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Hertz hits the brakes on its EV rollout plan due to unforeseen issue with Tesla models: '[It's a] greater burden'

"We nonetheless remain committed to our long-term strategy to electrify the fleet."

“We nonetheless remain committed to our long-term strategy to electrify the fleet.”

Photo Credit: iStock

Rental car company Hertz is scaling back its plans to integrate more EVs into its fleet, citing high repair costs and declining resale value.

What's happening?

In late 2021, Hertz bought 100,000 Teslas in a $4.2 billion deal — as a result, EVs accounted for 20% of Hertz's fleet, Car and Driver reported. Then, in April 2022, Hertz announced it would purchase up to 65,000 EVs from Polestar over five years. This was all part of what the company called a "global strategic partnership to accelerate electric vehicle adoption."

However, in late 2023, Hertz announced that it was putting the brakes on its plan, explaining that repair costs for Teslas were running the company double what they pay for gas car fixes, as The Verge reported. 

Plus, the resale values of its EVs are plummeting, as Tesla has been slashing prices in response to greater competition.

"The MSRP [manufacturer suggested retail price] declines in EVs over the course of 2023, driven primarily by Tesla, have driven the fair market value of our EVs lower as compared to last year, such that a salvage creates a larger loss and, therefore, greater burden," Hertz CEO Stephen Scherr told The Verge.

Part of the problem is an unexpected outcome of an Uber partnership. Half of the 100,000 Teslas acquired by Hertz in 2021 were to be allocated to Uber drivers. While the Teslas are extremely popular with drivers, rideshare vehicles apparently suffer a lot of damage due to higher utilization, and Tesla's high tech and safety features contribute to their cars being more costly to repair in certain types of accidents.

Why is Hertz's EV stall concerning?

Hertz's EV woes will complicate the company's plans to have a carbon-neutral fleet by 2030. This is also a setback for greater EV adoption in the United States.

According to the U.S. Department of Energy, using more energy-efficient vehicles (including hybrid, plug-in hybrid, and battery electric vehicles), helps support energy security in the United States. 

EVs can also save consumers money. Though initial purchase prices are generally higher for EVs, energy costs tend to be lower than for conventional vehicles. Incentives like the Clean Vehicle Credit can also help offset purchase prices.

EVs also produce zero tailpipe pollution, which is a win for cleaner air. Gas-fueled cars contribute to toxic air pollution that can cause cancer in humans and animals. This pollution can also lead to other health effects like neurological, cardiovascular, respiratory, immune, and reproductive system damage. 

Plus, tailpipe pollution from conventional vehicles is contributing to the overheating of our planet. EVs contribute less planet-warming pollution (which is mostly due to the energy used to charge their batteries). Researchers from MIT found that on average, gasoline cars release more than 350 grams (about 0.77 pounds) of heat-trapping carbon pollution per mile driven over their lifetimes. 

Meanwhile, EVs created just 200 grams (about 0.44 pounds) per mile. This could be further reduced by opting for clean energy alternatives like solar to charge.

What's being done about Hertz's EV stall?

Hertz said that this hurdle will not deter the company from moving forward with its EV plans.

"We nonetheless remain committed to our long-term strategy to electrify the fleet," Scherr said, per The Verge. "We believe in the value of being a first-mover."

Meanwhile, President Joe Biden is pushing to accelerate EV manufacture and adoption across the country. In April 2023, the Environmental Protection Agency announced plans to ensure that two-thirds of new passenger cars and a quarter of new heavy trucks sold in the United States are all-electric by 2032, the New York Times reported.

The motor vehicle industry is also shifting. General Motors plans to phase out the sale of all internal combustion vehicles by 2035, and Ford Motor said it hopes that EVs make up half its sales by 2030. Other automakers like Volkswagen, Hyundai, and Nissan are also pushing EV production forward.

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