Rental firm Hertz Global Holdings has announced the sale of approximately 20,000 electric vehicles, including Teslas, from its U.S. fleet. This move comes about two years after the initial deal with the automaker to offer electric vehicles for rent, signaling a potential shift in the demand for electric vehicles (EVs).
Hertz stated on Thursday that it will be transitioning to gas-powered vehicles due to higher expenses related to collision and damage for EVs. Despite earlier aspirations to convert 25% of its fleet to electric by the end of 2024, the company has faced challenges, including unforeseen costs associated with EV ownership.
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CEO Stephen Scherr had previously highlighted headwinds from increased expenses for EVs, particularly Teslas, at the JPMorgan Auto Conference last year. In an effort to address certain issues, Hertz had limited the torque and speed on the EVs and offered them to experienced users on the platform.
Shares of Hertz, which also operates vehicles from Swedish EV maker Polestar among others, fell approximately 4%, while Tesla’s (TSLA.O) stock experienced a decline of about 3%.
The decision to sell the EVs is expected to result in approximately $245 million in charges related to depreciation expenses for Hertz in the fourth quarter of 2023. The move underscores the challenges faced by the EV industry as sales growth slows, prompting some carmakers to adjust their production plans.
Morgan Stanley analyst Adam Jonas noted that Hertz’s decision is indicative of the need to “reset downward” EV expectations. While consumers appreciate the driving experience and fuel savings of EVs, there are concerns about hidden costs associated with EV ownership, including collision and damage expenses.
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Hertz, which had initially planned to order 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years, now intends to focus on improving profitability for the remainder of its EV fleet.
German rental car company Sixt also made headlines in December by announcing that it had not purchased Tesla vehicles since 2022 and was selling its fleet of Teslas as part of its regular de-fleeting process. Sixt, however, reiterated its commitment to offering a range of electrified vehicles and aims to electrify 70-90 percent of its rental fleet in Europe by 2030.
Meanwhile, the wholesale prices of used EVs have experienced a decline for most of 2023, reflecting the broader trend of falling used EV values. Hertz is reportedly selling some Tesla Model 3 vehicles for as low as about $20,000, nearly half the purchase price for the cheapest variant of the compact sedan, according to its used car website. The company lists over 700 EVs for sale, including models from BMW, Chevrolet, and Tesla.
