Hertz, a major player in the rental car industry, made headlines in 2021 when it announced its ambitious plan to electrify its fleet by purchasing 100,000 Tesla Model 3 vehicles. This move was seen as a significant step towards sustainability and reducing carbon emissions in the transportation sector. The company later expanded its order to include Model Y vehicles, further solidifying its commitment to electric vehicles.
The decision to add Tesla vehicles to its fleet proved to be a wise one, as Hertz reported an increase in customer satisfaction with the Tesla vehicles. Customers appreciated the performance, technology, and overall driving experience that the electric vehicles offered. However, the honeymoon phase was short-lived as Tesla began slashing prices on its Model 3 and Model Y vehicles in 2022 and 2023, leading to a significant drop in the resale value of these cars.
This sudden decrease in value had a detrimental impact on Hertz, as the company’s financials heavily relied on the fleet maintaining its value. In just a few years, Tesla Model 3 vehicles went from retaining up to 90% of their value within three years to losing nearly 50% of their value in the following years. The depreciation was even more pronounced for the Model Y vehicles.
To counter this trend, Hertz announced earlier this year that it would sell around 20,000 Tesla vehicles ahead of schedule. However, in a recent earnings announcement, the company revealed that it would accelerate the sales of Tesla vehicles even further. Hertz now plans to sell tens of thousands of Tesla electric vehicles this year and aims to complete the fleet overhaul by the end of 2025.
The decision to accelerate the sales of Tesla vehicles comes as Hertz seeks to mitigate the impact of the plummeting resale value of the cars. Currently, the company is experiencing a monthly depreciation of $600 per unit due to the Tesla fleet. By transitioning to a fully electric fleet, Hertz expects the monthly depreciation to normalize to the low $300s per unit by the end of 2025.
Despite the challenges faced by Hertz in managing the resale value of its Tesla vehicles, there is still significant value in having electric vehicles as rental cars. EVs are appreciated by customers, especially when traveling, and Tesla vehicles offer the added convenience of transferring driver profiles easily between vehicles. This makes the transition to a fully electric fleet a strategic move for Hertz in the long run.
In conclusion, while Hertz may have faced challenges with the depreciation of its Tesla vehicles, the company’s commitment to sustainability and innovation in the transportation sector remains unwavering. By accelerating the sales of Tesla electric vehicles, Hertz is taking proactive steps to adapt to changing market conditions and position itself for success in the future.