Many EV-sceptical media outlets were quick to run with stories suggesting waning consumer demand or a lack of commercial viability of EVs, when news broke that car rental heavyweight Hertz was cutting 20,000 Tesla EVs from its fleet.
Hertz CEO Stephen Scherr, however, speaking to US broadcaster NBC, made clear that the company's decision was in fact nothing to do with the viability of EVs as a rental fleet vehicle, but a residual value issue arising form a race to the bottom in terms of price, instigated by Tesla and OEMs, throughout 2023.
“We are experiencing the consequence of a material price decline in Teslas and EVs more generally," Scherr says.
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“We took a bold move and are making a strategic adjustment to our fleet to take 20,000 electric vehicles out of the fleet, he continues. "We are trying to address a cost issue which happens to be related to EVs in the context of damage and damage costs,"
Hertz sees a disproportionate rate of scrappage for its EVs versus its ICE fleet, which the company aims to address with informational campaigns about the differences between EV and ICE driving.
Scherr said on Hertz's Q3 earnings call that "collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle". But he stresses that depreciation is the key issue.
“This is about the numbers. It is about the financial performance and depreciation,” he says. “It is not about the broader issue of EVs for the company.”
In fact, when asked if customers responded well to the company’s fleet of EVs, Scherr revealed that “it did happen and it is happening”. And the Hertz chief remains long-term positive about EVs.
“The reality of EVs and Teslas being the best-selling cars will at some point render them the best rental car,” he predicts.
But Hertz’s move could signal a wider — albeit temporary — fallout from the US' 2023 EV price war. For hire firms like Hertz, and for any fleet buyer, the economics EVs will have been damaged by the driving down residual values of the vehicles.
“At the beginning of the year, when Tesla took down the price of their cars, the residual price falls, depreciation goes up, and that is obviously a cost to the business,” Scherr says.
Scherr insists, though, that Hertz was just potentially too early on its estimations after hailing its first-mover advantage on EVs last year. And not only will pricing pressure on residual value ease sooner or later, but anaysts believe Hertz's EV-focused rideshare business remains lucrative.
"The sell-off of a third of the fleet sounds like something of a reset for Hertz vis-a-vis B2C consumer renters. My impression is that the Uber/Lyft/Tesla/Hertz rental programme remains a hit and, if anything, is likely to expand," suggests Roger Lanctot, automotive connected mobility director at consultancy Tech Insights.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
