The Decline of EV Rental Cars

Last week, rental car giant Hertz Global Holdings (HZT) said it will sell about 20,000 electric vehicles from its U.S. fleet. In a filing with the U.S. Securities and Exchange Commission (SEC), Hertz reported that it will decrease its global EV fleet by roughly one-third. This comes just two years after Hertz made a deal with Tesla for 100,000 vehicles, as well as a five-year plan to purchase 65,000 EVs from Polestar. Hertz expects to take a loss of about $245 million due to depreciation on the EVs, an average of about $12,250, per vehicle according to the SEC filing.

Their original plan had been to convert 25% of its fleet to EVs by the end of 2024. This is yet another sign that the EV demand in the U.S. has cooled off from its previous high. Morgan Stanley analyst Adam Jonas noted Hertz's move was another sign that EV expectations need to be "reset downward."

Hertz is planning to allocate the funds it gets from selling the EVs toward purchasing more internal combustion engine vehicles (gas-powered cars) in order to "meet customer demand." Another part of this strategy is to "reduce damage expenses associated with EVs." In addition to being more costly to repair when they are damaged in a crash, EVs are getting into more crashes than their gasoline-powered counterparts.

Hertz CEO Stephen Scherr said in late October of 2023 that electric vehicles were approximately 11% of its overall pool of vehicles. According to their Chief Financial Officer, Hertz's global fleet averaged 590,000 vehicles.

While it is decreasing its EVs available for rent, Hertz is "[continuing] to execute its strategy around EV mobility" and will keep making a "wide selection" of vehicles available to its customers. "The Company continues to implement a series of initiatives that it anticipates will continue to improve the profitability of the remaining EV fleet."

Shares of Hertz fell about 4% after the announcement, and shares of Tesla (TSLA) fell about 3%.

If you are interested in purchasing a used electric vehicle from Hertz, they have several older model Teslas, with prices as low as around $20,000 according to the Hertz Car Sales website. It lists more than 700 EVs on sale, including BMW's i3, Chevrolet's Bolt, and Tesla's Model 3 and Model Y SUVs.

Overall, wholesale used-EV prices fell for most of 2023 as prices for new EVs fell and inventories of unsold electric vehicles rose, according to Cox Automotive data.