Hertz is selling off a third of its electric vehicle fleet, which is predominantly made up of Teslas, and will buy gas cars with some of the money it makes from the sales. The company cited lower demand for EVs and higher-than-expected repair costs as reasons for the decision.
The sell-off began last month and will continue through 2024. As some electric vehicle-focused blogs have noted, they’re being sold at steep discounts. The company said in a Thursday morning filing that it is recognizing “approximately $245 million of incremental net depreciation expense related to the sale,” which is a dry way of saying it’s taking a bath on the decision. Hertz told shareholders that it believes it will be able to make up that loss in the coming years.
Hertz’s move to slash its EV fleet comes as electric vehicle sales growth has cooled from record highs. The news also follows recent comments from Hertz’s global CEO Stephen Scherr about how the rental giant was dealing with high repair costs — in part because many of the Teslas were being used by Uber drivers — and dramatic depreciation thanks to Tesla’s drastic price cuts.
Just two years ago, Hertz announced plans to buy 100,000 EVs from Tesla by the end of 2022. The news helped Hertz distance itself from a chaotic bankruptcy and pushed Tesla’s valuation over the $1 trillion mark for the first time. But it never happened.
Instead, as of October 2023, Hertz had only purchased 35,000 Teslas and its entire electric fleet included about 50,000 EVs total. Scherr maintained at the time that his company was “committed” to buying 100,000 cars from Tesla, even while he admitted that the automaker’s price cuts had shrunk the value of its modest EV fleet.
Hertz didn’t just overpromise with Tesla. It announced plans in 2022 to buy up to 175,000 EVs from General Motors, and another 65,000 from Polestar. The company did not say Thursday how its decision to sell a third of its EV fleet will impact those plans, and didn’t immediately respond to a request for comment.