Hertz Global Holdings Inc HTZ announced Thursday it planned to cut one-third of its global EV fleet over the year. Following the announcement, Hertz CEO Stephen Scherr suggested the road to electrification could be bumpier than anticipated.
What To Know: In a new regulatory filing, Hertz said it made a strategic decision to sell about 20,000 EVs and use the proceeds to buy more internal combustion vehicles (ICE) “to meet customer demand.”
The vehicle rental company explained the EVs in its fleet were lower margin rentals and damage expenses associated with EVs are much higher than ICE vehicles.
“It’s really to respond to the reality, which is we’re trying to bring supply in line with demand and we are addressing a cost issue that happens to be related to the EVs in the context of damage and damage costs,” Scherr said Thursday on CNBC’s “Squawk On The Street.”
The Hertz CEO noted recent depreciation of Tesla Inc TSLA vehicles and EVs more broadly also played a role in the company’s strategic decision to slash its EV fleet.
“When Tesla took down the price of their cars, residual price falls, depreciation goes up, that’s obviously a cost to the business. We need to face that reality,” Scherr said.
Related Link: EV Prices Closer Than Ever To Combustion Engine Cars, Thanks To Tesla’s Fierce Price Cuts Last Year: Cox
Why It Matters: Scherr explained people are still using Hertz as a way to test what it would be like to own an EV, but he said it’s “just not happening at a level of demand that justifies us maintaining a fleet of this size.”
Teslas are the best-selling vehicles and at some point, Teslas and other EVs will be the most popular rental vehicles, but “not yet,” he said.
CNBC’s Jim Cramer pressed the Hertz CEO on the issue and asked if the move could be a sign that EV adoption isn’t going as planned.
Although he acknowledged demand hasn’t been as expected, he highlighted the success of the company’s collaboration with Uber Technologies Inc UBER.
“Our joint venture and the demand that we have with Uber is proving very successful … and they are taking up even part EV and ICE vehicles,” he said.
“Addressing the cost element in the context of a healthy demand layer is what we’re doing, it’s what this adjustment in fleet is about, and I think it will prove to be a net positive for the company as we go forward.”
HTZ Price Action: Hertz shares were down 3.48% at $9.03 Thursday at publication, according to Benzinga Pro.
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