Hertz will sell 20,000 EVs from US fleet to instead buy gas cars
Rental car company giant Hertz, which made big news in 2022 when it announced it planned to buy 175,000 electric vehicles from General Motors to diversify its fleet, now says it plans to sell about a third of its global EVs this year and use the proceeds to buy gasoline-powered cars instead.
In a government filing Thursday, Hertz Global Holdings Inc. said it started selling about 20,000 EVs from its U.S. fleet last month. It said it will continue the sale throughout the year, citing higher expenses on EVs related to collision and damage, as well as lower than anticipated demand for EVs, which erodes resale values, as reasons for the shift.
GM spokesman Kevin Kelly declined Thursday to comment on Hertz’s announcement or how it could impact GM’s order. “We will continue to work with Hertz to address their fleet needs,” Kelly told the Detroit Free Press.
Hertz reducing its EV fleet is the latest blow to EV adoption, which is falling shy of what automakers had expected.
GM CEO Mary Barra said last fall that GM would withdraw its target of making 400,000 EVs for 2022 through June 2024. GM still plans to end 2025 with 1 million units of North American EV capacity but Barra said if the demand is not there for 1 million EVs, GM will not build them.
GM missed its target to produce 150,000 EVs last year with the goal of half of those being the new models. Instead, it sold a total of 75,883, with most of them being the Chevrolet Bolt compact and the slightly larger Bolt EUV, lower-priced models not using the Ultium propulsion system that will soon be discontinued in their present form.
Reducing the ‘damage expense’
In the filing, Hertz said it expects to record a noncash charge in its fourth-quarter results
of $245 million related to incremental net depreciation expense, that means gradual costs related to the vehicles losing resale value.
But Hertz said the planned reduction in the EV fleet and reinvestment in additional gasoline-powered cars will improve its net income “across 2024, as vehicles are rotated, and in 2025, by which time all of the vehicles included in this plan are expected to be sold.”
“The Company expects to reinvest a portion of the proceeds from the sale of EVs into the purchase of internal combustion engine (“ICE”) vehicles to meet customer demand,” Hertz said in its filing. “The Company expects this action to better balance supply against expected demand of EVs. This will position the Company to eliminate a disproportionate number of lower margin rentals and reduce damage expense associated with EVs.”
Hertz said it will continue to “execute its strategy” on EVs to offer customers a wide selection of vehicles. Hertz spokesperson Lauren Luster did not have a comment Thursday beyond the government filing, she said in response to an email from the Detroit Free Press requesting further information, including details on how many EVs remain in its fleet and a breakdown of the vehicles it was selling.
But Hertz’s used car website has more than 1,100 EVs, which included hybrids, for sale across a variety of brands, including Kia EV6, Chevrolet Bolt and Tesla’s Model 3 and Model Y SUVs. In 2021, Hertz ordered 100,000 Tesla vehicles.
In Hertz’s filing, the company said it continues to implement a series of initiatives that it anticipates will continue to improve the profitability of the remaining EV fleet. Those include expanding EV charging infrastructure, growing relationships with EV manufacturers, particularly related to more affordable access to parts and labor, and continued implementation of policies and educational tools to improve the EV experience for customers.
“While this will probably have a negative effect on the public perception of EVs, I don’t think 20,000 used vehicles will significantly impact the market,” Mike Austin, senior research analyst for EVs and mobility at Guidehouse Insights in Detroit told the Detroit Free Press. “I’m also curious as to how many of that 20,000 is pulling sales ahead versus normal turnover. About 80% of Hertz’s (EV) fleet are Teslas and the company said in an earnings call last year that it expects EVs from other automakers to have a lower risk of damage and less costly repairs, so this is probably more of a Tesla issue than an EV issue.”
GM’s partnership with Hertz
The impact this move will have on GM remains unclear. In September 2022, Hertz announced it would order up to 175,000 EVs from GM through 2027. At that time, Hertz and GM said it was the largest EV expansion among fleet customers to date.
The vehicles Hertz would buy range from Chevrolet, Buick, GMC, Cadillac and BrightDrop — GM’s all-electric delivery vehicle unit. They would encompass everything from compact and midsize SUVs to pickups and luxury vehicles and at a variety of price points, Hertz said in 2022.
In August 2023, Barra touted Hertz’s plan to add GM’s EVs to the fleet in a video with Hertz CEO Stephen Scheer, which the Detroit Free Press reported.
Luster said at that time the company expects to have about 10,000 GM EVs in its fleet by the end of 2023 and it will continue to steadily take delivery of a range of EV models from GM in 2024 and beyond.