How the massive EV transition is starting in the car rental industry

0

Tesla Model 3 electric vehicles at a Hertz airport location.

Photo by E.R. Davidson

Not long after Hertz Global Holdings emerged from bankruptcy last summer, reorganized after the Covid-19 pandemic stalled the entire car rental industry, the Estero, Florida-based company boldly announced a $4.2 billion deal to purchase 100,000 Tesla fully electric vehicles (EVs) by the end of 2022. Just like that, the race was on within the industry to transition to EVs from internal combustion engine (ICE) models.

While Hertz was first off the starting blocks, its two biggest rivals, Enterprise Holdings and Avis Budget Group, have since joined in. But just like the full-scale adoption of EVs among American drivers is going to take years, the rental car shift also will be a marathon, not a sprint. “Companies that operate fleets at our size cannot just turn on a dime and next year go all EV,” said Sharky Laguana, president of the American Car Rental Association. “Our industry wants to move as fast as it can, but there are some serious and challenging constraints.”

The initial one, Laguana said, “is just getting your hands on the damn things.”

The $56-billion U.S. rental industry typically buys about one-tenth of auto manufacturers’ new cars every year, but with persistent supply-chain disruptions, especially the shortage of essential computer chips, the numbers are way down. The industry bought 2.1 million vehicles from OEMs in 2019, Laguana said, compared with only about 750,000 in 2021. U.S. sales of EVs doubled in 2021, but still only comprise about 4% of the nation’s total market for cars and trucks.

Another major speed bump for rental car companies is the paucity of EV charging stations, at airports and other rental locations, hotels, resorts and office buildings, as well as along local roads and interstate highways. And then there’s the challenge of educating and training companies’ agents and mechanics on EVs, not to mention familiarizing drivers on the differences from operating ICE vehicles.

Hertz does not state the overall number of vehicles in its fleet, said Jeff Nieman, senior vice president, operations initiatives, so it’s unknown how many Teslas are available in the more than 30 markets currently offering EVs, which now also include the first of the 65,000 Polestar 2s — an EV brand jointly owned by Volvo and its Chinese parent Gheely which has planned to go public through a SPAC deal — Hertz began purchasing in a five-year deal announced in April. Nieman did say, however, he is confident that EVs will represent “more than 30% of our fleet by the end of 2024.”

In the meantime, Hertz has several hundred thousand ICE models in the U.S. that will be rented for years to come, said Chris Woronka, an analyst at Deutsche Bank. Even so, “they’ve decided they’re going to carry the EV torch for the industry and be very outspoken about their plans and goals,” he said.

Look no further than the spate of Hertz TV spots, starring NFL superstar Tom Brady touting Tesla rentals, that aired during this year’s Super Bowl. Hertz also has created a dedicated area on its website to help educate drivers about EVs.

Renting EVs to corporates focused on ESG, carbon neutrality

A primary target for Hertz, according to Woronka, is the corporate market. “The leisure customer might think it’s cool to drive an electric car, but the longer game is on the corporate side,” he said.

Beyond comparing costs of employees driving EVs versus ICE cars — currently skewed by the national average of around $5 for a gallon of regular gas — companies view EVs as a quantifiable way to reduce their greenhouse gas (GHG) emissions, meet net-zero goals and burnish their environmental, social and governance (ESG) bona fides among sustainability investors and advocacy groups.

“The initial research has shown that corporate accounts are going to be willing to pay a premium for EVs,” Woronka said, “because it helps them achieve some of their ESG objectives.”

Not surprisingly, rental companies themselves are embracing this concept, said Sara Forni, director of clean vehicles for the nonprofit Corporate Electric Vehicle Alliance (CEVA). While they certainly “want to get more butts in EV seats,” she said, “they also want to meet their sustainability goals and greenhouse gas emissions reduction targets.”

Siemens US, an affiliate of the German-based conglomerate, is a flagship member of CEVA and was part of the Hertz EV program launch last fall. “We fully support our global decarbonization and ESG goals,” said Randall Achterberg, North America travel commodity manager, “and our fleet makes the largest Scope 1 emissions footprint and we’re already making progress with an aggressive EV transition strategy,” referring to GHGs produced by Siemens’ U.S. fleet of nearly 10,000 vehicles. “On the corporate travel side, we want to expand our employees’ usage of EVs.”

To date, Siemens has booked more than 100 EV rentals with Hertz. “We’re not pushing as heavily as we’d like to, because they’re not ready,” Achterberg said, acknowledging the inherent obstacles in its EV rollout. Siemens is alleviating one stumbling block: it builds EV charging stations and has committed to manufacture a million of them in the U.S. over the next three years.

Enterprise’s early Orlando EV rental car experiment

Enterprise may not be as out-front as Hertz with its EV rental program, but the privately held company, headquartered in St. Louis, has been in the exploratory stage since 2014. That’s the year it began participating in the Drive Electric Orlando Rental Pilot, a multi-year study sponsored by the Electrification Coalition, a Washington, D.C.-based nonprofit advocating for EV adoption, particularly among fleet owners.

The pilot, partly funded by the U.S. Department of Energy, was centered at Orlando International Airport and as well comprised resorts and theme parks in the area. “We also had close partnerships with local regulators and policymakers, which was critical in making sure we did this the right way,” said Chris Haffenreffer, assistant vice president of innovation at Enterprise. The company rented all-electric cars, including Chevy Volts and Nissan Leafs to travelers, who were incentivized with perks such as free charging, parking and valet service.

“Even though EVs were [then] an afterthought in our business, the lessons learned are consistent with what we see today,” Haffenreffer said. Namely, getting employees behind the wheel of EVs is crucial, “so they can communicate actively with customers,” as is partnering with other entities to invest in the charging infrastructure.

Although the rental companies have said they are building their own charging stations, another critical partner is the U.S. government, which in last year’s bipartisan infrastructure bill earmarked $7.5 billion to states to create a network of EV charging stations. Earlier this month, the Biden administration proposed regulations that would require stations built on interstates with federal dollars to be no more than 50 miles apart.

Enterprise, like Hertz, is focusing on its commercial-rental fleets and fleet-management division, where business customers will value the lower maintenance and operating costs. “It’s about being a trusted advisor to those customers, helping them understand how to operate an EV and the benefits,” Haffenreffer said. But as with leisure travel renters, figuring out how to get from point A to Point B and how to charge the car is increasingly challenging, Haffenreffer said.

Parsippany, New Jersey-based Avis saw its stock rocket in early November after it said it was getting into the EV rental business a week after the Hertz-Tesla deal broke, and though its come back down along with the entire market, CEO Joe Ferraro told analysts during a conference call at the time, “You’ll see us going forward be much more active in electric scenarios as the situation develops.”

Avis has been tight-lipped since then and declined to be comment for this article. But Woronka said, “I take them at their word.” He cited the rental car company’s sizable corporate fleet exposure as a reason. “They’re just not ready to pull back the curtain yet on what they’re doing,” he said.

U.S. automakers are spending billions to ramp up their EV production. General Motors aims to deliver 400,000 EVs in North America by the end of 2023, and Ford has committed to 600,000 by that same time. Considering that renting an EV is essentially an extended test drive, the rental market is seen as an important driver in President Joe Biden’s plan for half of all new cars and trucks sold in 2030 to be zero-emissions vehicles.

“From our point of view, the rental car market makes a ton of sense, especially as OEMs get into longer-range electric vehicles,” said Electrification Coalition executive director Ben Prochazka. “What a great way to get consumers exposure to new technology in a low-risk setting.”

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Chronicles Live is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – chronicleslive.com. The content will be deleted within 24 hours.

Leave a comment