Citing exceptionally high repair costs, rental car company Hertz is selling off 20,000 electric vehicles (EVs) from its fleet.
Representing roughly one-third of its entire electric fleet, the 20,000 EVs Hertz is selling include Teslas, Chevrolet Bolts, Volvos, and other EV brands. Many of the cars are already up for sale, many of them at a steep discount.
When rental car companies sell cars this cheap, it is a sign that the vehicles in question must be disposed of quickly to keep the business functioning smoothly and profitably.
"While direct operating expenses per transaction day, excluding collision and damage, will be flat for the quarter and down for the year, expenses related to collision and damage, primarily associated with EVs, remained high in the quarter, thereby supporting the Company's decision to initiate the material reduction in the EV fleet," Hertz said in a statement.
(Related: EVs are a scam, and here's why.)
Premarket Hertz trading nosedived by six percent following news of EV selloff
While the decision to sell these 20,000 EVs will help Hertz' earnings in 2024, the immediate effect was a nosedive in the company's share price by about six percent in premarket trading.
Keep in mind that in 2021 when Hertz emerged from bankruptcy as a "much stronger company" after the Wuhan coronavirus (COVID-19) "pandemic" started to wane, the company had proudly announced plans to add EVs to its fleet to help them go mainstream.
"It's a combination of data and also mindset," announced CEO Mark Fields at the time, celebrating the addition of EVs to Hertz's lineup.
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Fast-forward a few years and the entire auto market landscape has changed dramatically once again. The pool of EV early adopters is drying up, and consumers are being hit hard by rising interest rates that make purchasing an EV prohibitively expensive for many.
Not only are new EVs much more expensive than new gas-powered cars, on average, but there is also little-to-no used market for EVs like there is for gas-powered cars.
In many ways, EVs are a really bad bet both for consumers and for rental car companies because their batteries are unreliable, dangerous, and extremely expensive to replace when they go bad. Other replacement parts for EVs are likewise too expensive or too difficult to obtain on a regular schedule.
Even at Hertz, which was excited about its EV adoption, things started to become rocky, particularly last October when the company warned of higher repair costs for EVs.
Two months later in December, Business Insider reported that companies like Hertz are learning the hard way that rental processes for EVs are severely lacking.
Reports indicate that Hertz will be replacing the 20,000 EVs it is selling with new gas-powered cars that are more reliable, and cheaper and easier to fix.
"While consumers enjoy the driving experience and fuel savings (per mile) of an EV, there are other 'hidden' costs to EV ownership," said Morgan Stanley analyst Adam Jonas, noting that Hertz's decision to sell off 20,000 EVs from its fleet is a warning move, and a sign that EV expectations need to be "reset downward across the market."
Hertz had previously announced before all this that by the end of 2022, it planned to purchase 100,000 Teslas. That announcement was followed up by a change of plans in which Hertz instead decided to purchase just 65,000 units from Polestar rather than Tesla, and over the course of five years rather than by the end of 2022.
"Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter," Hertz said in a recent regulatory filing.
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