Car rental giant Hertz is gearing up to accelerate sales of its remaining Tesla electric vehicles after reporting lackluster second-quarter results on August 1, 2024.
Hertz to offload Tesla EVs
Hertz outlined an even bolder plan to offload the remaining Tesla electric cars in its fleet after suffering another worse-than-expected loss in Q2 2024. This initiative is apparently due to depreciation and mismanagement of the company’s electrification plans.
In hindsight, Hertz announced plans to add 100,000 Tesla EVs to its fleet three years ago. This particular announcement pushed its stock upward, enabling it to hit a $1 trillion market cap.
However, Hertz apparently failed to manage the acquisition or the maintenance of these luxury EVs. Tesla also imposed aggressive price cuts on the Model 3 and Model Y, causing the resale value to decline sharply. In effect, Hertz’s bet on Tesla EVs caused significant losses that continue to hurt its financials up until now.
Now, Hertz is planning to sell “tens of thousands” Tesla EVs this year alone, according to Bloomberg.
“Hertz has said it will sell tens of thousands of Tesla electric vehicles this year. The company said Thursday that it expects the fleet overhaul to be substantially done by the end of 2025, by which point monthly depreciation will normalize in the low $300s per unit.”
Bloomberg
For reference, Hertz is currently facing a per-unit monthly depreciation of $600.
Q2 2024 loss
As per Hertz’s Q2 2024 Financial Report, the car rental company lost an adjusted $1.44 a share ($440 million adjusted net loss). It represents a worse-than-expected result compared to industry analysts’ average estimate of a $1.17 deficit.
Hertz explained that its fleet refreshment initiatives pushed drove per-unit depreciation to $600/month, an over threefold increase from a year ago, as it sells off EVs faster than it initially planned.
Reevaluating EV strategy
Hertz’s new Chief Executive, Gil West, contends that more adequate management of the vehicle fleet and more efficient business practices can still reverse the downward trend in the company’s financials.
Considering the new plan to sell tens of thousands of Tesla EVs this year, Hertz expects to complete the fleet overhaul by the end of 2025.
The misfortune seems to be largely due to the increasing interest rates and slower economics, which prompted customers to delay purchase plans. In response, Tesla had to cut the prices of its EVs to maintain the demand-supply balance.
So far this year, Hertz shares are down 60%.
