Hertz’s Change in Strategy: Divesting One-Third of its Electric Vehicle Fleet

The Reader Wall Google News

Car rental giant, Hertz, is reportedly selling a significant portion of its electric vehicle (EV) fleet, including highly sought-after Tesla Model 3 sedans, in the used car market. This strategic decision, prompted by various factors, signifies a shift from acquiring EVs for rental purposes to offloading them.

An Opportunity for Savvy Shoppers, a Predicament for Current EV Owners

The sale presents a potential treasure trove for bargain hunters in search of affordable EVs, offering prices as low as $18,000 for a Model 3. However, it poses a challenge for current EV owners, including those with Teslas and other brands, as the resale value of their vehicles is expected to suffer. Tesla’s sales strategy, which involves reducing resale values and profit margins to drive sales, has negatively impacted the value of its cars. This decrease in value affects both Hertz and individual Tesla owners. In 2023, the average one-year-old EV in the US depreciated by 35%, nearly twice the rate of used internal combustion vehicles.

Tesla Owners Facing Negative Equity

Tesla owners who financed their purchases are particularly affected, with many dealing with negative equity. This means that the value of their cars has depreciated more rapidly than the repayment of their loans.

Impact on Car Manufacturers

Hertz’s decision also has implications for car manufacturers such as General Motors and Polestar, who had agreements with Hertz to sell EVs and were relying on the company to purchase a significant number of vehicles. Hertz CEO Stephen Scherr, who took charge after the company’s bankruptcy, had included EVs in the company’s recovery strategy. However, he has now indicated a reduction in EV purchases after the company’s earnings fell short of expectations due to higher depreciation and repair costs associated with the electric fleet.

Hertz is expected to incur a $245 million charge related to depreciation expenses for the fourth quarter. While the company will continue purchasing EVs from GM, the previous announcement of a plan to order up to 175,000 EVs from GM over five years was not binding.