Hertz Selling Electric Cars To Buy Gasoline Cars

Hertz is the giant US rental car company planning to sell approximately a third of its international fleet of electric vehicles. The prime reason for this decision is the slump in the resale prices and high repair costs. Additionally, the company said it would reinvest the money and purchase traditional gas-powered vehicles. It is because the company expects that this action will result in a better balance of supply against the anticipated demand for electric cars. 

Hertz said electric cars comprise around 11 per cent of its overall fleet. The sales add $245 million in depreciation expenses to its fourth-quarter earnings. Further in this article, we will discuss in detail the decision made by Hertz. Also, we will cover the reason that resulted in Hertz selling electric cars.

Why Hertz Selling Electric Cars

The Hertz group said it would sell around 20,000 electric vehicles this year and reinvest that money in buying traditional combustion cars. Nevertheless, Hertz previously announced its objective to achieve electric vehicles comprising 25% of its global fleet by the year’s end. So, it has agreements to purchase around 100,000 cars from Tesla and an additional 175,000 from General Motors. 

The recent move of Hertz selling electric cars could put those goals into question as the resale value for electric vehicles continues to decrease. The prime reason for this is Tesla’s ongoing price cuts for new electric cars. Plus, Ford and General Motors have delayed schedules for revamp-up electric vehicle production. 

The primary reason for this harsh decision of Hertz is that the electric vehicles have been hurting Hertz’s financials. The executives have said that they have way higher damage-repair costs and depreciation even after costing less to maintain. Additionally, the decrease in the price of electric vehicles in the new car market has also pushed down Hertz’s resale value of used electric vehicle rental cars.  

Bumpy Road for Electric Vehicle Growth

The decision of Hertz selling electric cars was made because of the bumpy road that electric vehicles hit as their sales growth decreased. As a result, this causes car manufacturers like Ford and General Motors to scale back production plans. Expert analysts’ data that the hertz move was another indication that electric vehicle expectations must be ‘reset download’. 

Customers indeed enjoy the fuel savings and driving experience of electric vehicles, but there are some other hidden costs to electric vehicle ownership. For instance, expenses related to damage and conspiracy associated with electric cars remained high in the quarter. 

The giant Hertz, earlier planned to order 100,000 Tesla vehicles by 2022 and 65,000 units from Polestar in five years, now says it should focus on improving profitability for the remaining of its Hertz electric vehicles fleet.

German rental car firm Sixt also said it had not bought Tesla vehicles since 2022. Also, it saw its Tesla fleets as a part of the regular deflecting process. Nevertheless, it remains committed to offering a variety of electrified vehicles and is on track to electrify 70-90% of its rental fleet in Europe by 2030 as initially planned.

Prices of Used Electric Vehicles Dropped

Meanwhile, the wholesale prices of used electric vehicles dropped for most of 2023. This is because the pieces of new electric cars dropped as there was a decrease in electric vehicle adoption trends. Also, stocks of unsold electric vehicles rose, per Cox automotive data. Cox predicted before Hertz’s decision that electric vehicle prices would decrease more than overall used electric vehicle prices in 2024.

Twenty thousand vehicles is a small number in the total used vehicle market, therefore, the plan of Hertz selling electric cars will face a significant loss on each of these sales. Meanwhile, further pitching into the trend of decreasing values used electric vehicles values. Hertz is selling some Tesla Model 3s for as little as $20,000. This amount is almost half the purchase cost for the most inexpensive model of the compact sedan.

Tesla Mostly to Blame

Although Hertz is not blaming Elon Musk’s Tesla directly, it seems that the renowned electric vehicles are primarily to blame for Hertz’s poor performance. Approximately 11% of Hertz’s total rental fleet is electric vehicles.  Tesla makes up around 80% of these. As Tesla fiercely cuts its vehicle price, other car manufacturers follow suit. Thus, it results in decreasing prices for all-electric vehicles. Plus, it contributes considerably to the $245 million lost in depreciation. 

Compounding the problem, since Tesla is a relatively new car company, the replacement parts of their cars sometimes take time to find. Also, finding technicians with expertise in Tesla vehicle services can be challenging. These are the reasons that drive up the costs of getting the repair done. 

Tesla is not similar to General Motors and other car manufacturers. These manufacturers have been around for generations, which has resulted in the association of a vast national parts supply network.  Experts say there is an aftermarket of vehicle parts, which needs to be more mature and developed. For sure, they talk in the context of Tesla.

Additionally, the CEO of Hertz, Scherr, also told why Hertz sold electric cars. He stated that electric vehicles cause more accidents than conventional vehicles. Plus he also said that their work with Tesla is to look at the car’s performance to decrease the risk of incidence of damage. Also, he further said they are in a straightforward engagement with them on labour and parts procurement and the like. You must understand that the main reason behind the Hertz Tesla sale is Tesla itself. 

Conclusion 

Hertz has made a big push into electric cars in recent years and put the majority of Hertz electric cars for sale. However, it has now been decided that it’s time to cut back. As an outcome, the company will sell off a third of its electric fleet. It takes around 20,000 vehicles and uses this money to buy more combustion engine vehicles. The prime reason for this is electric cars have been hurting Hertz financially. Their executives said that although they cost less to maintain, they have increased damage repair costs and depreciation. 

The drastic decline in the price of electric vehicles is primarily pushed by Tesla. Indirectly, Hertz says that Tesla is responsible for Hertz’s bold decision. These Hertz sustainability initiatives will work in their favour.

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