Rental firm Hertz Global Holdings (HTZ.O) dumped about 20,000 electric vehicles, including Teslas, from its U.S. fleet about two years after a deal with the automaker to offer its vehicles for rent. It plans to reinvest the proceeds into gas cars and expects higher earnings. The move comes as EV demand has cooled, and Hertz has faced significant unanticipated costs in other parts of the business.
Hertz will also look at cheaper EVs, like a redesign of the Chevy Bolt EUV, which it currently rents out for $285 a week, or a new US$35,000 Chevrolet Equinox going into production. These models are more accessible to rent and should be less costly to fix, Hertz CEO Stephen Scherr told CNBC’s “Squawk on the Street.”
“It is important to note that our decision to sell these vehicles is not related to customer demand or a lack thereof,” the company said in a statement. Instead, it results from higher expenses related to collision and damage for EVs, which have doubled over the past year. Hertz will reinvest the proceeds from the sale into traditional gasoline vehicles and anticipates this to impact its earnings in 2024 and beyond positively.”
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The EV sale should cut the fleet of these cars by about a third, Hertz says. The rest of the fleet will remain unchanged, including EVs from GM, BMW, Audi, Nissan, Ford, and other brands.
Hertz has had some success with EV rentals, but the high maintenance and repair cost has limited those efforts. It has worked to mitigate those issues by partnering with EV owners to help them maintain their cars, offering a free maintenance plan for its fleet.
It also has been sharing data about the performance of its EVs with city planners so they can plan for charging infrastructure. It is donating EVs to high school and community college auto programs so students can get hands-on experience with the cars.
Investors weren’t happy with the news that Hertz will cut its EV fleet, with shares falling about 3 percent at market open. The stock has lost about 48% in the past 12 months, compared with a gain of about 11% for the S&P 500. Its two active high-yield bond series also fell on Thursday. Those bonds are maturing in 2026 and 2029. They are paying about 8.5% and 9% respectively. Bond prices often reflect expectations about interest rates and the economy’s direction.