles, emphasizing that their initial purchasing strategy was ahead of the market’s adoption curve.
The decrease in demand for EV rentals, despite the increasing market share of EVs in new car sales, led to the decision to reallocate resources. EVs accounted for almost 7% of new car sales in 2023, with expectations to grow to 10% in 2024 and 15% in 2025, according to Cox Automotive. However, Tesla’s price cuts negatively impacted residual values for used EVs, contributing to Hertz’s strategic shift.
Hertz plans to reinvest a portion of the proceeds from the EV sales into acquiring more in-demand internal combustion vehicles. Despite the reduction in the EV fleet, Hertz remains committed to investing in EV charging infrastructure and fostering relationships with EV manufacturers for more affordable access to parts and labor. The decision aligns with an analysis from 2023, indicating that repairs for EVs cost 29% more than internal combustion vehicles, with EV parts being approximately 48% more expensive, as reported by Solera Holdings.