In October, General Motors and Honda Motor Co. announced they had canceled plans to jointly develop affordable electric vehicles in the face of slowing demand. Over the course of 2023, Tesla has reduced prices for its vehicles around the world, aiming to revive demand as consumer spending slows and the electric vehicle market becomes more crowded.
Hertz CEO Stephen Shear told CNBC's Jim Cramer on “Squawk on the Street” on Thursday that the company's move, which followed large orders for Tesla and GM EVs, was “a response to the reality, which is that we're trying to bring supply to market.” . In line with demand.”
“The fact that electric cars and Tesla are the best-selling car will, at some point, make them the best rental car,” Shear said. “It hasn't happened yet, so maybe we're getting ahead of ourselves in terms of how quickly it's going to happen, but it's going to happen.”
Hertz said it will sell about 20,000 electric cars. It will then use some of those proceeds to buy cars with internal combustion engines. The company will also have an additional net depreciation expense of $245 million as a result.
However, Hertz said in a regulatory filing that it expects to improve its bottom line by $245 million over the next two years by replacing those electric cars with cars with internal combustion engines.
The company had already indicated on its third-quarter earnings call in October that it was slowing its purchases of electric vehicles, citing lower MSRP on electric vehicles that had reduced the fair market value of its vehicles. The company said that about 11% of its entire fleet in October were electric cars.
On October 25, 2021, Hertz first announced plans to grow its fleet of battery electric vehicles with an “initial order of 100,000 Tesla vehicles by the end of 2022.”
A commercial featuring repeat Super Bowl champion Tom Brady, along with Tesla Model 3 electric sedans parked in a Hertz garage, accompanied the ad.
The move to sell part of its Tesla fleet is a “black eye for Hertz,” Wedbush analyst Dan Ives said on CNBC's “Last Call” on Thursday, adding that he believes Hertz miscalculated how the move would play out. Introducing electric cars and Tesla cars to customers. From a marketing and offering point of view.
Part of Hertz's original thesis about investing in EVs was that customers would be motivated to lease them for a variety of reasons, such as trying one for the first time, avoiding high fuel prices or choosing a more environmentally friendly rental car.
This type of experimentation was happening, but “it's not happening at the level of demand that justifies us maintaining a fleet of this size at this moment in time,” Scheer said. Shear added that Tesla's recent decision to reduce the price of its cars also influenced Hertz's decision due to its impact on the discontinuation.
Hertz had previously set a goal of having a quarter of its fleet electric vehicles by the end of 2024. Taking this course instead is about financial performance and operational integrity, Shear said.
“A smart company is one that is flexible, makes adjustments, eliminates financial and operational distractions, and moves forward,” Shear said.