The pace of transportation electrification took a downshift Thursday as rental car giant Hertz reported falling demand and higher upkeep costs, leading it to sell one-third of its electric vehicle fleet in the U.S.
Corporate owner Hertz Global Holdings filed an update with the U.S. Securities and Exchange Commission, revealing it had made the “strategic decision” to sell approximately 20,000 EVs from its U.S. fleet.
The divestment will take place over the course of 2024 and result in about $245 million in net depreciation expense, according to the SEC filing.
Hertz expects to re-invest proceeds from the sales, but not into future EV models.
“The company expects to reinvest a portion of the proceeds from the sale of EVs into the purchase of internal combustion engine vehicles to meet customer demand,” it reported to the SEC.
Despite the environmental move toward lower or no emissions vehicles, including government incentives toward EVs and charging infrastructure, Hertz said it is doing the sale for financial purposes. Incremental Cash flow will total between $250 million and $300 million over the next two years as a result of the transactions.
Two issues combining to justify the move, Hertz told the SEC, were lesser demand and rising operating costs per transaction day, primarily related to collision and damage expenses of the EV fleet.
“While direct operating expenses per transaction day, excluding collision and damage, will be flat for the quarter and down for the year, expenses related to collision and damage, primarily associated with EVs, remained high in the quarter, thereby supporting the company’s decision to initiate the material reduction in the EV fleet,” the filing reads.
In September 2022, Hertz announced a memorandum of understanding with bp’s electrification charging group, bp pulse, to manage quick recharging of EVs in the rental fleet across some 500 locations. At the same time, Hertz reported an EV fleet that included Teslas, Polestar and GM models.