Hertz (previously) is selling off one third of its electrical vehicle fleet, mostly Tesla models, to replace them with gasoline-powered cars. It's dumping some 20,000 vehicles and with the used-EV tax credit one may pay as little as $14,000. Listings show these vehicles are 2-3 years old with at least 60,000 miles on the clock.
The company said in a Thursday morning filing that it is recognizing "approximately $245 million of incremental net depreciation expense related to the sale," which is a dry way of saying it's taking a bath on the decision. Hertz told shareholders that it believes it will be able to make up that loss in the coming years.
Hertz's move to slash its EV fleet comes as electric vehicle sales growth has cooled from record highs.
Replacing the Tesla EVs with traditional gas guzzlers is the most remarkable thing. CNBC reports that EVs are not working well for rental companies. "Skyrocketing repair costs and low resale values" are among the problems.
In October 2021, Hertz publicly announced it intended to buy 100,000 Tesla vehicles. Newly emerged from bankruptcy, Hertz had a bold plan to lead the EV revolution in car rental. Shares of Hertz soared, as did Tesla's – its market value hit $1 trillion. First mover advantage aside, it would help Hertz distinguish itself in an industry plagued by commoditization. But only a couple of years in, the rental company's EV strategy is facing some serious challenges: pricing troubles, skyrocketing repair costs and low resale values. Meanwhile big rental rivals are holding back on EVs. Hertz's investors are divided over what to do next: either kill, or at least pause the EV initiative, or try to find a way to make it work. Meanwhile, the company is planning to reduce the share of Tesla vehicles in its fleet and buy more from other automakers.
The cost of maintaining old EVs sounds like it's going to be a big problem in the next few years for early adopters. And the cost of repairs, including even the most minor body repairs, is just astronomical.
Hertz had originally announced plans to buy 100,000 Teslas, but ultimately had bought only 35,000 by October last year, according to TechCrunch, a number that will now fall steadily as the fleet is sold off.
Tesla stock is down about 2% today. It's reportedly raising its wages in the U.S. to keep up with other major automakers after a year of productive labor union activity. The details aren't clear, but Bloomberg News quoted a 10% raise for most hourly workers at its Nevada gigafactory.
Just days ago, an exposé in the Wall Street Journal detailed Tesla boss Elon Musk's extensive problems with substance abuse and the various fears and consequences attending them for him and others. He denied recent use, but followed it with a jocular remark that suggested he not be taken seriously.
