Hertz Global Holdings (HTZ.O) has announced its decision to sell approximately 20,000 electric vehicles (EVs) from its U.S. fleet due to mounting expenses associated with collision and damage repairs.
The company intends to shift its focus towards gas-powered vehicles as a result of these financial challenges. Consequently, Hertz’s stock witnessed a decline of approximately 3% in early market trading.
Hertz, a rental firm known for its diverse vehicle offerings, including those from Tesla Inc (TSLA.O) and Swedish EV manufacturer Polestar, had previously made ambitious commitments to electrify its fleet.
They had initially declared plans to purchase 100,000 Tesla vehicles by the end of 2022, followed by a subsequent announcement to acquire up to 65,000 units from Polestar over a five-year period, Investing Insider reported on Friday.
In a regulatory filing on Thursday, Hertz cited persistently high expenses related to collision and damage, primarily associated with their EVs, as the driving force behind this strategic shift.
This move comes as a surprise, given the growing momentum towards electric mobility and sustainability initiatives.
Previously, Hertz had set a target for 25% of its fleet to be electric by the conclusion of 2024. However, this objective appears to be in jeopardy with the sale of 20,000 EVs.
The company anticipates incurring approximately $245 million in incremental depreciation expenses during the fourth quarter of 2023 as a result of the proposed sale.
Additionally, Hertz warned of a potential impact on adjusted corporate core profits for the same period.
Despite this course correction, Hertz remains committed to enhancing profitability for the remaining EVs in its fleet.
The company’s used car website currently lists more than 700 EVs for sale, including models from renowned manufacturers such as BMW’s i3, Chevrolet’s Bolt, and Tesla’s Model 3 and Model Y SUVs.
In light of this announcement, Hertz’s pivot away from electric vehicles underscores the complex economic challenges that can accompany the transition to electric mobility, serving as a reminder of the importance of carefully managing the costs associated with maintaining and repairing electric vehicles.