As electric vehicles face more driver and consumer resistance, Hertz plans to shed 20,000 EVs from its U.S. fleet and reinvest the sales proceeds back into internal combustion engine (ICE) vehicles, according to a Jan. 11 Form 8-K regulatory filing with Securities and Exchange Commission.
The EVs, comprising a third of Hertz’s global EV fleet, will be sold off during 2024 and cover multiple makes and models. The new ICE vehicles will help meet customer demand, the company said.
Hertz’s shift in strategy comes following a year of frequent media reports detailing the hassles and frustrations some rental car customers had with figuring out how to operate and charge rented EVs while on vacation or traveling for business. In some cases, customers at rental car counters were offered only EVs because all available ICE vehicles had been rented out.
In the filing, Hertz stated it expects its reduced EV fleet to better balance supply against expected demand, allowing the company to get rid of what it calls a high number of “lower margin rentals” while cutting the higher damage costs incurred by EVs.
Hertz will continue to pursue its overall strategy on electric vehicles by offering customers a wide choice of EV models while taking steps to improve the profitability of its remaining EV fleet, the filing states. Those steps include adding EV charging infrastructure, growing relationships with EV manufacturers to secure cheaper parts and labor, and create policies and more education to help orient customers to driving electric vehicles. Hertz will manage how it allocates its EV fleet across the key customer segments of leisure, corporate, government, and rideshare.
The reduction of the EV fleet will result during Q4 2023 of about $245 million of incremental net depreciation expense related to the sale, according to the filing.
This non-cash charge writes down the EVs’ carrying values as of Dec. 31, 2023 to their fair values, less related expenses associated with the sale of the vehicles. This charge is in addition to the depreciation expense Hertz will report for the fourth quarter in the ordinary course with respect to the remainder of its fleet.
“Future depreciation expense on the specific vehicles held for sale is expected to be limited to impacts from changes in the vehicles’ condition and general market factors,” according to the filing.
Hertz does not expect this EV fleet reduction and addition of ICE vehicles to affect its asset-backed securitization facilities, nor does it expect to contribute additional cash to such facilities because of its EV fleet reduction.
Hertz expects to report financial results for Q4 2023 on Feb. 6, 2024.