It’s a cautionary tale about how to evaluate new markets — and how not to introduce a new product
Hertz made waves in 2021 when it announced it would buy 100,000 Tesla Model 3 sedans in just over a year. Six months later, the rental car company said it would buy 65,000 Polestars over five years. It appeared that the EV transition was going to sweep the rental car market.
On Thursday, the sweep spread.
Hertz said to one SEC filing that it would sell 20,000 of its EVs and replace them with vehicles powered by fossil fuels. Another sign of EV momentum slowing? Maybe. But it’s more likely a cautionary tale about how businesses should evaluate new markets — and how not to introduce a new product to your customers.
After Hertz started buying electric vehicles, it directed most of them to Uber drivers. Uber has been pushing drivers toward electric cars in several markets, with cities like New York enticing them to make the switch, and they have attractive operating costs relative to gas-powered cars. Uber drivers also rented the cars for longer periods of time, Hertz said, meaning fewer employees were needed to support a given number of vehicles. In addition, maintenance costs were lower and Hertz was able to rent them at higher prices.
“Electric vehicles open the door to our growing presence in ride-share, where electrification is a rapidly approaching requirement rather than just an option, in a channel where we are uniquely positioned,” said Hertz CEO Stephen Scherr in the company announcement. Third quarter earnings call.
But while maintenance costs may have been lower, collision damage repair ended up being higher than expected. Given that Teslas cost more to repair, this should come as no surprise. They are relatively new vehicles and body shops don’t have that much experience with them. It’s a problem not unique to Teslas: it costs more to fix a Volkswagen than it does to fix a Chevy, for example. Why Hertz thought its cars would be any different is anyone’s guess.
