Hertz car sales put 20,000 cars on hold because of low demand and high maintenance costs.
Hertz Global Holdings Inc. planning to sell thirty percent of its fleet of electric vehicles (EVs) in the US because of low demand and high maintenance costs for its battery-operated models.
The business wants to concentrate on gas-powered vehicles. 20,000 EVs are planned to be sold, starting this month and running through 2024, according to a January 11 regulatory filing. Hertz expects to declare a $245 million non-cash charge in its fourth-quarter earnings as a result of higher depreciation costs.
This action follows Hertz’s abrupt strategy change in 2021 when it declared its intention to buy 100,000 Tesla automobiles. Nevertheless, in 2023, the United States waning appetite for fully electric vehicles resulted in a meager 1.3% increase in EV sales. The previous quarter’s high costs and interest rates were blamed for the reluctance of consumers.
#Telsa joined the trillion dollar club yesterday. Shares in the #electricvehicles maker climbed 12.6% after it struck a deal to sell 100,000 vehicles to the car rental firm #Hertz.
Here's a couple of years of Tesla's market cap compressed into a minute. Enjoy!#EVs #investing pic.twitter.com/mX4c9KkHyI
— James Eagle (@JamesEagle17) October 26, 2021
Hertz CEO’s Statement.
Stephen Sher, CEO of Hertz, stated: “The cost increase related to electric vehicles is ongoing. Handling it has shown to be more difficult.” Hertz is therefore keeping a careful eye on EV demand in both its rental and operating segments to ascertain whether it is still required to make additional vehicle purchases.
Hertz’s stock fell 4.3% to $8.95 at 10:01 AM in New York, indicating market trepidation and uncertainty. To make wise choices about the next car purchases, Sher stressed that the company will closely monitor EV demand, particularly in its dealership and operational areas.
Hertz is excited about its strategy to market low-cost electric vehicles (EVs), such as the updated Chevrolet Bolt and the soon-to-be-released Chevrolet Equinox, which are priced at less than,$35,000 and, $35,000, respectively. Sher said that it might be cost-effective for customers to rent these cars.
Sher went on, “We’re sticking to the plan. It will take longer to implement.”
Increase In Earnings.
With the gradual implementation of the EV divestiture strategy, Hertz is anticipated to see increases in revenue and profit in the upcoming years. The corporation wants to achieve higher daily revenue, lower depreciation, and better financial performance by the end of 2025 as a result of decreased operational expenses. By 2024 and 2025, Hertz expects a growth-oriented free cash flow of up to $300 million.
Sher announced in October that Hertz will be cutting back on its EV fleet, which made up 11% of the whole fleet and of which Tesla accounted for 80%. Tesla’s increased depreciation costs affected Hertz’s cost structure. Even though the EV market is anticipated to slow down relative to original projections, Hertz is confident that this strategy realignment will improve financial performance.