Car rental company Hertz will sell about a third of the electric vehicles in its fleet after they lost value more quickly than expected, the company said Thursday. The drop in value is a blow to the company's efforts to replace gasoline vehicles with cars that produce no tailpipe emissions.
The electric vehicles the company owned were also more likely to be involved in collisions, Hertz said, and were costly to repair. The company said it planned to buy more gasoline-powered vehicles to replace the 20,000 battery-powered cars it sold.
“Some of these electric vehicles became uneconomical for us,” Hertz CEO Stephen Scherr said in an interview Thursday.
The company's decision to sell 20,000 vehicles, which Scherr attributed in part to Tesla's “unprecedented” price cuts that undermined the cars' resale value, provided fuel for opponents of the Biden administration's policies to promote technology as a tool to address climate change and air pollution.
Sen. John Barrasso, R-Wyoming, seized on the announcement during a hearing Thursday on climate policies.
The Hertz decision showed that electric vehicles are expensive and unpopular, Barrasso told the Senate Energy and Natural Resources Committee. “Demand for electric cars is stagnating,” he said, adding: “So much for the Biden economy.”
Scherr implicitly placed much of the blame on Tesla, which makes about half of all electric vehicles sold in the United States, for the rental car company's decision to sell its electric vehicles.
Tesla vehicles, which make up the bulk of Hertz's electric fleet, fell in value after the automaker, led by Elon Musk, cut prices last year by about 30 percent. When the price of new vehicles drops dramatically, it reduces the value of used cars because buyers can get the newer versions for less.
As a result, Hertz was forced to write down the value of its electric cars more quickly than expected, which hurt profits, Scherr said.
Rental companies like Hertz estimate how much their cars will be worth when they finally sell them, and that estimated decrease in value is calculated as a cost. If the drop is greater than expected, profits fall.
Scherr said Tesla was less willing than other automakers to offer Hertz volume discounts on replacement parts. “Tesla is new to this game,” she said, suggesting that the electric car company's relative inexperience in serving car rental companies influenced that decision.
Tesla did not respond to a request for comment.
Hertz's plan is at least a temporary reversal for the company, which in 2021 had announced it would buy 100,000 Teslas as part of a broader effort to electrify its rental fleet.
But the deal did not set a deadline for Hertz to buy the cars, and the company has purchased only a fraction of that number. Hertz also offers electric vehicles from other manufacturers, including Kia, General Motors, Volkswagen and Polestar.
One possible reason Hertz electric vehicles were involved in more accidents, Scherr said, was that many people who rented those cars were inexperienced with the technology despite the company's efforts to educate customers. Electric cars accelerate faster than gasoline cars and are heavier. Demand for the vehicles was also lower than the company expected, Scherr continued.
Hertz's decision is likely to bolster the argument of some conservatives, including former President Donald J. Trump, that electric vehicles have been overhyped. “It will fuel the narrative about the downside of electric vehicles right now,” said Jeremy Robb, senior director of economic and industry insights at Cox Automotive.
But Robb noted that U.S. electric vehicle sales totaled nearly 1.2 million last year and were up 40 percent in the final three months of 2023 from the same period in 2022. “There is still a market for electric vehicles “, he pointed. saying.
Hertz will not abandon its plans to electrify its fleet or buy more Teslas, Scherr said. But the market needs to continue developing, he said.
“Tesla is among the best-selling cars in America,” he said, “but it's still not the best rental car.” Scherr added: “Those two have not converged as quickly as many people, including ourselves, thought. But they will.”
