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Hurt by Tesla's price cuts, Hertz will sell electric cars

Hurt by Tesla's price cuts, Hertz will sell electric cars

Rental car company Hertz will sell about a third of the electric vehicles in its fleet as their value depreciates faster than expected, the company said Thursday. The price drop is a blow to the company's efforts to replace gasoline vehicles with cars that don't produce tailpipe emissions.

Hertz said company-owned electric vehicles were also more likely to be involved in collisions, and repairing them proved costly. The company said it planned to buy more gasoline-powered vehicles to replace the 20,000 battery-powered cars it was selling.

“Some of these EVs became uneconomic for us,” Hertz Chief Executive Stephen Sher said in an interview Thursday.

The company's decision to sell 20,000 vehicles, which Mr. Sher partly attributed to “unprecedented” price cuts by Tesla that drove down the resale value of the cars, has angered opponents of the Biden administration's policies addressing climate change. Provided fuel to promote technology as a tool to. air pollution.

Republican Senator John Barrasso of Wyoming pushed for the announcement during a hearing on climate policies on Thursday.

Hertz's decision showed that electric vehicles are expensive and unpopular, Mr. Barrasso told the Senate Committee on Energy and Natural Resources. “Demand for electric cars is steady,” he said, “so much for the Biden economy.”

Mr. Sher indirectly placed much of the blame on Tesla for the rental car company's decision to sell its electric vehicles, which makes about half of all electric vehicles sold in the United States.

Tesla vehicles, which make up the largest portion of Hertz's electric fleet, declined in value after the carmaker, which is run by Elon Musk, cut prices by nearly 30 percent last year. When the price of new vehicles drops significantly, it reduces the value of used cars because buyers can get newer versions for less.

As a result, Hertz was forced to write down the value of its electric cars faster than it expected, which hurt profits, Mr. Sher said.

Rental companies like Hertz estimate how much their cars will be worth when they eventually sell them, and the estimated decline in value is calculated as the cost. If the decline is greater than expected, profits fall.

Mr Sher said Tesla was less willing to offer Hertz volume discounts on replacement parts than other carmakers. “Tesla is new to the game,” he said, suggesting that the electric car company's relative inexperience in serving rental car companies played a role in that decision.

Tesla did not respond to a request for comment.

Hertz's plan is at least a temporary reversal for the company, which announced in 2021 that it would buy 100,000 Teslas as part of a broader effort to electrify its rental fleet.

But the agreement did not set a deadline for Hertz to buy the cars, and the company has purchased only a fraction of that number. Hertz also offers electric vehicles by other manufacturers, including Kia, General Motors, Volkswagen and Polestar.

Mr. Sher said one possible reason electric vehicles at Hertz were involved in more accidents was that many of the people renting those cars were not experienced with the technology, despite the company's efforts to educate customers. Electric cars go faster than gasoline vehicles, and they are heavier. Demand for the vehicles was also lower than the company's expectations, Mr. Sher added.

Prior to Hertz's decision, President Donald J. This is likely to bolster an argument made by some conservatives, including Trump, that electric vehicles have been overhyped. “This will fuel the narrative on the downside for EVs right now,” said Jeremy Robb, senior director of economic and industry insights at Cox Automotive.

But Mr. Robb pointed out that electric vehicle sales in the United States were about 1.2 million last year, and were up 40 percent in the last three months of 2023 compared with the same period in 2022. “There is still a market for EVs,” he said.

Mr. Sher said Hertz is not abandoning its plans to electrify its fleet or buy more Teslas. But, he said, the market needs to be developed further.

“Tesla is one of the best-selling cars in America,” he said, “but it's not the best rental car yet.” Mr Sher added: “They didn't come together as quickly as many people, including us, thought. But they will.”

https://static01.nyt.com/images/2024/01/11/business/11hertz-ev/11hertz-ev-facebookJumbo.jpg

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