Hertz Global is reducing the speed at which it adds electric vehicles (EVs) to its rental fleet, according to executives on a third-quarter earnings call last Thursday.
The company cited Tesla’s price cuts, which have negatively impacted the resale value of its electric vehicles, and higher-than-expected repair costs as reasons for the slowdown, reports CNBC.
“Our in-fleeting of EVs will be slower than our prior expectations,” said Stephen Scherr, CEO of Hertz, during the company’s third-quarter earnings update. Hertz reported lower-than-expected margins for the quarter ending September 2023, attributing part of the challenge to EV repair costs.
“Our direct operating expenses remained controlled in the quarter as they grew with transaction volume. The exception remained vehicle damage costs, particularly those on our EVs,” Scherr added.
Scherr also pointed out that the Manufacturer’s Suggested Retail Price (MSRP) declines in EVs throughout 2023, primarily driven by Tesla, have lowered the fair market value of Hertz’s electric vehicles compared to last year. “This creates a larger loss and therefore greater burden,” he said.
Hertz’s stock closed down around 10% at $9.04 following the third-quarter update, while Tesla shares dipped approximately 3% to close at $205.76.
The company disclosed that about 80% of the battery electric cars in its fleet are Teslas, making up around 35,000 of the approximately 50,000 electric vehicles in its fleet. This falls short of the 100,000 Teslas that Hertz initially said it would order and expected to have by the end of 2022. Currently, electric cars comprise about 11% of Hertz’s entire fleet.