In a surprising turn of events, Hertz Global Holdings has announced its decision to sell approximately 20,000 electric vehicles (EVs) from its U.S. fleet, citing increased expenses related to collision and damage. The move comes as a deviation from their earlier commitment to electrify a significant portion of their fleet. This article delves into the details of Hertz’s decision, the impact on its financials, and the broader implications for the EV market.
The Backstory
Hertz had initially set an ambitious goal of having 25% of its fleet comprised of electric vehicles by the end of 2024. However, the company now finds itself reassessing this commitment due to the financial strain caused by collision and damage expenses, particularly associated with EVs. The decision to shift gears from electric to gas-powered vehicles is a significant departure from their previous strategy.
Financial Ramifications
Hertz anticipates facing approximately $245 million in incremental depreciation expenses in the fourth quarter of 2023 as a result of the proposed sale. This has led to concerns among investors, reflected in a 3% decline in the company’s shares at the market open. The impact on adjusted corporate core profit for the period is also a cause for caution.
Exploring the Rationalization
According to a regulatory filing by Hertz, the expenses related to collision and damage, primarily linked to EVs, remained notably high in the quarter, prompting the strategic shift. This move raises questions about the feasibility and sustainability of maintaining an extensive EV fleet, given the current challenges faced by the company.
Evolving Fleet Composition
Hertz, known for operating vehicles from prominent manufacturers like Tesla Inc and Polestar, had initially announced plans to order 100,000 Teslas by the end of 2022. Subsequently, they decided to procure up to 65,000 units over the next five years from Polestar. The shift back to gas-powered vehicles indicates a reevaluation of the practicality of sustaining such a large EV fleet.
Future Focus
Despite the setback, Hertz has affirmed its commitment to enhancing profitability for the remainder of its EV fleet. The company’s used car website currently lists over 700 EVs for sale, including models from BMW, Chevrolet, and Tesla. This suggests that, while scaling back the EV fleet, Hertz is not entirely abandoning the electric vehicle market.
Related FAQs
Q1: Why is Hertz selling 20,000 electric vehicles?
A1: Hertz is selling 20,000 electric vehicles from its U.S. fleet due to higher expenses related to collision and damage, particularly associated with electric vehicles. The decision is a strategic shift from their earlier commitment to electrify a significant portion of their fleet.
Q2: What impact will this decision have on Hertz’s financials?
A2: Hertz anticipates approximately $245 million in incremental depreciation expenses in the fourth quarter of 2023 as a result of the proposed sale. The decision has led to a 3% decline in the company’s shares at the market open, and there are concerns about the impact on adjusted corporate core profit.
Q3: Wasn’t Hertz planning to have 25% of its fleet as electric vehicles by 2024?
A3: Yes, initially, Hertz had set a goal of having 25% of its fleet comprised of electric vehicles by the end of 2024. However, the financial strain caused by collision and damage expenses, particularly associated with electric vehicles, has led to a reevaluation of this commitment.
Final Thoughts
Hertz’s decision to sell 20,000 electric vehicles reflects the challenges and complexities associated with maintaining an extensive electric fleet. While the financial considerations are paramount, this move also raises questions about the broader viability of large-scale EV adoption by rental car companies. The impact on Hertz’s future strategy and the evolving landscape of the electric vehicle market will be closely monitored.
Bernie Grady is a technology and business journalist who writes about trending topics in the world of technology, entertainment, and business. She has a keen eye for spotting new trends and loves to share her insights with her readers. Bernie has been writing professionally for over 10 years and has experience covering a wide range of topics. When she’s not writing, she enjoys spending time with her family and friends.