Hertz is divesting a significant portion of its electric vehicle (EV) fleet, which primarily consists of Tesla vehicles, and will utilize the funds from these sales to purchase traditional gasoline cars. The company has cited lower-than-expected demand for EVs as well as higher-than-anticipated repair costs as the primary reasons behind this decision.
The divestment process began in late 2023 and is projected to continue through 2024. Approximately a third of Hertz’s EV fleet, which includes about 50,000 vehicles, will be sold at discounted prices. These sales are expected to generate significant revenue, but the company has already recognized an incremental net depreciation expense of roughly $245 million related to this decision. This acknowledgment is a cautious way of stating that Hertz is incurring financial losses due to this divestment.
Hertz has stated that it anticipates being able to offset these losses over the next several years. The company’s move to reduce its EV fleet comes amid a slowdown in electric vehicle sales, which have cooled off from their record highs. This development also follows recent comments from Hertz’s global CEO, Stephen Scherr, who highlighted the company’s struggles with rising repair costs and significant depreciation due to Tesla’s aggressive pricing cuts for its vehicles.
Just two years ago, Hertz announced plans to acquire 100,000 EVs from Tesla by the end of 2022. This deal was part of a broader effort to position itself as a leader in electric vehicle adoption and to bolster its portfolio with cutting-edge technology. However, the company faced significant challenges, including steep discounts from Tesla, which ultimately led to a contraction in its EV operations.
By selling a portion of its EV fleet at a discount, Hertz aims to streamline its operations and focus on maintaining and expanding its core business—car rental and ground transportation services. The sale of these vehicles will provide the company with the necessary capital to fulfill its existing obligations while allowing it to reallocate resources toward its traditional car rental segments.
Despite these challenges, Hertz remains committed to its EV future. However, the decision to divest a significant portion of its fleet suggests that the company may need to adjust its strategy in light of current market conditions and operational difficulties. The company’s ability to recover from this divestment and stabilize its financial position will depend on its capacity to generate sufficient revenue from its remaining EV portfolio while managing its costs effectively.
This article is part of a series highlighting companies navigating the complexities of the electric vehicle landscape. For more insights into Hertz’s operations and strategies, please refer to additional resources provided below.
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