Hertz, a company that has been actively expanding its electric vehicle offerings, has now made the decision to scale back its operations. The company plans to sell approximately 20,000 vehicles from its electric fleet, generating funds to acquire additional gasoline-powered vehicles.
Hertz executives have acknowledged that electric vehicles have been impacting the company’s financials. While these vehicles have lower maintenance costs, they also incur higher expenses for damage repairs and depreciation.
“Collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle,” Hertz CEO Stephen Scherr said in a recent analyst call.
The decline in EV prices in the new car market has had a negative impact on the resale value of Hertz’s used EV rental cars.
“The 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 a salvage creates a larger loss and, therefore, greater burden,” Scherr said.
In general, individuals are typically willing to pay a slightly lower price for a pre-owned vehicle compared to a brand new one. With the decrease in the price of new cars, it naturally follows that the demand for used cars decreases as well.
Hertz anticipates incurring a significant loss of approximately $245 million as a result of the depreciation on the electric vehicles. This amounts to an average of around $12,250 per vehicle, as disclosed in the company’s SEC filing.
It seems that Hertz is suggesting that Tesla is primarily responsible, although they are not explicitly stating it.
Hertz’s electric vehicle fleet is predominantly composed of Tesla vehicles, accounting for approximately 80% of the total. In terms of Hertz’s overall rental fleet, electric vehicles make up around 11%. Other automakers have been compelled to lower the prices of their electric vehicles as Tesla continues to make significant reductions. When automakers lower the prices of new vehicles, it has a significant impact on the value of those models in the used car market, leading to a rapid decrease in their worth.
Depreciation plays a significant role in the business of rental car companies like Hertz, influencing their vehicle selection for their fleets in the used car market.
According to Hertz executives, Tesla, being a newer company, faces challenges in terms of readily available replacement parts and trained repair technicians. This can result in higher costs and longer repair times compared to other car companies.
“Remember, in the likes of GM and other [automakers], there’s decades of establishment of a broad national parts supply network,” Hertz CEO Stephen Scherr said in a recent analyst call. “There’s an aftermarket of parts that is there, that is less mature, obviously, in the context of Tesla.”
In addition to the higher repair costs associated with crashes, Scherr also noted an increase in the number of accidents involving EVs. According to the individual, the main issue lies with Teslas, which account for 80% of Hertz’s electric vehicle rental fleet, in both of these regions.
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