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‘The company’s initial goal was to procure 100,000 EVs from Tesla by the end of 2022.’
Hertz Slows Down Plans to Electrify Fleet, Citing Challenges with EVs
Car rental company Hertz recently announced its intention to order 100,000 electric vehicles (EVs) from Tesla by the end of 2022. However, it seems that Hertz is facing difficulties in reaching that target and may take longer to do so, if it even manages to achieve it. During the company’s third-quarter earnings call, CEO Stephen Scherr revealed that Hertz’s plans to incorporate EVs into its fleet are slowing down.
One of the primary factors affecting Hertz’s ability to meet its goals is the cost challenges associated with EVs. The company reported a 13 percent margin for the quarter, which Scherr noted would have been higher if not for the depreciation and the one-third drop in retail prices of the electric cars in its fleet. Tesla’s several price cuts over the past year, including a nearly 20 percent reduction in September, have compounded these challenges for Hertz.
Furthermore, Scherr mentioned that EVs are costing Hertz about twice as much in terms of damage repair costs compared to conventional internal combustion engine vehicles. To address this issue, Hertz is working closely with Tesla to analyze the performance of its cars and mitigate the risk of damage. The company is also exploring options to reduce costs associated with parts procurement and labor. Currently, 80 percent of Hertz’s EV fleet consists of Tesla vehicles, with 35,000 Teslas out of a total fleet of 50,000.
In addition to these challenges, Hertz’s decision to transition a portion of its EV fleet from ridesharing to leisure has impacted its margins. The company previously rented Tesla EVs to Uber and Lyft drivers but is now planning to reintroduce these vehicles into its ridesharing business.
Despite these setbacks, Scherr affirmed Hertz’s commitment to its long-term plan of electrifying its fleet. He suggested that incorporating EVs from other manufacturers, such as General Motors (GM), could help address some of the issues the company is currently facing. Scherr expects Hertz to be able to purchase EVs from other manufacturers at a significantly lower price point compared to Tesla. Additionally, he believes that these vehicles are likely to have a lower incidence of damage and lower costs for parts and labor. The broad parts supply network established by GM and other traditional automakers over the years could make it easier and potentially cheaper for Hertz to procure components.