Although automakers and governments around the world are poised to invest billions of dollars into developing electric vehicles and the required infrastructure, the transition from internal combustion engine vehicles to zero-emission electric vehicles will take quite a while. Electric vehicles are still too expensive for the average consumer, and with the global economy declining, costly EVs will be the last thing on many people’s minds.
Fleets, on the other hand, are not constrained by many of the factors that prevent lone drivers from transitioning to electric vehicles in the near term. As such, fleet managers such as the billion-dollar car rental industry could make up the bulk of the first mass EV adopters. Last October, for starters, car rental firm Hertz sent shockwaves through the nascent EV industry when it announced a massive $4.2 billion deal that would see it buy 100,000 battery-electric vehicles from Tesla by the end of 2022.
Hertz isn’t the only company in the car-rental space with lofty electrification dreams. Avis Budget Group and Enterprise Holdings, its two largest competitors, also plan on electrifying their fleets. Enterprise Holdings announced last June that it had purchased 100 plug-in electric vans and would offer them for daily and longer-term rentals. Late last year, Avis Budget Group saw its stock more than triple after it announced it would begin adding electric vehicles to its fleet in the near future.
However, American Car Rental Association president Sharky Laguana cautions that the transition of fleets from combustion cars to electric vehicles will be a marathon, not a sprint. Even though companies would like to electrify their fleets as fast as possible, she says several challenges are standing in the way.
For starters, Laguana explains, constant supply-chain disruptions, especially the ongoing global chip shortage, have significantly reduced production and reduced the supply of new cars. The industry bought only 750,000 vehicles from original equipment manufacturers (OEMs) in 2021 compared to 2.1 million units in 2019.
Rental car companies will have to contend with limited public charging infrastructure at offices, airports, hotels, resorts, and along minor and major roads. The U.S. Department of Energy’s Alternative Fuel Data Center estimates that there are more than 46,000 public charging stations in the country at the moment. According to EVgo CEO Cathy Zoi, the United States will need at least a million public EV chargers to support a mass transition to electric vehicles and boost the sales of all EV manufacturers, including Rivian Automotive Inc. (NASDAQ: RIVN).
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