Hertz, a company that recently emphasized its commitment to electric vehicles, has decided to scale back its EV fleet by selling approximately 20,000 electric vehicles, constituting a third of its electric fleet. The funds generated from this sale will be redirected towards the acquisition of more gasoline-powered vehicles.
Hertz cites financial challenges associated with electric vehicles, highlighting higher costs for collision and damage repairs, which can be double that of comparable combustion engine vehicles. CEO Stephen Scherr explained that despite lower maintenance costs, the combination of increased repair expenses and higher depreciation has impacted their bottom line.
The decline in electric vehicle prices, notably influenced by Tesla's aggressive pricing strategy, has contributed to a decrease in the resale value of Hertz's used electric cars. This price trend has resulted in a projected loss of around $245 million for Hertz due to depreciation on the electric vehicles.
While not explicitly blaming Tesla, Hertz notes that approximately 80% of its electric fleet consists of Tesla vehicles, and overall, electric vehicles make up about 11% of the company's total rental fleet. The competitive pricing moves by Tesla have triggered a domino effect across the electric vehicle market, leading to reduced prices for new electric vehicles and subsequently impacting the value of used models in the market.
Rental car companies, such as Hertz, heavily rely on the used car market, and depreciation plays a pivotal role in shaping their business strategies when selecting vehicles for their fleets.
In the case of Tesla, being a relatively new entrant in the automotive industry, the company faces challenges related to the availability of replacement parts and a shortage of trained repair technicians compared to more established automakers like GM. Hertz CEO Stephen Scherr highlighted the significant advantage that older companies have with decades of establishing a robust national parts supply network and a mature aftermarket for parts, which Tesla is still developing.
Aside from the cost and time associated with repairs, Scherr pointed out that electric vehicles, particularly Teslas comprising 80% of Hertz's EV fleet, are more prone to getting involved in accidents. To address these issues, Hertz is actively collaborating with Tesla to enhance the performance of their vehicles, minimize the risk of damage incidents, and streamline the procurement of parts and labor.
------The article excerpted from CNN Business.