American rental company Hertz continues to lose money on its unsuccessful electric vehicle push, according to the Q1 2024 financial report. In effect, Hertz (HTZ) shares dropped 19%.
Hertz also announced plans to increase the number of electric vehicles it plans to eliminate from its fleet.
Hertz to sell 10K more EVs than planned
Hertz disclosed that it decided to raise the total number of electric vehicles it will sell by 10,000 units.
In hindsight, the American rental firm announced early this year that it would resell 20,000 EVs it bought as part of its electrification efforts. The move is in response to a $245 million incremental net depreciation on its EV fleet’s total value.
Therefore, the 10,000 unit addition boosts the total number of electric vehicles it plans to resell this year to 30,000 EVs.
Q1 2024 results
Hertz recorded a massive $195 million depreciation charge to adjust the value of its electric vehicles held for sale.
“The Company incurred a $195 million charge to vehicle depreciation to write down the EVs held for sale which were remaining in inventory at quarter-end to fair value and recognize the disposition losses on EVs sold in the period.”
Hertz
However, the company’s total vehicle depreciation surged by $588 million. This figure equates to $339 per vehicle, with electric vehicles held for sale accounting for $119.
“Vehicle depreciation in the first quarter of 2024 increased $588 million, or $339 on a per unit basis, primarily driven by deterioration in estimated forward residual values and disposition losses on ICE vehicles compared to gains in the prior year quarter. Additionally, of the $339 per unit increase, $119 was related to EVs held for sale.”
Hertz
Brief background
Hertz’s sudden move to adopt electric vehicles stunned the industry, considering it was the first-ever rental giant to do so on a large scale.
In hindsight, the American rental company announced its plans to purchase $4.2 billion of Tesla EVs in October 2021. This amount is enough to acquire 100,000 EVs from the Musk-led company. Then, the company shifted to Polestar and other OEMs for more units.
Unfortunately, its electrification push did not go according to plan. It reportedly hit millions of dollars in loss due to Tesla’s aggressive price cuts throughout last year.
Moreover, the higher-than-expected maintenance costs also put substantial pressure on its revenue.
Hertz stock dropped 19.3% to close at $4.68 after declining as much as 25% on Thursday, Investopedia reported.
