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Rent an E.V.? No Thanks
Tom Finnerty • 05 Nov, 2023 • 3 Min Read
An accelerating race to the bottom for cars nobody wants.
If you've watched any sporting events in the past year or two, chances are you've caught some of Hertz Rental Cars' endless Electric Vehicle commercials, staring retired quarterback Tom Brady. Here's one example:
As these commercials suggest, Hertz has indeed been leaning hard into E.V.s, which is frankly bizarre. Surely, potential customers would prefer their rental cars to be as similar to the vehicles that they're already familiar with as possible. The last thing you want when you're renting a car for a couple of days is to spend a chunk of that time figuring out how to operate it.
But that's exactly what would happen if you ended up with an E.V., either because that's all they have left on the lot or because you inadvertently reserved one. (And, having recently had to rent a car for a trip, this writer can attest to how easy it would be to do just that. It isn't as if their websites make it especially clear which cars are E.V.s and which aren't.) Moreover, you'd have to include the hours it takes to charge an E.V. into the time of your rental. There's no way to just gas up and go.
So, aside from bulking up on ESG points, why are they doing it? Over at Capital Matters, Andrew Stuttaford mentions that his "own suspicion was (and is) that rental companies have been drawn to E.V.s at least in part by the chance of getting hold of them at a good price" since "E.V.s have been selling less well than planned." Stuttaford notes their stated reasons, put forward by the president of the American Car Rental Association, namely their belief that they are "far easier to maintain" than gas-or-diesel driven cars, and that they "seem to hold their value" over time.
Don't forget to factor in the wait time.
Both of these contentions are extremely debatable. While it is true that E.V.s have "fewer moveable parts" than traditional cars, mechanics have much less experience with them. So if E.V.s remain in fashion, and ownership increases, it is probable that that knowledge base will expand. But at the moment, E.V.s remain both more expensive and more time-consuming to repair.
As to the claim that they maintain their value better, Stuttaford quotes The Atlantic's Saahil Desai who calls the idea into question, since E.V.s are in the process of "moving up a sharp innovation curve," and are thus are continually evolving. That is to say, there is very little stability in E.V. technology -- next year's model will presumably work out many of the bugs in this year's model. Why, then, would anyone want to buy older E.V.s which contain those unresolved issues?
And, as predicted, this investment has been working out terribly thus far for Hertz. From Bloomberg:
Hertz Global Holdings Inc. earnings missed estimates amid headwinds from Tesla Inc. price cuts and the high price of repairs for electric vehicles. Tesla has been rapidly dropping its prices to spur sales, which has lowered the resale value of the EVs in Hertz’s fleet by about one-third. Repair costs for EVs have also been higher than expected, about double what the company pays to fix damaged gasoline cars, Chief Executive Officer Stephen Scherr said in an interview Thursday.
Hertz will slow the pace of buying EVs while it learns how to manage costs, Scherr said. Hertz has 50,000 EVs currently, of which 35,000 are Tesla models. EVs account for about 11 percent of its total fleet. Scherr said Hertz remains committed to buying 100,000 cars from Tesla and 175,000 EVs from General Motors Co., but the rental company won’t meet its goal to have EVs account for 25 percent of the fleet by the end of 2024, he said. The first order of business is to work with parts suppliers to lower repair costs. As EV prices settle, Hertz will buy more of them, he said.