Hertz slows down on EV plans
During the third-quarter earnings call this week, Scherr referred to Tesla’s price cuts negatively impacting the resale value of its EVs and higher-than-expected repair costs for electric cars as a reason to slow its pace of electrification.
Scherr said, “our in-fleeting of EVs will be slower than our prior expectations.”
The rental car company’s margins also remained behind expectations, and the CEO said EV repairs were partly to blame. “Our direct operating expenses remained controlled in the quarter as they grew with transaction volume. On a unit basis, we achieved productivity gains across most categories of auto. The exception remained vehicle damage costs, particularly those on our EVs.”
Scherr added, “MSRP declines in EVs over the course of 2023, driven primarily by Tesla, have driven the fair market value of our EVs lower as compared to last year, such that as salvage creates a larger loss and therefore greater burden.”
Hertz now has nearly 50,000 vehicles in its fleet – off-target of the 100,000 Teslas that Hertz originally ordered and expected by the end of 2022. Still, about 80% of the battery-electric cars in its fleet are Teslas today. About 11% of Hertz’s entire fleet is comprised of EVs now.
Despite the delays and changed calculations, the company says it is sticking to its plan to fleet 100,000 electric cars from Tesla and 175,000 from GM. However, Hertz will not achieve its previous goal of having electric vehicles makeup more than a quarter of its fleet by the end of 2024.
“Our focus and our work with Tesla is to look at the performance of the car so as to lower the risk of incidents of damage,” Scherr said. “And we’re in very direct engagement with them on parts procurement and labour and the like.”
The fact that Hertz’s fleet of Teslas is progressing much more slowly than planned initially had already become apparent in February. However, the company had not given a reason like today. When the car rental company placed its order in October 2021, it was aware that it may not be fulfilled on time due to external reasons. It cited the then-ongoing global semiconductor crisis and other pressures on international supply chains as potential bottlenecks.
“Remember, in the likes of GM and other OEMs, there’s decades of establishment of a broad national parts supply network. There’s an aftermarket of parts that is there that is less mature obviously in the context of Tesla,” Scherr said, adding that margins and other EV issues would improve as the company looks to “diversify” that part of its fleet.
These will not only be Tesla cars but also cars by Polestar and electric cars by General Motors. Hertz had ordered up to 65,000 Polestars in 2022 to be delivered over a period of five years. GM is to deliver 175,000 units by 2027.
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