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Hertz’s Decision to Reduce Fleet of Electric Vehicles
In a strategic shift, Hertz has decided to decrease its fleet of electric vehicles, citing concerns over reliability and higher costs compared to traditional gas-powered vehicles. This decision comes as the company disclosed a significant $392 million loss for the first quarter of 2024.
Evaluation of Electric Vehicle Strategy
The Florida-based rental car company has announced plans to offload an additional 10,000 electric vehicles this year, bringing the total to 30,000 units planned for sale in 2024. This move follows a $195 million charge incurred last quarter due to the depreciation of its electric vehicle fleet, coupled with a $245 million write-down in the final quarter of 2024.
Former CEO Stephen Sherr’s ambitious bet on electric cars has proven costly for Hertz, resulting in a staggering $440 million loss. With the latest round of sell-offs, the company will now retain only 30,000 electric vehicles in its fleet.
Challenges Faced by Hertz
CEO Gil West, who assumed the role on April 1, highlighted the impact of fleet and direct operating costs on the company’s recent financial performance. Acknowledging the need to optimize vehicle supply while reducing capital expenditure and enhancing productivity, Hertz aims to address these challenges.
Despite these efforts, Hertz’s stock dipped by more than 3% in morning trading, contributing to a year-to-date decline of nearly 56% and lowering the company’s market capitalization to $1.38 billion.
Consumer Experience with Electric Vehicles
Hertz acknowledged that the transition to electric vehicles posed challenges for renters, many of whom were unfamiliar with charging procedures and other aspects of EV operation. This lack of familiarity, compounded by limited traditional vehicle options, created a burden on consumers.
This development marks a stark contrast to Hertz’s previous ambitions, including partnerships with prominent electric vehicle manufacturers such as Tesla and Polestar, as well as collaborative efforts with ride-sharing giant Uber to expand its electric vehicle presence.
However, mounting repair costs for electric vehicles, along with Tesla’s aggressive price reductions impacting fleet value, have led to a reassessment of Hertz’s electric vehicle strategy. Repairing Teslas reportedly cost twice as much as comparable gas-powered vehicles, underscoring the financial strain associated with maintaining an electric vehicle fleet.
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