(CTN News) – Car rental company Hertz surprised many last week by selling a third of its global electric vehicle fleet, reversing course on several big bets.
It seems like the move follows the rest of the auto industry, which has shifted its stance on EVs after years of aggressive plans and projections.
General Motors and Honda Motor announced in October that they were canceling plans to build affordable EVs together. With consumer spending slowing and the EV market getting more crowded, Tesla cut prices of its cars globally in 2023, hoping to reignite demand.
In an interview on “Squawk on the Street” on Thursday, Hertz CEO Stephen Scherr said the company was “trying to bring supply in line with demand,” following large orders of Tesla and GM electric cars.
Tesla’s and EV’s being the best-selling cars will eventually make them the best rental cars, Scherr says. We might have been ahead of ourselves about how fast it’ll happen, but it’ll happen.”
Hertz said it’ll sell about 20,000 electric cars. The proceeds would be used to buy ICE cars. As a result, the company would have to take an additional $245 million in depreciation.
In a regulatory filing, Hertz said it expects to boost its bottom line by $245 million over the next two years by replacing those EVs.
EV MSRP declines are driving down fair market values of the company’s cars, according to its third-quarter earnings call in October. According to the company, 11% of its fleet was electric in October.
By the end of 2022, Hertz plans to have 100,000 Teslas in its fleet of electric cars.
A commercial featuring Tom Brady alongside parked Tesla Model 3s in a garage accompanied the announcement.
During “Last Call” on Thursday, Dan Ives said Hertz’s move to sell part of its Tesla fleet is a “black eye” for the company. Ives says Hertz miscalculated the marketing and rollout of its move into electric cars and Teslas.
According to Hertz’s original thesis, customers would be eager to rent EVs for a variety of reasons, like avoiding high gas prices or choosing a more environmentally friendly rental car.
According to Scherr, this sort of experimentation happens, but there’s not enough demand to justify maintaining such a big fleet now. In light of Tesla’s recent decision to cut prices, Scherr said Hertz’s decision was influenced by deprecation as well.
By 2024, Hertz wants a quarter of its fleet to be EVs. Taking this course instead is about financial performance and operational integrity, Scherr said.