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The global car renting giant has posted its fourth loss in a row as it slashes its fleet of Tesla and Polestar electric cars.
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Rental car giant Hertz has announced higher than expected losses of more than $AU2 billion which the company says is largely due to its failed electric vehicle strategy.
In announcing its third-quarter (July-September) 2024 results to shareholders, Hertz reported a loss of $US1.3 billion ($AU2 billion) with the majority being losses from its ex-rental electric vehicle sell-off.
The company says it is targeting an average of below $US300 ($AU460) in monthly depreciation for each vehicle, but it’s latest reported figure is nearly double at $US537 ($AU823).
The vehicle depreciation bill for the third-quarter was a staggering $US937 million ($AU1.43 billion).
The company decided to offload one-third of its United States (US) fleet of Tesla and Polestar electric cars – meaning around 20,000 vehicles – in January 2024, which it said was due to high ongoing repair costs.
The following month Hertz cancelled a deal to buy 65,000 Polestar electric cars which were also destined for its US fleet, and in April 2024 said it would sell off an addition 10,000 electric cars.
Tesla and Polestar electric cars remain available for rent through Hertz – and other rental firms – in Australia, where there are currently no plans to remove them.
Hertz’s decision to sell its US fleet of electric cars and return to petrol-powered vehicles came as resale values of electric vehicles in the US worsened – led by the Tesla Model 3.
A September 2024 study by iSeeCars.com found the second-hand value of electric cars in North America fell by around 25 per cent over the previous 12 months.
This compared to 6.0 per cent decline for hybrids – which are increasing in popularity – and a 4.4 per cent fall for petrol-powered vehicles.
Hertz flooding the used electric car market with thousands of cars would only push Tesla and Polestar values lower – which has now seen the car-rental giant suffer bigger financial losses than expected.
The rental company still plans to meet its previously announced goal of selling 30,000 electric vehicles from its fleet by the end of 2024.
Contributing to the used value decline has been the reduction in new-car prices of electric vehicles in the US, with Tesla repeatedly slashing new vehicle prices, something it has done elsewhere including Australia.
Tesla’s behaviour is significant as it leads US electric car sales – as it does in Australia – with its 471,374 posted sales making up more than half of all electric vehicles sold in the US year-to-date (873,151 at the end of September).
US buyers have seen the new-car price premium compared to petrol-powered models fall from 33 per cent in September 2020 to 16 per cent in September 2024, according to Kelley Blue Book.
Hertz also paid a premium for petrol-powered cars it purchased during the COVID-19 pandemic.
A global shortage of semi-conductors – critical for new-cars – saw waiting lists stretch and prices increase, with some car makers pausing production during the supply crisis.
Hertz now has to sell petrol vehicles it paid inflated prices for during the pandemic to a readjusted market where prices have fallen back to relative normal.
While electric vehicles sales have increased in the US so far in 2024 – up around 8.4 per cent to the end of September – the US auto industry is awaiting policy changes by president-elect Donald Trump, who takes office in January 2025.
Trump’s return to The White House has seen campaign donor and Tesla CEO Elon Musk announced as part of the new government’s administration.
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