The electric vehicle (EV) landscape is undeniably dynamic, a reality starkly evident in Hertz’s decision this week to hit the brakes on its plans for EV expansion.
In a surprising twist, the car rental giant has chosen to pause its commitment to acquiring more EVs, particularly from Polestar, signalling a strategic rethink.
In 2022, Hertz made headlines with its ambitious announcement to add 65,000 battery-powered Polestars to its fleet, complementing the earlier pledge of 100,000 Teslas.
However, the recent backtrack stems from the harsh financial realities faced by Hertz’s existing EV fleet. Factors like Tesla-induced price cuts, unexpected depreciation, and soaring repair costs have turned EVs into a seemingly unviable business deal for the company, resulting in an anticipated loss exceeding US$245 million.
This move undoubtedly marks a setback for Hertz, which had set its sights on making 25 per cent of its fleet electric by the close of 2024.
With the recent sale of 20,000 Teslas – around one-third of its electric fleet – and the suspension of plans with Polestar, the company seems to be reevaluating its course in the rapidly evolving EV landscape.
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The unique “at risk” model employed by Hertz, where it outright owns the vehicles, adds an interesting layer to the financial dynamics.
Polestar, understanding the challenges faced by Hertz, displayed flexibility by waiving the requirement to purchase all 65,000 vehicles. This, however, is contingent upon Hertz not swiftly selling off its existing EV stock at discounted rates.
While the broader EV market is thriving, with over 1 million plug-in vehicles sold in the US in 2023, constituting nearly 8 per cent of the market, Hertz’s decision mirrors a growing trend.
Companies are cautiously reassessing their commitments in response to evolving market dynamics and a slightly softer demand compared to previous years.
In essence, Hertz’s pragmatic pivot is not a retreat but a strategic adjustment to navigate the complexities of the EV era. It underlines the importance of adaptability and a realistic understanding of the financial landscape, especially in an industry where rapid changes can reshape the road ahead.