As the American Car Rental Association (ACRA) gears up lobbying around the likelihood of electric vehicles (EV) becoming more prominent in the industry, Hertz dumped about 20,000 EVs from its fleet last week, spurring political attacks on the Biden Administration’s climate change policy.
Hertz published an SEC filing on Jan. 11 stating its plans to sell 20,000 of its U.S. EV fleet, or about one-third of its global EV fleet, and reinvest the money into internal combustion engine (ICE) vehicles to meet customer demand.
“The company’s decision to reduce its EV fleet will result in the recognition, during the fourth quarter of 2023, of approximately $245 million of incremental net depreciation expense related to the sale,” the filing said.
Stephen Scherr, Hertz’s chief executive, told the New York Times that Tesla’s decision to cut the cost of its vehicles by 30% devalued Hertz’s fleet. Tesla also wouldn’t play ball with discounting parts for the rental company, the story said.
Hertz found EVs are involved in more crashes, according to the article.
“One potential reason the electric vehicles at Hertz were involved in more accidents, Mr. Scherr said, was that many people renting those cars did not have experience with the technology despite efforts by the company to educate customers,” the New York Times article said. “Electric cars accelerate more quickly than gasoline vehicles, and they are heavier. Demand for the vehicles was also less than the company had expected, Mr. Scherr continued.”
A LendingTree study published last month found Tesla vehicles have the highest crash rate out of the 30 brands reviewed. The study was released just days after Tesla recalled more than 2 million vehicles upon the conclusion of a two-year investigation into the safety of the vehicles by the National Highway Traffic Safety Administration (NHTSA).
Sen. John Barrasso (R-Wyoming) used Hertz’s decision to attack the Biden Administration’s initiatives to invest in EV infrastructure. He said it showed that “demand for electric cars is stagnating.”
The Biden Administration announced $623 million in grants to build the EV charging network on the same day Hertz filed with the SEC. Last year, the administration used Hertz as an example of a company committed to the expansion of EVs.
As Hertz scaled back, EV sales for Q3 2023 showed growth. A report from the Alliance for Automotive Innovation (Auto Innovators) states that 378,000 EVs were sold nationwide during Q3, a 63% increase over Q3 2022.
Public EV charging infrastructure isn’t keeping up with current and projected sales, according to the Auto Innovators report. During the first three quarters of 2023, the number of public EV chargers increased by 26% year-over-year while EV sales increased by 59%, the report said.
While Hertz is scaling back its EV operations for now, Scherr told the New York Times the company is not abandoning EVs altogether. He said the EV market needs to develop more.
As the market develops for EVs, ACRA is preparing for a future where the technology transforms the rental car industry. It recently created an EV Task Force for the creation of policy recommendations, according to Auto Rental News.
“It’s the biggest paradigm shift in the history of ground transportation in 100 years,” Auto Rental News said. “The auto rental industry will need to work with federal, state, and local legislators and regulators, as well as diverse stakeholders such as utilities, airports, EV infrastructure providers, and EV manufacturers to determine realistic and attainable goals and procedures.”
The industry expects Americans will try EVs through rental car companies before purchasing one, the article said. Yet, infrastructure needs to be in place to increase revenue, it said.
This includes telematics that reports battery status, condition, and charging locations in real-time, Auto Rental News said. It will also take time to build a charging infrastructure that customers will trust.
J.D. Power’s 2023 U.S. Electric Vehicle Experience (EVX) Public Charging Study, based on a six-month EV owner survey, states that despite the increase in public charging stations across the country, customer satisfaction with public Level 2 charging has declined to 617 on a 1,000-point scale, which is 16 points lower than a year ago and the lowest level since the study began in 2021.
S&P Global Mobility data has shown that charging infrastructure must be more robust to support a maturing EV market fully. The U.S. will need to see the number of EV chargers quadruple between 2022 and 2025, and grow more than eight-fold by 2030, S&P says.
Auto Rental News said the cost of EVs is another stumbling block for the rental car industry.
“With EVs costing more than ICE vehicles, it creates uncertainty for rental operators in setting rates, comparing the value and profitability of EVs to the economy and compact ICE vehicles, and making long-range business plans for an EV fleet,” Auto Rental News said. “There will be a time for more certainty, but not likely in the next two to three years.”
It notes that Tesla’s price cuts are an example of how the resale value of EVs is volatile.
Courtesy Photo by Makhbubakhon Ismatova/iStock