Hertz Reassesses EV Fleet Strategy Amidst Tesla Price Drops
October 29, 2023
Hertz faced a 15% decline in stock value after their Q3 reports revealed a miss in earnings projections, largely attributed to Tesla's recent price reductions - according to a Bloomberg report.
The car rental giant's investment in 35,000 Tesla vehicles has been impacted as Tesla slashed prices for its Model 3 by 17% and Model Y by 26% this year, diminishing the resale value of Hertz's fleet.
Tesla's strategy to rejuvenate demand led to significant price cuts throughout the year. Consequently, Hertz CEO, Stephen Scherr, confirmed that the estimated resale value of their Tesla vehicles has decreased by approximately one-third.
Hertz's 50,000-strong electric vehicle (EV) fleet has also seen repair costs that are about double those of their petrol counterparts. Notably, Tesla repairs, especially after accidents, are notoriously pricey. Hertz's fleet also includes a substantial number of Polestar vehicles, which, being premium European EVs, come with high repair costs.
According to Bloomberg, these challenges have prompted Hertz to reconsider its EV strategy. While the company currently boasts 50,000 EVs, with 35,000 being Tesla models, they only make up 11% of Hertz's total fleet.
Despite the setbacks, Scherr remains optimistic about Hertz's commitment to EVs. The company still plans to purchase 100,000 Tesla vehicles and 175,000 from General Motors Co. However, the initial target of EVs making up 25% of Hertz's fleet by 2024 might be delayed.
Scherr's immediate focus is on collaborating with parts suppliers to reduce repair expenses. He believes that as EV prices stabilize, Hertz will be in a better position to expand its EV fleet.
Scherr commented on the current market situation, stating, "We can now acquire these vehicles at nearly a third of our initial Tesla purchase cost. With decreasing prices, our margins on these cars will improve, especially if we address the repair cost issues."
In line with their commitment, Hertz aims to acquire 10,000 EVs from GM this year and has agreements in place for an additional 165,000 vehicles.
It's worth noting that 2022 saw a general decline in used vehicle residual values in the U.S. As the market adjusts, Hertz's revenue from selling its used rental cars has been affected.
In Australia, Tesla prices were further cut by $3900 across all variants of the Tesla Model 3 and Tesla Model Y on the 1st of July, 2023.
Hertz Australia utilises a fleet of Polestar 2's, Tesla Model 3 and Tesla Model Y. It is unclear how the price cuts have effected the Australian division of Hertz specifically.
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