(CNN) — Hertz, which has bet heavily on electric vehicles in recent years, has decided it’s time to cut costs. The company will sell a third of its electric fleet, which totals 20,000 vehicles, and use the money to buy more gasoline cars.
Executives said electric vehicles hurt Hertz’s finances. As they explained, although these cars are cheaper to maintain, they also have higher damage repair costs and, in addition, higher depreciation.
“Collision and damage repairs on an electric vehicle can often be double those associated with a comparable combustion vehicle,” Hertz CEO Stephen Sher said in a recent meeting with analysts.
Additionally, the decline in the price of electric vehicles in the new car market has reduced the resale value of used Hertz rental cars.
“The drop in EV prices during 2023, driven primarily by Tesla, reduced the fair market value of our EVs compared to last year, such that salvage creates a larger loss and thus a higher burden,” Scher said.
Simply put, people are generally willing to pay a certain amount less for a used car than for a new one. As the price of new cars falls, people are willing to pay more to buy a used car.
Hertz expects to lose about $245 million due to depreciation of electric vehicles, an average of $12,250 per vehicle, the company said in a filing with the Securities and Exchange Commission. short name in English).
Although Hertz isn’t directly pointing fingers at anyone, it seems Tesla bears most of the blame.
Tesla represents about 80% of Hertz’s fleet of electric vehicles, and in total, electric cars represent about 11% of Hertz’s total rental fleet. Tesla has been aggressively cutting the prices of its vehicles, prompting other manufacturers to do the same with their electric vehicles. When automakers cut the price of a new car, the value of that model drops in the used vehicle market, causing rapid depreciation.
For car rental companies like Hertz, which sell many vehicles on the second-hand market, depreciation has a big impact on their business, and is an important factor when deciding which cars should be in their fleet.
As a relatively new company, Tesla doesn’t have as many replacement parts or trained repair technicians as other car companies, making repairs expensive and time-consuming, according to Hertz executives.
Let’s remember that GM and others (automotive manufacturers) have been building extensive national parts supply networks for decades, Share highlighted in a meeting with analysts. “There’s a secondary parts market that’s out there, which is less mature, obviously, with respect to Tesla.”
In addition to accident damage being more expensive to repair, Sher also noted that electric vehicles are involved in more accidents. Again, Teslas, which account for 80% of Hertz’s EV rental fleet, are mostly the problem in these two areas, he said.
“Our work with Tesla is to look at the performance of the car, to reduce the risk of accidental damage,” he said, “and we’re in direct engagement with them on procurement of parts and labor and things like that.”
Hertz sells its used vehicles at auctions as well as directly to consumers on its Hertz Car Sales website.
