In 2021, Hertz announced that it was going to order 100,000 electric vehicles from Tesla by the end of 2022. Turns out the car rental company is far from being able to reach that number still, and it may take a while to get to 100,000, if it even gets there, because it’s slowing down its plans to electrify its fleet. During the company’s third-quarter earnings call (PDF), CEO Stephen Scherr said Hertz’s “in-fleeting of EVs will be slower than [its] prior expectations.”
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Hertz reported a 13 percent margin for the quarter, which Scherr said would’ve been “several points higher” if not for the cost challenges associated with EVs. One of the factors that affected the company’s margins was depreciation, compounded by the one-third drop in retail prices of the electric cars in its fleet. Tesla had implemented several price cuts over the past year, slashing the Model S and X prices by nearly 20 percent in September.
In addition, the CEO said that EVs are costing Hertz “about twice in terms of damage cost repair than a conventional internal combustion engine vehicle.” He said the company is working directly with Tesla to look at its cars’ performance and lower the risk of damage, as well when it comes parts procurement and labor. The company disclosed in its earnings report that 80 percent of its EVs is made up of Tesla vehicles, which means it has 35,000 Tesla in its fleet out of 50,000. As CNBC explains, EVs come with their own set of maintenance challenges, potentially brought about by their heavier weight. Aside from those two factors, moving a portion of its EV fleet from ridesharing use to leisure had affected its margins, as well. Hertz rents Tesla EVs to Uber and Lyft drivers, and it’s now planning to move the vehicles it removed from the pool back to its ridesharing business.
Scherr said Hertz remains committed to its long-term plan to electrify its fleet, but it’s going to pace itself while it looks for solutions to its EV-related issues. The CEO talked about how taking on EVs by other manufacturers like GM could address some of the problems it’s facing. He expects Hertz to be able to purchase them at an “appreciably lower price point” than the prices it paid for its Tesla vehicles. He also thinks that those cars “will likely speak to lower incidence of damage,” as well as to “a lower cost of parts and labor.” GM and other traditional automakers have a broad parts supply network nationwide established over the decades, which will make it easier — and potentially cheaper due to aftermarket availability — to procure components.