Hertz selling off 20,000 Tesla EVs, to be replaced with ICE models

Hertz, which has one of the largest car rental fleets in the world, began adding EVs to its fleet in 2021. It ordered 100,000 EVs (mostly Model 3) from Tesla starting from October that year, one of the largest ever single orders for EVs. The order was valued at about US$4.2 billion, making Elon Musk a very happy man as Tesla’s value rocketed to US$1 trillion.

The company expected that demand for EVs would grow quickly in line with the industry push towards electrification. “Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest,” said Hertz interim CEO Mark Fields at that time. “The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America and a commitment to grow our EV fleet and provide the best rental and recharging experience for leisure and business customers around the world.”

High cost of repairs
However, by the end of 2022, Hertz had taken only 48,000 Teslas, which was around 11% of its fleet. And the company also started to see that demand for its EVs was not that great. It has also found that repair costs are high and repairs can take a long time, which is obviously not good for a car rental business.

EV renters different from EV owners
Furthermore, renting an EV and owning one are two different things. Those who rent an EV are likely to be using it for a short period and if they are businessmen, they may not have the time to waste at a charging station.

Also, not everyone might be keen on renting an EV. Many may just prefer to play it safe and rent a car with an internal combustion engine (ICE) which they are more familiar with. More importantly, they can refuel almost anywhere. They won’t have to think about how far they can go (range anxiety) or where the nearest charging station is when they are on the road.

Seeing that the EV strategy is not working out, the company has made the ‘strategic decision’ of reducing its EV fleet. According to an Automotive News report, Hertz plans to sell off 20,000 EVs (about a third of its EV fleet) this year. The process started last month via the company’s Rent2Buy site which offers used rental cars for sale.

More related to Tesla than EVs in general?
Some industry observers wonder if this decision is specifically related to Teslas as Hertz does also have number of Polestar EVs but doesn’t seem to be selling them off. In fact, its  promotion of Polestar models as rental cars is ongoing.

‘Rebalancing’ the fleet mix
While it expects to lose money on the sales as residual values have fallen, whatever money it gets will go towards the purchase of new ICE vehicles. In this way, it will ‘rebalance’ its mix to be more in line with real demand by customers. “It will better balance supply against expected demand of EVs,” said the company, which had previously planned to have EVs making up 25% of its fleet by the end of this year.

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