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After Big Tesla Bet, Hertz Selling One-Third of EV Fleet
Car-rental company cites low demand, says some proceeds to be used to buy internal-combustion-engine vehicles
By Mike Colias, & Ben Glickman, WSJ
Updated Jan. 11, 2024 3:38 pm ET
Hertz is selling about a third of its global electric-vehicle fleet, a major reversal for the rental-car company after it positioned itself as a champion of the technology with plans to vastly grow its fleet of plug-in models.
Hertz said Thursday that it would sell about 20,000 EVs in the U.S., and use some of the proceeds to purchase internal-combustion-engine vehicles. The company in a regulatory filing cited weaker demand for electrics, and their higher operating costs.
The move is the latest example of a swift retrenchment by the car business on EVs. After years spent outlining aggressive expansion plans, automakers in recent months have put some EV projects on ice and dialed back production forecasts, citing signs that U.S. consumers aren’t ready to move to cars powered exclusively by batteries as quickly as once thought.
The car industry’s effort to sell consumers more broadly on EVs has run into some resistance lately as automakers have largely exhausted the pool of early adopters who tend to be willing to take a chance on new technology.
EV sales in the U.S. increased last year but the pace of growth has slowed. Car buyers are worried there won’t be enough places to plug in or their travel will be too limited by battery range, surveys show. High prices also are turning off consumers.
Hertz shares fell about 4% in afternoon trading Thursday. Tesla TSLA -2.87%decrease; red down pointing triangle shares were down about 2.7%.
Hertz signaled its big push into EVs in 2021, with a surprise move to eventually purchase 100,000 Tesla EVs. The Estero, Fla., company, which months earlier had emerged from bankruptcy, pegged part of its turnaround story to the effort to broaden electric choices for customers.
“Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest,” said Mark Fields, a former Ford Motor chief executive, who was then serving as Hertz’s interim CEO. Hertz’s stock rose 10% that day, and helped send Tesla’s valuation above $1 trillion for the first time.
Hertz pushed further into EVs under its current CEO Stephen Scherr who took over in February of 2022. A few weeks later, the company said it agreed to buy 65,000 cars from Swedish EV manufacturer Polestar.
At the time, Scherr said some of Hertz’s customers were eager to rent EVs to avoid high gas prices, and he added that nearly half of the company’s electric rentals had enough range that customers wouldn’t need to stop and charge. In September 2022, Hertz said it would buy 175,000 EVs from GM over five years.
Around then, automakers had been touting long wait lists for their newest electric models, and early buyers were shelling out thousands of dollars above the sticker price for them. Other rental companies, including Avis Budget Group, also signaled their interest in expanding their EV offerings.
Signs of a looming deceleration in the U.S. EV market appeared early in 2023, when Tesla sharply cut prices, pressuring other automakers that had been rolling out new EV models at the time.
Tesla’s price cuts last year lowered the starting prices of some models by about a third in the U.S., hammering the value of used Teslas and other electric cars, which began sliding in late 2022 and continued to decline throughout most of last year.
Hertz previously set a goal to electrify a quarter of its fleet by the end of 2024. On Thursday, the company said it would focus on matching supply with demand and focus on margins.
Hertz has faced higher repair costs on its EVs, and price cuts for Tesla cars have dented the value of its electrified fleet. The company said Thursday it would still offer EVs to customers and was working to improve profitability on its remaining fleet by expanding charging infrastructure and working with EV makers to access more-affordable parts.
The company said it would log a $245 million incremental net depreciation expense related to the sale of the 20,000 electric vehicles. Hertz sells its used rental vehicles directly on its website.
It expects to improve its bottom line by about that same amount over the next two years by replacing the EVs with internal-combustion-engine models.
Hertz on Thursday also cut its outlook for the year, in part from higher collision and damage expenses, primarily related to EVs, the company said.
It is forecasting adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, of negative $120 million to negative $130 million, not including the noncash charge related to selling electric vehicles.
Hertz said it is expecting revenue of $2.1 billion to $2.2 billion in the quarter ended Dec. 31, compared with $2.04 billion a year earlier. Analysts polled by FactSet are expecting fourth-quarter revenue of $2.19 billion.
Write to Ben Glickman at firstname.lastname@example.org
Corrections & Amplifications
Tesla recently had a market capitalization of nearly $750 billion. An earlier version of this article incorrectly said its market capitalization was nearly $750 million. (Corrected on Jan. 11)