Hertz to sell a third of US EV fleet amidst weak demand

Hertz (HTZ) is set to sell a third of its available US electric vehicle fleet citing weak rental demand and higher maintenance costs. The company expects about $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023. The cars, which include various Tesla (TSLA) models, can be directly purchased by consumers on their Rent2Buy website.

Yahoo Finance Autos Reporter Pras Subramanian joins the Live show to discuss the latest developments for the rental car company and the implications for the auto rental market at large.

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JOSH LIPTON: Rental giant Hertz Global is shifting gears on its US fleet. The company selling a substantial portion of its electric vehicles, including Tesla's. Shares of both companies sliding in today's trading session. Here with the details is Yahoo Finance's Pras Subramanian. Pras.

PRAS SUBRAMANIAN: Hey, Josh. Remember when they made this big announcement a couple of years ago?

JULIE HYMAN: Yes.

PRAS SUBRAMANIAN: A lot of hoopla. They trotted out Tom Brady himself came out and was all excited about renting a Tesla at Hertz. Well, a little backtrack here. They're talking about weak demand and higher repair costs saying that this fleet is hard to maintain, expensive to maintain. They've got to cut back on about a third of that EV fleet, which said a majority of that's Tesla.

An even bigger thing that I noticed here also is that the fact they had to write down the value of these cars, the residual value of the cars because of the big Tesla price cuts that sort of made them have to take that hit. And unfortunately, it's $245 million write down on that residual value of that fleet. It's a big problem for rental companies that they have-- it's a big asset they have to actually deal with and then sell off fleet whatever they have to.

In this case, a lot of that fleet is going to come off the books pretty soon. They started selling them right now. We've been seeing some deals of Tesla Model 3s for $14,000 to $20,000 online. The only car to get one

JULIE HYMAN: Where do you get them? Like, how are they selling them?

PRAS SUBRAMANIAN: So Hertz has a buy-to-own type of website on their little mini website where you can actually buy their fleet directly from them as opposed to auction or things like that. So you can buy Tesla Model Ys, Tesla Model 3s at a very drastic reduction in price. They're all high milers, so that's a little bit of the gamble there. But yeah, you can do that now.

So it's actually a shame recently because I actually rented a couple of Teslas at Hertz. It's very easy. You can actually charge them, of course, with that ubiquitous charging network. It's actually a very smooth and easy process for people that want to use EVs.

JULIE HYMAN: Wait and how many do they still have?

PRAS SUBRAMANIAN: They ordered 100,000.

JULIE HYMAN: And they're selling--

PRAS SUBRAMANIAN: They have about 60,000 now. They're going to sell 20,000. The question is, how far will they ramp up to that 100,000 or so? They have an order with Polestar and also GM for, I think, 60,000 additional EVs, so who knows when they're going to actually fulfill that in the future?

JOSH LIPTON: Yeah, Hertz just needed a few more Pras to come in and order. That's all they needed.

JULIE HYMAN: Is it much more expensive to rent them?

PRAS SUBRAMANIAN: No, no, it's actually around the same price as like a compact car.

JOSH LIPTON: Yeah, now selling them, by the way, into a market where we know softening demand at least in North America.

JULIE HYMAN: Yeah.

PRAS SUBRAMANIAN: Right, exactly, exactly.

JOSH LIPTON: Thank you, Pras, Appreciate it.