Hertz announced today that they’re selling 20,000 EVs from their fleet and replacing them with internal-combustion engine vehicles, taking a $245 million loss. As noted in my earlier column, Hertz’ decision to place an order for 100,000 Tesla’s was a really stupid move that was never clearly thought through:
….Owning an EV as a personal car with home charging is a lot different than using one as a rental, especially a Tesla that has a completely different user interface and a new method of refueling for many. But EV renters need to charge their car at their hotel or on the road during their rental period, and that requires planning for the extra time it takes to find a charger. Once they get to a charging station, they need to set up an online account to pay. And what business traveler has time to stop for 30 to 60 minutes to refuel on the way back to the airport?
Here’s how the WSJ positions the move:
“The move represents another setback for the auto industry, which has been moving aggressively to boost sales of electric vehicles in part to meet stiffening environmental regulations around the world. It also marks a reversal for Hertz, which in 2021 bet on EVs with a 100,000-vehicle order ….. “
But the WSJ is dead wrong.
It’s a setback for a poorly thought through strategy by Hertz to pump their stock and play up to Elon Musk, while never considering what’s best for their customers. It’s what happens when the customers’ needs are secondary or in this case ignored. It has nothing to do about EVs. It’s like giving computers to kindergarteners, and when they struggle to use them, declaring computers are a failing product.
EVs were the wrong product for rental customers, so it was entirely predictable that the strategy would fail. The real conclusion that the WSJ should have come to is that Hertz tried to impliment a stupid idea and the market spoke.
More poor Hertz business acumen
The additional mistake that Hertz made was doing business with Tesla. The rental company sufferred huge losses from the depreciation of their fleet as Tesla, with little warning, slashed the retail pricing of their cars by about 20%. Hertz’s fleet of nearly untouched Teslas lost tens of millions of dollars just being parked. Why didn’t Hertz have price protection for their huge purchase? And if Hertz was interested in the positive environmental impact of their fleet, why are they not replacing the Teslas with hybrids?
A good time to buy EVs
This should not discourage us from buying an EV. There are dozens of excellent models with great incentives and rebates. Some brands are experiencing great success, such as BMW and Volvo.
After much investigation, testing, and study, I just leased a new Lexus RZ EV. The SUV gets 220 miles on a full charge, less than the average 250 or so of the most popular EVs, which has reduced its demand, but created a great opportunity for those who find that range acceptable. The car has a sticker price of $63,000, but if leased, is discounted a whopping $15,000. With an additional dealer discount off the retail, the lease payments are similar to a car retailing for about $43,000. The residual value after three years is over $29,000, meaning the lease amount is just $14,000 over three years. Other brands, like the Lexus, that are not entitled to government rebates because they are built outside of the U.S.,are also offering lease incentives of $7500.
So while it’s good time for Hertz to get out of EVs, it may just be a great time for individuals to get into one. Even a hardly-used Tesla from Hertz.