In a setback for the Biden administration's efforts to promote the use of electric vehicles (EVs), rental car company Hertz announced plans to sell off its fleet of 20,000 electric cars due to concerns over depreciation and rising repair costs. Hertz, one of the world's largest rental car companies, intends to use the funds generated from this sale to invest in more gas-powered vehicles to meet customer demand.
The decision by Hertz to unload their EVs could be seen as a blow to the growing EV market. The rental car giant had previously committed to purchasing 100,000 Teslas in 2021 as part of its strategy to build up its electric vehicle fleet. However, the cost of Teslas dropped significantly in 2022 and early 2023, adversely impacting the company's financial calculations.
Hertz highlighted the high costs associated with repairing EVs as one of the primary reasons for their decision. Electric vehicle components, such as battery packs, come with hefty price tags, making repairs and replacements significantly more expensive than their gasoline-powered counterparts. The company cited concerns over profitability, explaining that keeping a fleet of electric cars that consistently generated losses was not viable.
Hertz CEO emphasized that the demand for EVs did not materialize as quickly or as significantly as anticipated, further justifying the decision to divest from electric vehicles. The company's primary responsibility is to ensure that its vehicles are utilized consistently, as keeping idle cars results in financial losses. Therefore, selling off 20,000 electric cars is seen as a strategic move to mitigate financial risks and streamline the rental car company's operations.
The sale of these electric cars is expected to bring in approximately $245 million for Hertz. While this is a substantial amount, it remains to be seen how the market will respond to the influx of used electric vehicles. Some Teslas already listed on Hertz's website are priced as low as $20,000, potentially attracting buyers looking for more affordable options.
Hertz's decision to sell off its EV fleet comes at a time when the Biden administration is actively working to support the growth of electric vehicles in the United States. The administration recently announced a grant of $623 million to assist in the development of a nationwide electric vehicle charging network. This investment aims to address one of the key obstacles hindering the widespread adoption of electric vehicles by expanding the infrastructure needed to support their charging.
While Hertz's move may raise concerns about the viability of EVs in the rental car industry, it also underscores the need for further improvements in both the affordability and accessibility of electric vehicles. As the technology continues to evolve and government initiatives promote their adoption, it remains crucial to address crucial challenges such as depreciation and repair costs to drive the mass adoption of electric vehicles.