Rental firm Hertz Global Holdings is selling about 20,000 electric vehicles, including Teslas, from its U.S. fleet about two years after a deal with the automaker to offer its vehicles for rent, in another sign that EV demand has cooled.
Hertz will instead opt for gas-powered vehicles, it said on Thursday, citing higher expenses related to collision and damage for EVs even though it had aimed to convert 25% of its fleet to electric by 2024 end, reports Reuters.
CEO Stephen Scherr had last year at the JPMorgan Auto Conference flagged headwinds from higher expenses for its EVs, particularly Teslas.
Hertz even limited the torque and speed on the EVs and offered it to experienced users on the platform to make them easier to adapt after certain users had front-end collisions, he said.
Shares of the company, which also operates vehicles from Swedish EV maker Polestar among others, fell about 4%. Tesla’s stock was down about 3%.
Hertz also expects about $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023.
BUMPY ROAD FOR EV GROWTH
Its decision underscores the bumpy road EVs have hit as their sales growth slows, causing carmakers like General Motors (GM.N) and Ford (F.N) to scale back production plans.
Morgan Stanley analyst Adam Jonas said in a note Hertz’s move was another sign that EV expectations need to be “reset downward”.
While consumers enjoy the driving experience and fuel savings (per mile) of an EV, Jonas said there are other “hidden costs to EV ownership”.
“Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter,” Hertz said in a regulatory filing on Thursday.
The company, which had earlier planned to order 100,000 Tesla vehicles by 2022 end and 65,000 units from Polestar over five years, said it would focus on improving profitability for the rest of its EV fleet.
German rental car company Sixt said in December it had not purchased Tesla vehicles since 2022 and was selling its fleet of Teslas “as part of our regular de-fleeting process”.
It still plans to offer a range of electrified vehicles and “stick to our goal to electrify 70-90 percent of our rental fleet in Europe by 2030”, it said on Thursday.
USED-EV PRICES DROP
Meanwhile, wholesale used-EV prices fell for most of 2023 as prices for new EVs fell and inventories of unsold electric vehicles rose, according to Cox Automotive data.
Cox forecast before Hertz’s decision that used-EV prices would decline more than overall used vehicle prices in 2024.
“While 20,000 cars isn’t a large number in the total used vehicle market, it does mean Hertz will be taking a major loss on each of these sales while further contributing to the trend of falling used EV values,” iSeeCars.com analyst Karl Brauer said.
Hertz is selling some Tesla Model 3 for as low as about $20,000, nearly half the purchase price for the cheapest variant of the compact sedan, its used car website showed.
It lists more than 700 EVs on sale, including BMW’s i3, Chevrolet’s Bolt and Tesla’s Model 3 and Model Y SUVs.
