Electric vehicle (EV) sales may have set records in the U.S. in 2023, but that didn’t translate into a boost for car rental company Hertz. In fact, the company saw the opposite happen, Bloomberg reports. The company is now looking to lower costs after missing analysts’ fourth-quarter estimates. The move to cut costs comes after Hertz has already sold 20,000 Tesla EVs, approximately a third of its electric fleet.
Hertz moved into cost-cutting mode after it reported it lost an adjusted $1.36 per share—analysts projected the car rental company would lose 76 cents a share during the quarter. The decrease follows a 70-cent profit just a quarter prior. Hertz is looking to cut another $250 million in costs, according to CEO Stephen Scherr.
“Hertz recorded elevated costs from its EV fleet in (the second half of 2023),” Jody Lurie, Bloomberg Intelligence senior credit analyst said. “Management said the reversal could boost free cash flow by $250 to 300 million in 2024-25 and improve corporate (earnings before interest, taxes, depreciation and amortization) but we see the reshuffling as material growing pains.”
EVs appeared to be one of the biggest culprits in Hertz’ recent financial woes. Scherr noted the company “took on more EV exposure than where the market otherwise took us.” The combination of high repair costs, Tesla price cuts and a battery-electric model slowdown in sales growth also hindered Hertz’ plan to adopt EVs. Scherr remains optimistic about the future, however.
“The decision we made in the fourth quarter to make a pivot on EV sets us up for a transitional year that’s achievable,” he said. “We’ll spring into 2025 a better company.”
Hertz’ 20,000 Tesla sell-off plan is now a month old, Bloomberg reports. The vehicles resulted in a $245 million charge last year. While there’s a place for EVs in travel, not all customers are ready to transition from gas-powered cars, Scherr said. Hertz’ decision whether to sell more Teslas next year and buy new EVs will depend on customer demand and the car market.
“Hertz bought more EVs than near-term demand would justify,” Scherr said. “We’re in the consumer business. We’re in the business of providing ease of use. To the extent that some people find EVs more difficult to use, not as convenient a car as others, we’re giving people a choice.”
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