Summary
- Hertz bought 100,000 EVs from Tesla for $4.2 billion in October 2021
- Price cuts to Tesla lineup caused significant losses as the value of the fleet depreciated
- Hertz began a fire sale of its electric vehicles to limit losses
- The goal is to sell 30,000 EVs by the end of 2024 and diminish overconcentration of powertrains in the fleet
- Recent earnings call reported a loss of $0.68 per share, worse than Wall Street’s estimate of $0.46 per share
Article
Hertz revealed during its Q3 Earnings Call that it is still facing significant challenges due to its massive electric vehicle purchase from Tesla in October 2021. The rental service bought 100,000 EVs for $4.2 billion in an attempt to add sustainable powertrains to its fleet, but subsequent price cuts to the Tesla lineup led to large-scale losses as the value of the fleet depreciated rapidly. The company also acquired EVs from Polestar, compounding the financial difficulties it faced.
Initially, Hertz saw positive results from its EV strategy, but following the departure of its CEO, the company decided to initiate a fire sale of its electric vehicles in order to limit its losses. In January 2024, Hertz announced a strategic decision to start selling its EVs in an effort to recoup losses and mitigate the damage incurred. Subsequently, in August, it disclosed plans to sell “tens of thousands” of EVs from its fleet to help alleviate financial pressures.
Hertz still aims to sell 30,000 EVs by the end of 2024 and is focused on aligning its fleet size with customer demand for EV rentals. The company has set a goal to finish the EV sale by the end of 2025 and is working towards reducing its losses in the coming quarters by adjusting its overall fleet composition. However, the impact of the EV purchase and subsequent depreciation has resulted in millions of dollars in losses over recent quarters.
During the recent Earnings Call, Hertz reported a loss of $0.68 per share, which was higher than the Wall Street estimate of $0.46 per share. The company’s financial performance has been significantly impacted by the challenges stemming from its EV purchase and subsequent devaluation of the fleet. Hertz is also offering customers the opportunity to purchase EVs directly from its website, providing an alternative avenue for reducing its inventory of electric vehicles.
Despite the setbacks and financial losses, Hertz is actively working to address the challenges posed by its EV fleet and is implementing strategies to mitigate the impact on its operations. The company’s decision to sell off a significant portion of its EVs through a fire sale reflects its commitment to improving its financial position and focusing on aligning its fleet size with customer demand for electric rentals. As Hertz continues to navigate the effects of its EV purchase, it remains focused on mitigating losses and optimizing its fleet composition for the future.
Read the full article here
