The Hertz car rental company, whose locations can be found almost all over the world, reported a staggering loss of US$1.33 billion for the third quarter of 2023, which beat expectations and reduced the value of the stock. At the same time, part of the blame lies with electric cars, whose value is falling significantly faster than the company had anticipated.
Years ago, the company decided to make a big bet on electric cars and purchased around 100,000 units of the Tesla Model 3 electric car, while in the following years it expanded the offer to include Tesla Model Y cars. However, it did not realize that the prices of electric cars are falling dramatically faster than those of cars combustion engines.
In addition, the whole situation was not helped much by the car company headed by Elon Musek, which significantly reduced the price of new cars several times in the past years. The value of the electric cars owned by Hertz thus fell even faster. In addition, however, the company’s profits from car rental itself also fell.
Hertz to sell a third of its fleet of electric cars in the US, replacing them with internal combustion engines
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Cars with internal combustion engines, which the company bought even during the crisis in the processor market, are not without fault either. The range of cars was thus limited and their prices higher. The reduction in the value of the vehicle fleet in the third quarter alone was supposed to amount to one billion dollars, as he reported Bloomberg.
In an effort to reduce losses, the company already decided to sell 20,000 electric cars at the beginning of the year, and now it will get rid of another 10,000 electric cars. By the end of the year, it plans to sell 30,000 electric cars, mainly Tesla. The machines will head to the used car markets.
In addition, the company plans to continue to modify its vehicle fleet, in which only as many electric cars will remain as customers want to rent. He plans to complete this transformation by the end of next year, which should help reduce the average monthly loss in the value of the vehicle from about $537 (about CZK 12,800) to $300 (about CZK 7,200).
A year ago, i.e. in the third quarter of 2023, the monthly loss on one car was around 284 dollars (approx. 6,800 CZK).
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The Electric Car Conundrum: Hertz’s High Voltage Fiasco
Ah, Hertz! You know, the car rental service that’s practically everywhere. It’s like the IKEA of car rentals—great choice, but sometimes you end up with more problems than a DIY flatpack. Well, they’ve managed to drive themselves into a £1.33 billion hole this quarter, and it looks like they took the long route on that one. And you thought your last car rental horror story was bad!
Now, let’s take a step back. Hertz made a massive bet on electric cars—specifically, around 100,000 shiny new Tesla Model 3s. At first, everyone thought that was a brilliant move! What could go wrong? Oh, just the small matter of electric car values dropping faster than your confidence at karaoke night! Yes, I’m talking about a depreciation rate that even a bad haircut wouldn’t dare to match.
Betting Big on Tesla: Did Hertz Overreach?
With Tesla’s CEO sporting more price cuts than a butcher on a Saturday, Hertz found itself feeling a bit like the bloke who brings chips to a fine dining restaurant. Prices of those once-coveted electric chariots have plummeted quicker than a daredevil contestant on “Wipeout.” The company has had to accept that the electric fantasy isn’t quite as profitable as they’d hoped.
And just when you think it couldn’t get worse, Hertz also revealed that its traditional car rentals aren’t making it rain cash either. It’s safe to say that the honeymoon with electric vehicles is over, folks! But don’t worry, they’re not taking all the Teslas out for dinner; they’re selling off 30,000 of them by the end of the year. It’s like a breakup where you have to find someone to take the cat… or in this case, the Teslas!
Internal Combustion Engines to the Rescue? Not Quite!
And what’s the remedy? They’re planning to roll back to those good ol’ internal combustion cars. You know, the ones that guzzle petrol like there’s no tomorrow? It’s kind of like giving up gluten for cake—you know it’s bad for you, but can you resist? And this move isn’t without its own hiccups; they’ve been pinching pennies during a chip shortage which has left their fleet looking rather pathetic. So, in short, their fleet was limited, prices were high… kind of like their expectations.
The Plan to Sell, Sell, Sell!
So what’s Hertz’s plan? They’re slashing the electric fleet down to size—20,000 units sold this year, followed by another 10,000! It’s a bit of a clearance sale, like your local supermarket at 9 PM when they’re trying to get rid of those shriveled-up tomatoes. And at the end of this, they hope to reduce their average monthly loss per vehicle from about $537… to just $300. Talk about a glow-up!
Will the Tax Credits Help Tesla? Or is That Just Hot Air?
As the electric car saga continues, we have political drama on the side. Trump’s team is looking at canceling tax credits for electric car purchases, which would obviously do wonders for Tesla. It’s like suggesting a factory reset on a game console—strategic and very entertaining for the spectators. I mean, heating up the competition has never looked so easy!
To sum it all up, Hertz’s electric dream has taken a serious detour, and it’s clear their relationship with Tesla could use some serious counselling. Remember, folks, the road to success is often full of potholes, or in Hertz’s case, very expensive speed bumps!
Hertz, the renowned global car rental giant, has unveiled an alarming financial report, revealing a staggering loss of $1.33 billion for the third quarter of 2023. This unexpected downturn has not only surpassed analysts’ pessimistic projections but has also led to a significant decline in the company’s stock value. A considerable factor in this financial struggle stems from the rapid depreciation of electric vehicles, which has outpaced Hertz’s forecasts.
In a bold move years ago, Hertz placed a substantial wager on the electric vehicle market by acquiring approximately 100,000 Tesla Model 3 units, later adding the Tesla Model Y to its fleet. However, the company failed to foresee the swift decline in resale values of electric cars, which are declining at a much steeper rate than traditional gasoline-powered vehicles.
Moreover, the financial predicament was exacerbated by Tesla, the electric car manufacturer led by Elon Musk, which has aggressively slashed the prices of its new models multiple times over the past few years. As a result, Hertz’s fleet of electric vehicles has lost value more rapidly than initially expected, compounding the company’s struggles in the car rental market.
Hertz to sell a third of its fleet of electric cars in the US, replacing them with internal combustion engines
The internal combustion cars that Hertz acquired during the semiconductor crisis have not alleviated the company’s challenges. The limited range and increased costs of these vehicles have further stressed Hertz’s operations, contributing to a staggering $1 billion decrease in the value of its fleet within just the third quarter, as detailed by Bloomberg.
In a decisive effort to mitigate its losses, Hertz initiated the sale of 20,000 electric cars earlier this year, and it now plans to offload an additional 10,000 units. The company aims to have 30,000 electric vehicles on the market by year’s end, primarily consisting of Teslas, which will transition to the used car sector.
Looking ahead, Hertz is committed to reshaping its vehicle fleet, retaining only as many electric cars as customer demand dictates. This strategic transformation is slated for completion by the end of next year, with hopes of reducing the average monthly depreciation per vehicle from approximately $537 (around CZK 12,800) to $300 (about CZK 7,200).
In the same quarter last year, Hertz faced a monthly loss of around $284 (about 6,800 CZK) for each vehicle in its inventory.
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How will Hertz’s shift towards traditional combustion engine models impact the average monthly depreciation loss per vehicle?
P class=”c_a3″>In an effort to mitigate these significant losses, Hertz has decided to trim its electric vehicle fleet by selling 20,000 electric cars at the beginning of the year, with an additional 10,000 slated for sale by year-end. The company aims to offload a total of 30,000 Tesla vehicles, redirecting them to the used car market.
Hertz plans to adapt its rental offerings, keeping only the electric vehicles that remain in demand from customers and replacing the rest with traditional combustion engine models. This shift is expected to transform its vehicle fleet by the end of next year, potentially lowering the average monthly depreciation loss per vehicle from around $537 to approximately $300.
Interestingly, the situation has also sparked political discourse around electric vehicle tax incentives. There’s talk from the team of former President Trump about eliminating tax credits for electric car purchases, a move that could potentially benefit Tesla by stabilizing vehicle prices in the market.
Hertz is grappling with a costly miscalculation in its electric vehicle strategy, prompting a reevaluation of its fleet composition. The company’s experience highlights the volatility of the electric vehicle market and underscores the challenges rental companies face as they navigate the rapidly changing automotive landscape.
