Car rental company Hertz informed United States stock market authorities this Thursday that it has started selling about 20,000 electric vehicles (EVs) from its fleet and will use part of the proceeds to buy gasoline vehicles.
Hertz said in documents filed with the US Securities and Exchange Commission, “The company expects to reinvest a portion of the proceeds from the sale of EVs in the purchase of combustion engine vehicles and to respond to consumer demand. US (SEC).
Hertz’s decision feels like a hard blow, at least psychologically, to ambitious global plans to firmly establish the use of electric cars and leave combustion vehicles behind. The big question now is whether what this rental company has done is just a warning or a reflection of what could or is happening in the automobile market.
At the moment, investors haven’t taken the news well and are heavily punishing the shares of both Hertz and Tesla, which represent roughly 80% of the rental company’s electric vehicle fleet.
Hertz made the decision after experiencing higher-than-expected wear and tear and repair costs on its electric vehicles. US$245 million.
Furthermore, apparently, Demand for Hertz’s electric cars is lower than expectedSo selling more of them will help “better balance supply with demand” expected for this type of vehicle, according to the company.
Turning to its ambitious electrification goals
The company had previously set a goal of 25% of its fleet being electric by the end of 2024, but it looks like it has just made a big change in that strategy.
In 2021, Hertz announced it would buy 100,000 Tesla vehicles, sending the electric car maker’s shares skyrocketing, and in 2022 it agreed to buy another 65,000 EVs with Swedish Polestar (owned by Volvo and Chinese corporation Geely).
In October, Hertz CEO Stephen Scherr already announced during the presentation of its third quarter results that the car rental company will reduce its EV fleet, which is more than 10% of the total, because the high cost of operating these vehicles is affecting. Its financial consequences.
As Scherer explained, EVs are more expensive to repair than gasoline cars.
Problems with Tesla
Tesla represents approximately 80% of Hertz’s electric vehicle fleet. Tesla’s aggressive price cuts throughout 2023 have forced other manufacturers to do the same with their electric vehicles, leading to rapid depreciation in the used car market, which rental car companies are very close to.
In addition, Hertz has faced some additional problems with its Teslas: they are involved in more accidents and their repair costs are higher. And, as a relatively new company, it lacks as many spare parts and trained repair technicians as other automotive companies, according to Hertz officials. These repairs are more expensive and time consuming.
A reflection of what’s happening in the market with electric cars?
The big question now is whether this decision by Hertz and the problems with demand and management of electric vehicles is a true reflection of what is happening in the market or what could happen in the coming months.
EV sales continue to grow strongly, but demand is not meeting the expectations of manufacturers and other companies that have invested billions of dollars in the sector. The prospect of interest rates staying high for an extended period of time has led companies to alter their plans and make inquiries for 2024, as explained by Reuters a few months ago.
Demand for electric cars is cooling and facing the same problems as years ago: consumers worry about the range and infrastructure to charge them and complain that their prices are significantly higher than combustion models.
Last summer, a report by consulting firm Cox Automotive showed that electric cars spend more time in dealerships than gasoline cars. At the time, car dealers had 92 days of inventory of electric vehicles compared to 54 days of conventional gasoline or diesel vehicles.
To this we must add that, like Hertz, many drivers who chose an electric vehicle have regretted their decision. This was reflected in Europe by a YouGov study for Danish startup Monta.
The survey was conducted in France, where 12% of its vehicle fleet is electric among 6,167 owners of this type of vehicle. The results show that 54% of them, more than half, regret choosing an electric car.
Article prepared in part with information from EFE and Reuters.
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