(CNN) — Hertz, which has invested heavily in electric vehicles in recent years, decided it was time to cut costs. The company will sell a third of its electric fleet, totaling about 20,000 vehicles, and will use the money to buy more gasoline vehicles.
Executives say electric vehicles have hurt Hertz’s finances. As they explain, while these cars have lower maintenance costs, they also have higher damage repair costs and, in addition, higher depreciation.
“Crash and damage repairs for electric vehicles are typically twice as long as comparable gas-powered vehicles,” Hertz CEO Stephen Scherr said during a recent meeting with analysts.
Additionally, falling EV prices in the new-car market have lowered the resale value of Hertz’s used vehicles.
“The lower electric vehicle prices in 2023, driven primarily by Tesla, reduce the fair market value of our electric vehicles compared to last year, so scrapping will cause a greater loss and therefore a greater burden,” Schell said. “
Simply put, people are generally willing to pay less for a used car than a new one. As new car prices fall, so does people’s willingness to buy used cars.
Hertz said in a filing with the U.S. Securities and Exchange Commission that it expects to lose about $245 million due to depreciation on its electric vehicles, an average loss of about $12,250 per vehicle.
Although Hertz didn’t directly blame anyone, Tesla appears to bear most of the blame.
Tesla accounts for about 80% of Hertz’s electric vehicle fleet, and electric vehicles total about 11% of Hertz’s rental fleet. Tesla has been aggressively lowering the prices of its cars, prompting other manufacturers to do the same with their electric vehicles. When automakers lower the prices of new cars, the value of those models decreases on the used car market, causing rapid depreciation.
For car rental companies like Hertz, which sell a large number of vehicles on the used market, depreciation has a large impact on their business and is an important factor in deciding which cars to have in their fleet.
Hertz executives said that as a relatively new company, Tesla does not have as many replacement parts or trained repair technicians as other car companies, making repairs costly and time-consuming.
“Let’s remember that GM and other companies (automakers) have been creating extensive national parts supply networks for decades,” Scheer stressed in a meeting with analysts. “In the context of Tesla, there is a secondary parts market that is obviously not very mature.”
In addition to more expensive accident damage repairs, Schell noted that electric vehicles are involved in more accidents. He said Tesla accounts for 80% of Hertz’s electric car rental fleet, which is a major issue in both areas.
“Our cooperation with Tesla is to examine the performance of the car to reduce the risk of accident damage,” he said. “We have very direct contact with them in terms of sourcing parts and labor.”
Hertz sells its used vehicles at auctions and directly to customers on its Hertz Auto Sales website.