Rental firm Hertz Global Holdings said on Thursday it would sell about 20,000 electric vehicles, including Teslas, from its U.S. fleet due to higher expenses related to collision and damage, and will opt for gas-powered vehicles.
Shares of the rental company, which also operates vehicles from Swedish EV maker Polestar among others, fell about four per cent. Tesla’s stock was down about three per cent.
Hertz also expects to record about $245 million US in costs related to depreciation expenses from the proposed sale of the electric vehicles in the fourth quarter of 2023.
CBC News has reached out to Hertz for clarification on whether Canadian vehicle fleets will be affected or included in these fleet changes.
Hertz’s decision underscores the bumpy road EVs have hit as the growth rate on sales of those vehicles has slowed. This has also resulted in carmakers such as General Motors or Ford to scale back production plans of those vehicles.
Morgan Stanley analyst Adam Jonas in a note said the car rental firm’s move was a warning across the EV space and it was another sign that EV expectations need to be “reset downward across the market.”
“While consumers enjoy the driving experience and fuel savings (per mile) of an EV, there are other ‘hidden’ costs to EV ownership,” Jonas added.
Hertz had said it would order 100,000 Tesla vehicles by the end of 2022 and followed that with a decision to buy up to 65,000 units over five years from Polestar.
“Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter,” Hertz said in a regulatory filing on Thursday.
Hertz not only player cutting back on EVs
German rental car company Sixt said in December that it had not purchased Tesla vehicles since 2022 and is selling its fleet of Teslas “as part of our regular de-fleeting process.”
Sixt said on Thursday it still plans to offer a range of electrified vehicles and “stick to our goal to electrify 70 to 90 per cent of our rental fleet in Europe by 2030.”
Hertz said it would continue to focus on improving profitability for the remainder of its EV fleet.
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 announcement that used EV prices would decline more than overall used vehicle prices during 2024.
Analyst says Hertz ‘taking a major loss’
The car rental firm is selling some Tesla Model 3s for as low as about $20,000 US, nearly half the purchase price for the cheapest variant of the compact sedan.
“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 previously set a target for 25 per cent of its fleet to be electric by the end of 2024.
The company’s used car website lists more than 700 EVs on sale including BMW’s i3, Chevrolet’s Bolt and Tesla’s Model 3 and Model Y SUVs.
Polestar did not immediately respond to a request for comment from Reuters.