Hertz pumps the brakes on EV uptake

RENTAL car agency Hertz is planning to slow the number of electric vehicles it introduces to its fleet citing higher repair costs and low resale values as the driving factor behind the decision.

 

Hertz global CEO, Stephen Scherr, told CNBC this week that lower than expected margins for the period ending September 2023 and costly EV repairs were a challenge that had forced a rethink in the number of electric vehicles Hertz would offer going forward.

 

“Our in-fleeting of EVs will be slower than our prior expectations,” he stated.

 

“Collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle.

 

“Our direct operating expenses remained controlled in the quarter as they grew with transaction volume. On a unit basis, we achieved productivity gains across most categories of auto.

 

“The exception remained vehicle damage costs, particularly those on our EVs, which we are addressing in a very targeted way.

 

“MSRP declines in EVs over the course of 2023, driven primarily by Tesla, have driven the fair market value of our EVs lower as compared to last year, such that as salvage creates a larger loss and therefore greater burden.”

 

Hertz said that around 80 per cent of its battery electric fleet are Teslas, while around 11 per cent of its fleet is now comprised of electric vehicles.

 

The company has around 50,000 EVs on its fleet currently, meaning 35,000 of those are sourced from Tesla – well short of the 100,000 units it originally forecast at the end of 2022.

 

Mr Scherr said Hertz remains committed to its order, as well as EVs from GM and Polestar (in Australia).

 

“Our focus and our work with Tesla is to look at the performance of the car so as to lower the risk of incidents of damage. We are in very direct engagement with them on parts procurement and labour and the likes,” he added.

 

“Remember, in the likes of GM and other OEMs, there are decades of establishment of a broad national parts supply network. There is an aftermarket of parts that is there that is less mature obviously in the context of Tesla.”

 

As outlined by CNBC, electric vehicles can face unique maintenance needs not often considered in the context of ongoing vehicle maintenance, particularly within rental fleets.

 

Kinetic CEO, Nikhil Naikal told the publication that the weight of an electric vehicle is proving to place added wear and tear on brake and suspension components, as well as tyres and other consumable parts.

 

“The reality of electric vehicles is that they can be 1000 pounds (453kg) heavier or more than gas vehicles, and they move faster, with higher torque,” he noted.

 

“Since they’re extremely zippy and heavier, it’s just physics – the ability to overcome inertia so quickly is going to affect their suspension systems, the brakes, and steering columns.

 

“It’s counterintuitive, but even with fewer moving parts they (EVs) are susceptible to requiring more maintenance. They especially require tyre-swapping because the tyres wear our more quickly from that high torque and weight.”

 

Despite the poorer outlook for its EV fleet, Hertz reported third quarter revenue of $2.7 billion ($A4.25b), net income of $629 million ($A989.8m) and an adjusted corporate EBIDTA of $359 million ($A564.9m)

 

“Hertz produced record revenue in the quarter, reflecting ongoing strength in demand and stability in pricing,” said Mr Scherr.

 

“Our premium Hertz brand performed well, and we saw further growth in our rideshare business and progress in reinvigorating our value brands.

 

“We nonetheless remain focused on the cost side to improve margins. Our ongoing investments will give rise to better operating fundamentals, and with the growth opportunities ahead of us, I am confident in the trajectory of our business and the forward for Hertz.

 

“Across these efforts, we remain committed to delivering excellent service to our customers while shaping the future of mobility.”