As the news of Hertz’s fire sale on previously rentable Teslas makes its way through the news cycle, the rental giant has also quietly announced that it’s pivoting more toward traditional gas-powered vehicles in the future. The company says that it is “rebalancing” the numbers in its fleets, which means selling off a third of its EV fleet and replacing those cars with ICE models.
According to Automotive News, Hertz said that it expects to sell off 20,000 cars in its EV stock, and that process already started as early as last month. The cash generated from the sales of its EV fleet will be pumped back into meeting demand for rental ICE vehicles. This comes on the heels of Hertz’s October announcement that it would be scaling back its EV operations, citing high repair costs and reduced residual value compared to the rest of its vehicles as reasons why its EV rental operations weren’t going so well.
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The rental car industry is having a reckoning moment with EVs
Rental car customers have had a lot of frustrations with EVs last year, leading big players like Hertz to now focus on gas cars instead.
To some anti-EV pundits, Hertz is getting its just desserts. To them, Hertz has overinvested in a technology that isn’t proven, ready, or wanted by consumers. Now it has to pay the piper for overbuying a fleet of cars that no one wanted.
But is that what’s actually going on here?
True, the growth in demand for EVs has been a bit softer lately than many expected, but that information is likely immaterial to Hertz’s woes. Hertz has said that 80% of its EVs are Teslas, and although Hertz says that EVs come with higher repair costs, we can’t help but wonder: is this an EV thing, or is it a Tesla thing?
Hertz has claimed that damage and collision costs are high for its EV rentals. Given Tesla’s higher-than-average insurance costs and notoriously long and expensive repair times, it almost feels as if the concept of EV running and repair costs have been conflated as being an EV thing, rather than a more specific Tesla-adjacent problem. (Hertz has not responded to a request for comment from InsideEVs.)
Moreover, not long after it started purchasing Teslas, price cuts as well as the reintroduction of the $7,500 new EV tax credit meant the Model 3 and Model Y became dramatically cheaper. Sometimes literally overnight. Those cars settled down in the mid-$30,000 range and low $40,000 range, respectively. That may be good for consumers in search of a deal, but it had the effect of hurting resale value. Hertz had effectively overpaid for vehicles that it would not be able to get anywhere near as much of a return on when it was time for them to be sold, and resales are a huge source of revenue for rental companies.
Other automakers may have cut prices, but none as dramatically and carte blanche as Tesla. These problems aren’t just affecting rental companies, as Tesla owners have openly and loudly alleged that reduced residual values due to price cuts have abnormally hurt their resale value.
But again, that’s more of a Tesla problem, rather than an EV problem. The rental car company Sixt seems to recognize this, it still plans to electrify 90% of its rental fleet, but it’s pivoting away from Tesla for similar reasons as Hertz.
(It’s worth noting that while the bulk of Hertz’s EV fleet is—or was—comprised of Teslas, it also purchased a substantial amount of Polestar 2s as well. It’s unclear whether those cars suffered with the same repair cost issues, although we do know they tended to have low resale values as well.)
Finally, it’s worth noting that Hertz and other rental car companies haven’t exactly nailed the experience and education part of the EV piece. It’s not hard to find a consumer who rented an EV from Hertz and encountered bad customer service, got surprised with an EV and no explanation as to how it works, or received any instruction on how and where to charge.
Heck, I rented a Kia EV6 from Hertz last April in Phoenix. The experience was more than slightly frustrating; I was given a car with a 50% state of charge despite the reservation asserting that the car would be at or close to 100%. I needed to go to Tuscon, about two hours away, and I hadn’t planned or researched online where I could DC fast charge near PHX airport. It’s not fun trying to find an accessible DC fast charger in an unfamiliar city when you’re on a time crunch.
I’m paid to understand these things so perhaps I am naturally more prone to suffering than a normal driver. However, I couldn’t help that this experience could make the average renter hate EVs.
Still, a reduction in the EV fleet doesn’t mean that Hertz is eliminating its fleet entirely. Hopefully, Hertz has learned a lesson here, and a smaller, more streamlined EV renting experience prevails.
On the flip side, the purge of 20,000 EVs from Hertz’s fleets means that used EV deals might be the name of 2024. Those $20,000 three-year-old Teslas might be the rule, not the exception.