Hertz announced today that they’re selling 20,000 Tesla EVs from their fleet and replacing them with internal-combustion engine vehicles, taking a $245 million loss. As noted in my earlier column, Hertz’s original decision to purchase 100,000 Tesla’s was a really idiotic move that was never clearly thought through:
….Owning an EV as a personal car with home charging is a lot different than using one as a rental, especially a Tesla that has a completely different user interface and a new method of refueling for many. ….EV renters need to charge their car at their hotel or on the road during their rental period, and that requires planning for the extra time it takes to find a charger. Once they get to a charging station, they may need to set up an online account to pay. And what business traveler has time to stop for 30 to 60 minutes to refuel on the way back to the airport?
Here’s how the WSJ positions the latest announcement:
“The move represents another setback for the auto industry, which has been moving aggressively to boost sales of electric vehicles in part to meet stiffening environmental regulations around the world. It also marks a reversal for Hertz, which in 2021 bet on EVs with a 100,000-vehicle order ….. “
But the WSJ is dead wrong.
It’s a setback for a poorly thought through strategy by Hertz to pump up their stock and play up to Elon Musk, while never considering what’s best for their customer. It’s what happens when the customer needs are ignored. It has nothing to do with EVs. It’s like giving computers to kindergarteners, and when they struggle to use them, declaring computers are a failing product.
EVs are the wrong product for rental customers, so it was entirely predictable that the strategy would fail. A more accurate conclusion that the WSJ should have drawn is that Hertz tried to implement a stupid idea and the market rejected it.
More poor Hertz business acumen
Hertz also erred in doing business with Tesla. The rental car company sufferred huge losses from the depreciation of their EV fleet as Tesla, with little warning, slashed the retail pricing of their cars by about 20%. Hertz’s fleet of nearly untouched Teslas lost tens of millions of dollars in value by just being parked. Why didn’t Hertz negotiate price protection for their huge purchase? You’d think buying cars should be one of Hertz’s strengths. And if Hertz is interested in the positive environmental impact of an EV fleet, why are they not replacing the Teslas with hybrids?
A good time to buy EVs
This should not discourage us from buying an EV. There are dozens of excellent models with great incentives and rebates. Some brands are experiencing great success, such as BMW, Kia, Hyundai, and Volvo.
What I bought
After much investigation, testing, and study, I just leased a new Lexus RZ EV. The SUV gets 220 miles on a full charge, less than the average 250 or so of the most popular EVs, which has reduced its demand, but created a great opportunity for those who find that range acceptable. The car has a sticker price of $63,000, but if leased, is discounted by a whopping $15,000. With an additional dealer discount off the retail, the lease payments are similar to a car retailing for about $43,000. The residual value after three years remains at more than $29,000, meaning the lease amount is under $14,000 over three years. Other brands like this Lexus that are not entitled to government rebates because they are built outside of the U.S., are also offering lease incentives of up to $7500 using a loophole in the government rebate program that provides a rebate to the leasee.
So while it’s good time for Hertz to get out of EVs, it may just be a great time for individuals to get into one. Even a hardly-used Tesla from Hertz.