Rental giant Hertz on Thursday said it will sell off about 20,000 electric vehicles from its fleet and buy more gas-powered cars – a stunning reversal after tapping NFL legend Tom Brady to tout its transition to EVs.
The company said the high costs to repair electric vehicles and a lack of demand among renters led to its decision to abandon those plans.
Brady starred in a series of buzzy Hertz commercials in 2021, with Hertz vowing it would order 100,000 Tesla vehicles by the end of 2022 — before Thursday’s sudden U-turn.
“The company expects this action to better balance supply against expected demand of EVs,” Hertz said in a regulatory filing announcing the move.
“This will position the company to eliminate a disproportionate number of lower margin rentals and reduce damage expense associated with EVs.”
Hertz said it expects to complete sales of its electric vehicles by 2025.
The company’s shares plunged more than 4% in trading Thursday. Tesla shares fell about 3%.
The Tesla deal was just one element of Hertz’s plan to “electrify” its rental fleet. The company previously said in 2022 that it would buy 175,000 EVs from General Motors and as many as 65,000 electric vehicles from Swedish manufacturer Polestar.
The rental service expects to incur about $245 million in “incremental net depreciation expense” related to the move, according to the filing. Those costs will be reflected in the fourth fiscal quarter of 2023.
The cost of maintaining a fleet of electric vehicles has been a source of concern for Hertz executives.
Last October, Hertz CEO Stephen Scherr told analysts that “collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle.”
Scherr insisted at the time that Hertz was “committed” to a “long-term strategy to electrify the fleet.”
Hertz’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.