Hertz, a leading car rental company, had originally set its sights on acquiring 100,000 electric vehicles (EVs) from Tesla by the end of 2022. However, the company has had to revise its plans due to several factors affecting its EV fleet. During its third-quarter earnings call, CEO Stephen Scherr acknowledged that Hertz introduction of EVs into its fleet would be slower than initially anticipated.
One of the significant challenges impacting Hertz’s margins has been the depreciation of EVs, partly caused by the one-third reduction in retail prices of electric cars in its fleet. Tesla’s price cuts, particularly a nearly 20% reduction in Model S and Model X prices, played a role in this. Additionally, EVs have incurred approximately double the damage repair costs compared to conventional internal combustion engine vehicles.
Hertz is actively collaborating with Tesla to enhance the performance of its EVs and reduce the risk of damage, along with optimizing parts procurement and labor. Presently, 80% of Hertz‘s EV fleet comprises Tesla vehicles, which translates to 35,000 Teslas out of 50,000. This move towards electric vehicles has not only impacted Hertz’s maintenance costs but has also affected its margins due to a shift in a portion of the EV fleet from ridesharing to leisure use.
Despite these challenges, Hertz remains committed to its long-term goal of electrifying its fleet. The company is considering the adoption of EVs from other manufacturers like GM, with the expectation of securing them at more competitive price points and potentially experiencing fewer incidents of damage. Traditional automakers like GM have established extensive parts supply networks, which can streamline component procurement and reduce costs.