2024-01-12 21:43:00
The electrification of the economy is subject to tremors.
Hertz said yesterday that it has put a third of its electric vehicles on sale, around 20 thousand cars, and will use the resources to renew the fleet – but only buying good old gasoline cars.
In October 2021, Hertz had announced plans to buy 100,000 Model 3s from Tesla by the end of 2022 – news that helped push Tesla’s market value to $1 trillion at that point. But in October 2023, the rental company said it had purchased just 35,000 Teslas, and that its entire electric fleet was 50,000 vehicles at that date.
Hertz said the decision to sell is linked to low demand for electric cars and high maintenance costs – half of its electric car fleet is now used by Uber drivers.
Despite the savings on fuel, the cost of maintaining an electric car has been twice that of combustion models, and replacement parts are not easy to find.
Hertz CEO Stephen Scherr recently said that he has been having difficulties in the parts market for electric cars – especially Tesla, which represents 80% of its electric fleet.
According to him, it is not possible to compare Tesla with automakers such as GM and Ford, which have been operating for decades and have a large replacement market. “Obviously, there is a less mature parts market in the Tesla context,” he said.
But the sales process will not be smooth.
With the slowdown in the electric car market – in the last quarter, sales grew just 1.2% – Tesla and competitors have been offering discounts of up to 30% to encourage consumers.
Therefore, to attract buyers, Hertz is having to give aggressive discounts.
Model 3s, whose factory price is around US$43,000, sell for US$17,700 at the Hertz sale. (But since there’s a $4,000 tax credit for used electric cars, the final price is even lower.)
As a result, Hertz said it is charging a net additional depreciation expense of $245 million, or $12,000 per car, to the balance sheet.
“The drop seen in electric car prices in 2023, driven by Tesla, has reduced the fair value of our vehicles compared to the previous year,” Scherr, the CEO, said on the latest call with analysts.
Hertz is trying to recover an EBITDA margin that fell from 25% to 13% in the third quarter of 2023. The rental company’s stock has fallen almost 50% in the last 12 months.
André Jankavski and Geraldo Samor
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