American car rental giant Hertz has replaced its CEO following the electric car debacle that saw the company pledge to purchase up to 100,000 battery electric vehicles (BEVs) in October 2021 as part of companywide efforts to electrify its vehicle fleet before selling off 20,000 EVs just two years later. Hertz had plans to buy 100,000 Tesla EVs followed by 175,000 electric cars from General Motors and an additional 65,000 from Polestar.
However, Hertz found that the costs involved in running, maintaining and repairing electric cars were more than initially projected. Consequently, the company decided to offload one-third of its electric vehicle fleet. The company has now announced that Hertz CEO Stephen Scherr is stepping down at the close of March and will be replaced by former Delta Airlines chief operating officer Gil West.
Before he was appointed Hertz CEO, Scherr spent close to three decades at Goldman Sachs and was instrumental in building up Hertz’s fleet of electric vehicles. Although the company’s rental EV fleet quickly became the largest such fleet globally, Hertz faced several challenges after building up the massive fleet.
High maintenance and repair costs forced Hertz to spend more than it had originally projected managing its electric vehicle fleet. The EVs burned through their tires faster than ordinary fossil fuel-powered cars and took longer to repair when they were damaged. Furthermore, a drop in overall electric vehicle prices meant that Hertz’s massive investment in electric cars lost a lot of value. Facing stiff competition in the Chinese market, Tesla initiated a price discount war that led to lower prices for both new and second-hand electric cars in China, the United States and Europe.
As a result, falling second-hand EV values caused Hertz’s earnings to drop by $245 million last quarter. Some industry analysts also say that the car-rental company contributed to the ongoing EV debacle by mishandling the transition to an electric fleet. Wedbush Securities analyst Daniel Ives says the project’s marketing and execution was a “ that will be hard to recover from.
According to Ives, drivers interested in but unable to buy EVs aren’t any more likely to rent one for trips when they still won’t be able to charge on the road with the same convenience a home charger offers. Furthermore, Ives notes that the way Hertz enforced EV charging rules may have discouraged drivers from renting its electric cars. He says the company’s decision to not install EV charging infrastructure at any of its rental locations “hurt its business.”
Hertz’s EV experience is likely to make it harder for other manufacturer, such as VinFast Auto Ltd. (NASDAQ: VFS), that may have wanted to tap the EV market presented by fleet operators.
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