Hertz will sell off a third of its all-electric vehicle fleet in the U.S. as a result of lower-than-expected demand and the high repair costs of EVs. The rental car company will reinvest funds from the sale to bolster its gasoline-powered vehicle fleet.
Back in 2021, Hertz announced an order for 100,000 new Teslas, while last August, the company said it would add the Cadillac Lyriq and Chevy Silverado EV to its EV rental fleet. In September, Hertz said it was poised to order 175,000 new GM EVs over the next five years.
Now, however, according to a recent report from Bloomberg, Hertz is in the process of shrinking its EV fleet, with plans to sell 20,000 EV units total. The company’s EV sell-off began this past December. EVs previously made up 11 percent of the rental company’s total vehicle fleet, with 80 percent of those EVs wearing a Tesla badge.
“The company expects to reinvest a portion of the proceeds from the sale of EVs into the purchase of internal combustion engine vehicles to meet customer demand,” the company said in a recent regulatory filing. The rental company added that this move will “better balance supply against expected demand of EVs.”
According to Hertz CEO Stephen Scherr, Tesla’s recent price cuts raised the rental company’s depreciation costs. It was also indicated that EVs had higher repair costs compared to the rest of Hertz’s fleet, which hurt the company’s bottom line and contributed to missed third-quarter earnings estimates.
According to the recent regulatory filing, the EV sell-off should improve the rental car company’s cash flow and earnings in 2024 and into the 2025 calendar year, with improved financial results thanks to increased revenue per day, lower depreciation, and lower operating expenses by the end of 2025. Hertz expects incremental free cash flow of up to $300 million over the next two years.