Hertz, the global car rental company, is making a huge leap towards full electrification. It is ambitiously planning to electrify 25% of its 500,000-vehicle fleet in the United States by the end of 2024, up from the current 10%.
This acceleration involves the purchase of 330,000 EVs from industry leaders like Tesla, Polestar, and General Motors under various deals that were initiated last year.
“At the end of March, we had about 50,000 electric vehicles in our fleet, comprising approximately 10% of total cars,” said Hertz CEO Stephen Scherr during the company’s recent earnings call.
The recent price drops in the EV market, driven by Tesla’s market share war in a softer economy, have facilitated Hertz’s buying spree. “The drop in price on EVs is an encouraging proposition for us as we move from 10% to 25%, and higher. I’m obviously a happier buyer at a lower price point,” Scherr remarked.
Hertz’s decision to adopt an all-electric fleet, which will replace its conventional internal combustion engine vehicles, came in response to a rapidly changing market landscape. Growing awareness of climate change, coupled with advancements in electric vehicle technology, have spurred a global shift towards cleaner, more efficient transportation options. It’s clear that Hertz is eager not to be left behind.
Hertz is projecting a steep increase in EV rentals, with nearly 2 million expected in 2023 in the US, a five-fold rise from last year. Over time, EVs also have the potential to redefine the business model for rental car firms, according to Oppenheimer & Co. analyst Ian Zaffino.
Rental companies like Hertz benefit from a lower depreciation expense from EVs than internal-combustion engine vehicles because they retain electric cars longer due to cheaper operating costs and their suitability for rideshare programs. “The more the vehicles hold their value, the less it costs to hold them,” Zaffino explained.
Hertz reports that an average driver renting an EV rather than a gas-powered Hertz car will earn 10 to 15 percent more overall. Furthermore, 50,000 Uber drivers have rented an EV through Hertz in the US, driving them over 260 million miles. Uber indicates 4.1% of its U.S. miles driven are in an EV, eight times more than the general population.
EV rentals also cater to Hertz’s business clients, who account for half of its rentals. Many companies are opting for electric vehicle rentals as part of their strategy to reduce their carbon footprints. To alleviate concerns about EVs’ range and scarce charging facilities, Hertz offers incentives and collaborates with BP’s Pulse for the build-out of EV charging infrastructure at Hertz locations in major US cities.
“I think adoption will sort of continue to take hold,” Scherr told analysts on the recent earnings call, pointing to the near-future requirements for Uber and Lyft networks to be all-electric. “I would say to you that I think Hertz and our EV fleet is the most affordable entry point for drivers to get into those electric vehicles and use them,” he concluded.
Hertz’s move comes amid a broader trend of industries and governments worldwide adopting policies to reduce carbon emissions. Many countries, including the UK and Germany, have announced plans to ban the sale of new internal combustion engine vehicles in the coming years, and the auto industry is under increasing pressure to transition to electric vehicles.
The financial market has also responded positively to the Hertz announcement; the company saw a surge in its market shares following its recent Q1 earnings report, which revealed a revenue of $2 billion and earnings per share at 39 cents, surpassing forecasts of 21 cents.
The UAE is a much smaller country overall, with adoption of EVs lagging many other countries, and the car rental firms don’t have nearly the same volume. However, Hertz UAE says that 15% of its 11,000-strong fleet is already electric or hybrid, featuring brands such as Volvo, Polestar and BYD. This proportion is expected to increase substantially over the next few years.
We can expect to see a huge acceleration of EV rental availability here as UAE drivers – and tourists – demand electric vehicles.
