Hertz sells 20,000 EVs as demand cools and expenses soar

Hertz Global Holdings (HTZ.O) is divesting approximately 20,000 electric vehicles (EVs), including Teslas, from its U.S. fleet, signaling a shift away from electric towards gas-powered vehicles. This move, occurring about two years after a deal with Tesla to incorporate their vehicles into Hertz’s rental offerings, underscores a slowdown in EV demand.

Hertz cites higher expenses associated with collision and damage for EVs as a key factor in this strategic shift. Although the company initially aimed to convert 25% of its fleet to electric by the end of 2024, CEO Stephen Scherr had previously mentioned challenges, particularly with Tesla’s higher expenses, at the JPMorgan Auto Conference in the previous year.

Hertz had implemented measures such as limiting torque and speed on EVs to mitigate risks, making them more accessible to experienced users. Despite these efforts, Hertz’s decision resulted in a 4% drop in its shares, while Tesla’s stock experienced a 3% decline. Hertz anticipates approximately $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023.

This move reflects challenges facing the EV industry as a whole, with carmakers like General Motors and Ford scaling back production plans due to slowed sales growth. Analysts, including Morgan Stanley’s Adam Jonas, suggest that Hertz’s decision is indicative of the need to readjust downward expectations for EVs. Meanwhile, used-EV prices have seen a decline, with Hertz selling some Tesla Model 3 vehicles for as low as $20,000, contributing to the broader trend of falling used EV values. Despite Hertz’s move away from EVs, other rental companies, like Sixt, continue to pursue electrification goals, emphasizing a commitment to electric fleets in Europe by 2030.