Hertz Global Holdings Inc. has announced its decision to sell off a third of its US electric vehicle (EV) fleet and reinvest in gas-powered cars due to weak demand and high repair costs for its battery-powered options. The rental giant revealed that the sales of 20,000 EVs commenced last month and will continue throughout 2024, resulting in a non-cash charge of approximately $245 million related to incremental net depreciation expense in the fourth quarter.
This significant shift comes after Hertz’s initial plans in 2021 to purchase 100,000 Tesla Inc. vehicles, indicating the diminishing demand for all-electric cars in the US. The growth in EV sales slowed sharply in 2023, with a mere 1.3% increase in the final quarter, attributed to consumer reluctance due to high costs and interest rates.
Hertz’s CEO, Stephen Scherr, highlighted the persistent elevated costs associated with EVs, leading to the decision to transition back to gas-powered vehicles. Consequently, the company’s shares fell by 4.3% to $8.95 following the announcement.
Looking ahead, Hertz will closely monitor EV demand at dealerships and within its own operations to determine potential future vehicle purchases. As a result, the agreement to buy 175,000 EVs from General Motors Co. over the next four years and an additional 65,000 from Polestar may face extended timelines for completion.
The company plans to utilize the proceeds from the EV sales to acquire gas-powered vehicles, aiming to achieve a better balance between supply and anticipated EV demand. This strategic shift signifies a departure from Hertz’s previous focus on EVs, which were expected to command higher prices at the counter and retain their value better than traditional cars.
