Hertz to Offload 30K EVs This Year, Deepens Cuts Amid Mounting Fleet Losses

In a recent financial revelation, Hertz disclosed continued losses from its electric vehicle (EV) investments, announcing plans to sell 30,000 EVs this year amid depreciating values and escalating maintenance costs.

Hertz Escalates EV Sales to 30,000 Amid Surging Depreciation Costs and Strategic Shifts

In a recent report by Teslarati, Hertz announced that it had raised the number of EVs it would offer by 10,000 units to sell 30,000 of its purchased electric vehicles this year. In January, it announced the sale of 20,000 units after experiencing $245 million in incremental net depreciation on the value of its EV fleet.

Losses persisted in Q1. Hertz stated that it took a $195 million penalty for vehicle depreciation to write down the EVs kept for sale. Overall, vehicle depreciation increased by $588 million, or $339 on a per-unit basis.

Many people were surprised when Hertz announced in January that it would be the first big-scale rental firm to commit to EVs on such a significant scale.

In October 2021, Hertz announced plans to purchase $4.2 billion in Tesla EVs from the corporation. This plan was later extended to Polestar and other manufacturers. Hertz also spent millions of dollars advertising the change, using celebrities such as Tom Brady to help spread the word.

It did not go as planned. Hertz lost millions of dollars owing to Tesla's price adjustments in 2023. Furthermore, higher-than-expected maintenance expenditures weighed on profits.

When Hertz bought EVs from Tesla, Stephen Scherr, CEO, said in October 2023, “We have an opportunity to buy these cars now at roughly a third less than where we bought the initial component of our Teslas. We’re ultimately better buyers at a falling price, and the margin composition on those cars will be better.”

Hertz recorded a net income loss of $392 million for the quarter, compared to $126 million the previous year. Bloomberg reports it lost $1.28 per share, roughly three times what analysts projected.

Hertz to Trim Electric Fleet by 20,000, Cites Oversupply and Shifting Market Demands

Earlier this year's report, Hertz disclosed in a regulatory filing with the SEC that it had taken a "strategic decision" to reduce its electric vehicle fleet by 20,000 vehicles.

In the filing, Hertz stated that the figure represents nearly one-third of its global EV fleet. "These vehicle dispositions, which were initiated in December 2023 and are expected to take place in an orderly fashion over the course of 2024, will cover multiple makes and models," the business stated in its regulatory filing.

The EVs Hertz has listed for sale will "remain eligible for rental" until sold. Hertz stated that a portion of the sale earnings will be used to purchase combustion engine vehicles in high demand.

Hertz reported a significant fall in the value of its EV fleet. During the fourth quarter of 2023, Hertz experienced "approximately $245 million of incremental net depreciation expense related to the sale."

Bloomberg initially reported on the petition. It also stated that it expects the sale to better balance supply versus predicted demand for EVs, which was lower than anticipated.

The petition explains why a fleet of Tesla automobiles has already been marketed for sale in a program known as "Rent2Buy." Some vehicles were listed on Hertz's website for as little as $17,700 before tax incentives were applied.

The current maximum tax credit for a used EV is $4,000. Therefore, the Tesla Model 3 models sold by Hertz might be less than $14,000.

In its statement, Hertz stated that it anticipated a return to gas-powered vehicles would improve the company's financial performance.

“It is expected that the planned reduction in the EV fleet and reinvestment in additional ICE vehicles will improve Adjusted Corporate EBITDA across 2024, as vehicles are rotated, and in 2025, by which time all of the vehicles included in this plan are expected to be sold.”

In October 2021, Hertz agreed to buy 100,000 EVs from Tesla for $4.2 billion. There was no explicit contract between the two firms, and CEO Elon Musk stated that Hertz purchased the Model 3s at full price.

Hertz then increased its EV choices, including the Model Y and vehicles from other manufacturers such as Polestar.

During its Q3 Earnings Report, Hertz stated that it was still learning the ropes of EV ownership and that Tesla's price cuts on its lineup had hampered its financials, resulting in missing profit forecasts.

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