Hertz, once optimistic about its transition to electric cars, now faces severe financial setbacks due to overly ambitious plans. Initially, the company celebrated massive orders of electric vehicles, including Teslas, GM cars, and Polestars. However, these purchases turned into a nightmare as financial losses mounted, leading to the resignation of the former CEO and the decision to sell off electric cars.
The company’s initial plan to gradually integrate 340,000 electric cars into its fleet fell short, with only about 60,000 acquired by the start of 2024. Despite a 2% increase in turnover compared to the previous year, Hertz reported a significant net loss of $392 million for the first quarter of 2024, primarily due to the depreciation of electric vehicles.
The sharp decline in the residual value of electric cars, exacerbated by Tesla’s price reductions and higher repair costs, contributed to Hertz’s financial woes. This depreciation alone accounted for $195 million in losses for the company in the first quarter of 2023. As a result, Hertz is now compelled to sell off a significant portion of its electric fleet and redirect funds towards purchasing conventional cars.
The success of Hertz’s recovery plan hinges on its new CEO, Gil West, formerly of General Motors. The company aims to stabilize its finances by reinvesting the proceeds from the sale of electric cars into acquiring traditional vehicles. However, the effectiveness of this strategy remains uncertain, given the ongoing challenges in the automotive market and the rapid evolution of electric vehicle technology. Hertz faces a daunting task in navigating its way back to profitability amidst the shifting landscape of the automotive industry.
