Car rental company Hertz will sell about a third of its electric fleet after they lost value faster than expected, the company announced on Thursday. The drop in value is a blow to the company’s efforts to replace gasoline-powered vehicles with cars that produce zero emissions.
Electric vehicles owned by the company were also more likely to be involved in collisions, Hertz said, and proved costly to repair. The company said it plans to buy more gas-powered vehicles to replace the 20,000 battery-powered cars it sells.
“Some of these electric vehicles have become uneconomical for us,” Stephen Scherr, Hertz’s chief executive, said in an interview Thursday.
The company’s decision to sell 20,000 vehicles, which Mr. Scherr blamed in part on “unprecedented” price cuts by Tesla that reduced the cars’ resale value, provided fuel to opponents of the Biden administration’s policies to promote technology as a tool to tackle climate change and air pollution.
Sen. John Barrasso, a Republican from Wyoming, took advantage of the announcement during a hearing Thursday on climate policies.
The Hertz decision showed that electric vehicles are expensive and unpopular, Mr. Barrasso told the Senate Energy and Natural Resources Committee. “Demand for electric cars is stagnant,” he said, adding, “So much for the Biden economy.”
Mr. Scherr implicitly placed much of the blame on Tesla, which makes about half of all electric vehicles sold in the United States, for the rental car company’s decision to sell its electric vehicles.
Tesla vehicles, which make up the largest share of Hertz’s electric fleet, have fallen in value after the automaker, which is run by Elon Musk, plunged about 30 percent last year. When the price of new vehicles drops drastically, it lowers the value of used cars because buyers can buy the newer versions for less.
As a result, Hertz has been forced to write down the value of its electric cars faster than it expected, which has weighed on earnings, Mr. Scherr said.
Rental companies like Hertz estimate how much their cars will be worth when they eventually sell them, and that estimated drop in value is counted as a cost. If the drop is greater than expected, the profit is reduced.
Mr. Scherr said Tesla was less willing than other automakers to give Hertz volume discounts on parts. “Tesla is new to the game,” he said, suggesting that the electric car company’s relative inexperience in serving rental car companies played a role in that decision.
Tesla did not respond to a request for comment.
Hertz’s plan is at least a temporary turnaround for the company, which in 2021 announced it would buy 100,000 Teslas as part of a broader effort to electrify its rental fleet.
But the deal did not set a deadline for Hertz to buy the cars, and the company has bought only a fraction of that number. Hertz also offers electric vehicles from other manufacturers, including Kia, General Motors, Volkswagen and Polestar.
One possible reason Hertz’s electric vehicles were involved in more accidents, Mr. Scherr said, was that many people renting the cars lacked experience with the technology despite the company’s efforts to educate customers. Electric cars accelerate faster than gasoline vehicles and are heavier. Demand for the vehicles was also lower than the company expected, Mr. Scherr continued.
Hertz’s decision is likely to bolster the argument by some conservatives, including former President Donald J. Trump, that electric vehicles have become overhyped. “It will feed into the downside narrative for EVs right now,” said Jeremy Robb, senior director of financial and industry intelligence at Cox Automotive.
However, Mr. Robb noted that electric vehicle sales in the United States totaled nearly 1.2 million last year and were up 40% in the last three months of 2023 compared to the same period in 2022. “There is still a market for EVs,” he said. he said.
Hertz is not abandoning its plans to electrify its fleet or buy more Teslas, Mr. Scherr said. However, he said, the market needs to be developed further.
“Tesla is among the best-selling cars in America,” he said, “but it’s still not the best rental car.” Mr Scherr added: “These two have not converged as quickly as many people, including ourselves, thought. But they will.”
