After big Tesla bet, Hertz is selling 33% of EV fleet

January 12, 2024

Hertz is selling about one-third of its global electric vehicle fleet—citing weaker demand for its electrified rentals, reports The Wall Street Journal.

The car-rental company said in a regulatory filing on Thursday, January 11, that it would use part of the proceeds from selling about 20,000 EVs in the United States to purchase internal-combustion-engine vehicles.

The move represents another setback for the auto industry, which has been moving aggressively to boost sales of electric vehicles, in part to meet stiffening environmental regulations around the world. It also marks a reversal for Hertz, which in 2021 bet on EVs with a 100,000-vehicle order from Tesla.

At the time, the deal propelled Tesla’s valuation over the $1 trillion mark. With shares recently around $233.94, Tesla had a market capitalization of nearly $750 billion.

Hertz said the sell-down would help it to better balance supply against anticipated EV demand from customers. The company will cut out an outsize portion of lower-margin rentals and cut down on high expenses associated with EVs, Hertz said in the filing.

Hertz’s website highlights models made by Tesla and Swedish EV startup Polestar as among those in its EV fleet. The rental-car firm also has faced higher repair costs on its EVs, and price cuts for Tesla cars have dented the value of its electrified fleet.

The car industry’s effort to sell consumers more broadly on EVs has run into some resistance lately as automakers have largely exhausted the pool of early adopters who tend to be willing to take a chance on new technology.

EV sales in the USA grew last year, but the pace has slowed—prompting many car companies to pullback on investment plans. Buyers remain hesitant to make the switch, worried there won’t be enough places to plug in or their travel will be too limited by battery range.

Hertz said it would log a $245 million incremental net depreciation expense related to the sale. The company said in the Thursday filing that it would still offer EVs to customers and was working to improve profitability on its remaining fleet, including by expanding charging infrastructure and working with EV makers to access more affordable parts.

Research contact: @WSJ