The rental car market was hit hard by the restrictions on traveling during the pandemic and Hertz, one of the biggest players in the market, went bankrupt as a result.
In October 2021, the company was back on its feet after a reconstruction, and then launched a major investment in electric cars with the goal that 25 percent of the company’s cars would run on electricity.
It also revealed the intention to order as many as 100,000 Tesla Model 3s.
The news led to a surge in the share prices of both Hertz and Tesla, but two years later, American CNBC now reports that the venture was anything but successful.
The public is skeptical
The goal for Hertz was, among other things, to appear more environmentally conscious and differentiate itself from other rental car companies. They also wanted to appeal to corporate customers who have sustainability goals to achieve, as well as get a head start in the industry.
However, it has been found that most people who do not already own or have driven an electric car are skeptical about renting one. This is a problem as the market share for electric cars is still low in most parts of the US.
Other major rental car companies, such as Avis and Enterprise, waited to invest in electric cars to see how demand developed and have therefore not found themselves in the same situation.
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Expensive repairs and poor resale value
Another big problem is that the electric cars have been shown to have long delivery times for repairs, and the repair costs in the event of an accident are around double compared to the rest of the Hertz fleet.
Recently, used prices for electric cars have also fallen sharply, not least because Tesla has lowered its new prices to levels far below what Hertz bought its cars for.
According to CNBC’s calculations, Hertz spent around $2.5 billion on Tesla cars in 2022, which means that the brand accounts for the absolute majority of the company’s electric car fleet.
All this affects the company’s results negatively.
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There are flashes of light
However, Hertz’s investment in electric cars has not been bad on all fronts.
The electric rental cars have proved popular with taxi drivers who drive for apps such as Uber and Lyft, who rent around two-thirds of Hertz’s electric cars.
However, Uber and Lyft drivers pay significantly less to rent the cars than regular consumers, and also crash more often than average car renters.
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Continuing, but without Tesla
Hertz now says that it will not abandon the investment in electric cars and go back entirely to more conventional rental cars.
However, due to the problems with repair times, Tesla will be abandoned as a supplier.
Instead, they will buy cars from General Motors and Polestar, which have better availability of spare parts and more extensive service networks.
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