Hertz is pausing plans to electrify more of its rental car fleet because maintenance costs for electric vehicles are higher than the company expected. Tesla The price cuts reduced the resale value of most electric vehicles in its fleet by about a third.
CEO Stephen Scherr talks about the company’s third quarter earnings Thursday’s update said, “Our electric vehicle rollout will be slower than we previously anticipated.”
The rental car company reported lower-than-expected profit margins for the period to September 2023, and its chief executive said electric vehicle servicing was a challenge. “Our direct operating expenses remained controlled during the quarter as they increased in line with higher volumes. On a unit basis, we achieved productivity improvements across most vehicle categories. The only exception was vehicle damage costs, specifically It’s our electric car.”
Scherr also said, “The lower MSRP for electric vehicles in 2023, driven primarily by Tesla, will result in the fair market value of our electric vehicles being lower than last year, so scrapping will cause greater losses, resulting in higher A big burden.”
Following the third-quarter update, Hertz shares closed down about 10% on Thursday at $9.04. Tesla shares also fell about 3% on Thursday, closing at $205.76.
Hertz also revealed on Thursday that about 80% of the electric vehicles in its current fleet are Teslas. Currently, approximately 11% of Hertz’s entire fleet is electric. The Hertz fleet currently has about 50,000 electric vehicles, which means the Hertz fleet currently has about 35,000 Tesla vehicles.
That number is far lower than the 100,000 Tesla electric vehicles Hertz originally said it would order from Tesla by the end of 2022.
Hertz global chief executive Stephen Scherr said Hertz remains “committed” to buying 100,000 vehicles from Tesla and 175,000 electric vehicles from General Motors, but not by the end of 2024 as previously hoped. The goal is to have electric vehicles make up a quarter of the fleet.
“The focus of our work with Tesla is to look at the performance of the car to reduce the risk of damage accidents,” Schell said. “We have very direct contact with them in terms of parts procurement and labor.”
Schell said on the company’s third-quarter conference call that as Hertz buys more electric vehicles from General Motors and other automakers, the company expects the vehicles will “reduce the incidence of damage” and “reduce parts and labor costs. ”.
“Keep in mind that manufacturers like General Motors and other OEMs have built extensive national parts supply networks over decades. The parts aftermarket there is obviously less mature in the context of Tesla,” Schell said. It added that margins and other EV issues will improve as Hertz looks to “diversify” that part of its fleet.
On October 25, 2021, Hertz announced for the first time plans to expand its electric fleet, with “initial orders for 100,000 Teslas by the end of 2022.” After Hertz announced the news, Tesla’s market value exceeded $1 trillion for the first time.
The announcement was accompanied by an ad featuring Super Bowl champion Tom Brady alongside a Tesla Model 3 electric sedan parked in a Hertz garage.
Tesla CEO Elon Musk waited until a week later, on November 2, 2021, to post on Twitter (the social network he now owns, Twitter, has been renamed X) to inform Tesla shareholders that Hertz has not signed any high-dollar contracts with Tesla. Large orders.
Musk has often said electric vehicles require less maintenance than vehicles with internal combustion engines, including plug-in hybrids. This is a huge potential selling point for electric vehicles and also refers to engine oil, oil filter, engine air filter, transmission fluid, spark plugs and other items that require annual maintenance or periodic replacement.
But EV owners may also face unique repair needs. Nikhil Naikal, CEO of Kinetic, a new startup not affiliated with Hertz or Tesla that provides electric and autonomous vehicle repair services, told CNBC on Thursday:
“The reality of electric cars is they can be 1,000 pounds or more heavier than gas cars, and they move faster and have more torque. Because they’re so agile and heavier, it’s just physics – overcoming inertia so quickly. ability to affect their suspension, brakes, and steering columns. It’s counterintuitive, but even with fewer moving parts, they tend to require more maintenance. They especially need tires replaced because they wear out under high torque. Faster and heavier.”
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