A Recap of Hertz’s Electric Intentions
In a ripple in the electric vehicle (EV) trend, rental giant Hertz made headlines as it pledged to acquire 100,000 Teslas. While this bold move elevated Tesla’s stock to a market capitalization of $1 trillion for the first time, the real triumph was the mainstream endorsement of electric vehicles. However, this progressive path has not been without challenges.
The Complications of EV Conversion in the US
An increasing pessimism towards the electric vehicle revolution characterizes the current automotive climate. Some argue that this stems from manufacturers’ overestimation of EV sales growth, while others attribute this to purposeful misinformation from industry players. Additional factors include the harsh economic climate, lack of comprehensive EV education, and a significant number of auto loan borrowers falling behind on their payments. All these factors have inevitably affected Hertz’s transition to electric.
Hertz’s Unique Obstacles
While the broader climate has impacted Hertz’s EV plans, the company is also grappling with its own specific obstacles which became apparent during its recent quarterly investors’ conference call.
The Realities of EV Users and Rental Businesses
A personal anecdote serves to illustrate the issues at hand. A frequent EV user was approached by a Hertz rental customer confused about charging their Hyundai IONIQ 5—an indication that some renters lack basic knowledge about electric vehicles. It was apparent that the individual had no idea of charging stations or how to use them. This could lead to disenchantment with EVs, contributing to a slower adoption rate.
Issues Identified by Hertz and Their Potential Impact
Hertz’s commitment to purchasing 100,000 Teslas was a significant move. Surprisingly, only 35,000 of these vehicles have been added to Hertz’s fleet so far. The shortfall can be attributed to three key issues that have emerged in Hertz’s journey towards electrification.
Increased Maintenance Costs
Electric Vehicles, with their rapid acceleration capabilities and heavier weight compared to traditional cars, pose unique challenges, particularly regarding the lifespan of their tires and other components. As Kinetic CEO Nikhil Naikal explains, despite EVs having fewer moving parts, their relatively higher weight and higher torque can lead to increased wear and tear. This phenomenon translates to more frequent maintenance needs, consequently escalating costs.
Rental Vehicle Damage
Hertz CEO Stephen Scherr noted that the company is experiencing an uptick in vehicle damage costs, particularly on its EVs. Notably, it isn’t clear whether Tesla’s high torque is causing excessive wear and tear or whether drivers unfamiliar with the EV experience are contributing to increased damage rates.
Vehicle Depreciation
Previously, Tesla’s high resale value contributed to the positive cost of ownership forecasts for the brand’s models, particularly the Model 3. However, increased production and significant price cuts have led to a decline in resale value. As such, depreciation becomes a more significant factor, ultimately affecting Hertz’s electric vehicle ambitions.
The Path Ahead for Hertz
Given the above challenges, Hertz’s decision to slow down its EV acquisitions is understandable. However, the company must improve its customer education on EVs by providing charging network cards or apps, detailed charging instructions, and a basic guide to charging EVs. By providing these tools and guidance, Hertz can ensure a smooth EV rental experience for customers, potentially increasing the adoption rate for EVs. Clearly, the lack of these support mechanisms can negatively impact the EV rental experience and contribute to skepticism about EV technology in general.
