Hertz is reevaluating its decision to move a significant portion of its rental car fleet to electric vehicles. While it’s too early to know what the eventual result of this experiment will be, there’s no question that the short-term return from the program isn’t what they were expecting.
Shortly after emerging from bankruptcy in 2021, Hertz announced they would purchase 100,000 electric vehicles. As per recent filings, 10% of Hertz’s 500,000 vehicle fleet are electric vehicles; they’re either Teslas or from other manufacturers like Polestar and GM. Hertz had stated its plan to have 25% of its fleet be EVs by the end of 2024.
But the EV program at Hertz hasn’t gone as planned. Hertz CEO Stephen Scherr, who inherited the bold EV initiative when he joined the company in 2022, said in a recent earnings call that “our in-fleeting of EVs will be slower than our prior expectations.”
What happened?
Once Hertz’s plan of buying EVs for the fleet reached a critical mass, there was a big problem. Most car rental customers did not want to rent an electric vehicle. Unless they already drove one, people didn’t want a learning curve about how to drive and charge their car while on vacation or a work assignment.
In addition, Hertz kept changing the rules about returning an electric vehicle. At first, there was no charging fee as long as the car had at least a 10% charge left. However, now you’re expected to return the vehicle with the charge at which you received it, or be required to pay a recharging fee. Notice that they’re not requiring themselves to give you an EV with a full (or almost full) charge.
While Hertz might have predicted a consumer reluctance to rent an electric vehicle, the program’s other problems are more complex and have nothing to do with renting Teslas.
Repair, Resale & Rideshare
Hertz’s electric vehicle problem can be summed up in these three words. The three topics all blend together, and this video from CNBC does an excellent job of showing how Hertz ended up where they are now:
What’s going to happen?
This is the big question. Hertz investors seem to be split on what should be done. The company has already invested a large amount of money in buying electric vehicles, building out a charging infrastructure, and promoting the rental of EVs to both corporate and leisure customers.
Moreover, electric vehicles aren’t going anywhere. They represented 10% of new car sales in 2022, which is only expected to increase, meaning more people will drive an EV and feel more comfortable renting them. However, Hertz’s mistake was assuming that customers would treat EV and gas vehicles interchangeably.
Finally, Hertz put itself in a bind by tying the EV program so closely to one company, Tesla. This is because Tesla controls the price of vehicles, which also impacts the value of used vehicles when Hertz needs to sell them.
Hertz is working to resolve these issues by partnering with other EV producers like GM and Polestar, which should help reduce dependence on Tesla for repairs and resales.
Final Thought
Hertz made a bold move by heavily investing in electric vehicles for the rental market. However, it may have been too early to go all-in on EVs.
The company is now realizing its mistakes and is taking steps to rectify them. Unfortunately, challenges such as a lack of charging stations, expensive repairs, and customers’ unfamiliarity with the product are beyond their control.
Whether this early adoption will prove to be a wise decision or a costly mistake for Hertz remains to be seen.
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4 comments
I own an EV and seriously considered renting them from Hertz several times. The reason why I never did is because having to return the vehicle with at least the same charge as it was during pick-up or be slapped with a $35 fine ($25 for Gold Plus members). Almost always I have to return a rental car to an airport to catch a flight at a specific time. When returning an ICE car, you will always be able to find a gas station in the vicinity of the airport (even non-rippoff ones) and usually not spend more than 5 minutes at it. Charging stations, their locations, waits and operational status are always unpredictable. Even if a level 3 charger (the fastest type of charging currently available) is available, you might still be waiting at least a half-hour for it to charge to the desired level.
Renters of EVs should be able to return the cars at as little charge as they want with zero fine. If that were the case, I’d have to problem renting one.
I dunno–I’ve had clients that rented EV (they have gas at home) and hated it. Hard to find someplace to charge the car on the road. Until more charging stations are installed, car rental locations are best not pushing them on clients.
Awful idea. I had a miserable experience in Vegas trying to find a charger without a lengthy wait. Spent about an hour total dealing with the process. And had to download the app, enter payment details, etc. Total PIA for this boomer who was forced to take the EV though a gas car had been confirmed. And I’m President’s Circle.
I’m Hertz Presidents Circle.
Every time I try to rent a Tesla, they “upgrade” me to some other POS. Last time it was a Hyundai Santa Fe. And they tried to tell me it’s an “upgrade” from a Model Y.
They can’t figure out how to manage EVs. It’s not a product problem, it’s a people problem.