The car rental company Hertz informed the United States stock market authorities this Thursday that it has begun selling approximately 20,000 electric vehicles (EVs) from its fleet and that it will use part of the revenues received to purchase gasoline vehicles.
“The company expects to reinvest a portion of the proceeds from EV sales into purchasing combustion engine vehicles and responding to customer demand,” Hertz said in documents filed with the US Securities and Exchange Commission (SEC).
Hertz’s decision comes as a blow, at least psychologically, to ambitious global plans to definitively establish the use of electric cars and leave combustion vehicles behind. The big question now is whether what this rental company has done is just a warning shot or a reflection of what could happen or is already happening in the automobile market.
At the moment, investors have not taken this news well and are taking a huge hit on both Hertz and Tesla shares, which represent about 80% of the rental company’s electric vehicle fleet.
Hertz made the decision after experiencing higher-than-expected depreciation and repair costs on its electric vehicles. US$245 million,
Furthermore, apparently, Demand for Hertz’s electric cars is lower than expectedSo according to the company, selling in larger numbers will help “better balance supply with demand” expected for this type of vehicle.
A turn towards its ambitious electrification goals
The company previously aimed for 25% of its fleet to be electric by the end of 2024, but it appears to have made a major change to that strategy.
In 2021, Hertz announced it would buy 100,000 Tesla vehicles, sending shares of the electric car maker skyrocketing, and in 2022 it partnered with Swedish Polestar (owned by Volvo and Chinese corporation Geely) to acquire another 65,000 EVs. Expressed agreement.
In October, Hertz CEO Stephen Scherr had already announced during its third quarter results presentation that the car rental company would be reducing its EV fleet, which amounts to a little more than 10% of the total, as these vehicles The high cost of operation was affecting. Its financial consequences.
As Scherr explained, EV repairs are more expensive than gasoline cars.
problems with tesla
Tesla represents about 80% of Hertz’s electric vehicle fleet. Tesla’s aggressive price cuts throughout 2023 have inspired other manufacturers to do the same with their electric vehicles, causing a rapid depreciation in the used car market, to which car rental companies are very close.
Additionally, Hertz has faced some additional problems with its Teslas: They are involved in more accidents and they cost more to repair. And, according to Hertz executives, as a relatively new company, it lacks as many spare parts and trained repair technicians as other automotive companies. This makes repairs more expensive and time consuming.
A reflection of what’s happening in the market with electric cars?
The big question now is whether Hertz’s decision and its problems with demand and management of electric vehicles are a true reflection of what is happening in the market or what may happen in the coming months.
EV sales continue to grow, but demand is not meeting the expectations of manufacturers and other companies that have invested billions of dollars in the sector. The prospect that interest rates will remain high for a long time has caused companies to revise their plans and cast doubt on 2024, as Reuters reported a few months ago.
Demand for electric cars appears to be waning and faces the same problems as years ago: customers are concerned about range and the infrastructure to charge them and complain that their prices are significantly higher than combustion models. There are more.
Last summer, a report from consulting firm Cox Automotive showed that electric cars spent more time in dealerships than gasoline cars. At the time, car dealers had 92 days of inventory of electric vehicles, compared to 54 days of traditional gasoline or diesel vehicles.
To this we have to add that, as is the case with Hertz, many drivers who choose electric vehicles have come to regret their decision. This was reflected in Europe by a YouGov study for Danish startup Monta.
The survey was conducted among 6,167 owners of this type of vehicle in France, where 12% of its vehicle fleet is electric. The results show that 54% of them, more than half, regretted choosing an electric car.
The article is partly drawn from information from EFE and Reuters.
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