Hertz, the well-known car rental company, has recently faced a significant setback in its ambitious plan to transform its business by incorporating a large fleet of electric vehicles (EVs). The company’s decision to purchase 100,000 Tesla EVs in 2021, shortly after emerging from bankruptcy, was seen as a bold move to position Hertz as a leader in the mobility industry. However, the reality of this venture has proven to be far more challenging than anticipated.
The announcement of Hertz’s massive Tesla order sent shockwaves through the automotive industry, propelling Tesla’s valuation to an impressive $1 trillion. Despite the initial enthusiasm, the company’s EV strategy began to unravel under the leadership of CEO Stephen Scherr, who joined Hertz after the Tesla purchase decision had been made. Scherr continued to expand Hertz’s EV fleet by placing orders with other automakers such as Polestar and GM, ultimately amassing around 60,000 EVs from the three manufacturers combined.
However, a series of unforeseen complications derailed Hertz’s EV plans. Tesla’s decision to significantly reduce the prices of its Model 3 and Model Y EVs had a detrimental effect on the resale value of Hertz’s fleet. Additionally, the company discovered that Tesla’s vehicles were not only costly to maintain but also unpopular among renters, further compounding their difficulties.
Faced with these challenges, Hertz made the difficult decision to sell off approximately 20,000 EVs, representing a third of its electrified fleet. This move resulted in a substantial financial blow to the company, incurring a $245 million charge and leading to its most significant quarterly loss since the pandemic. Hertz is not alone in its struggle with EVs, as other rental car companies, such as Germany’s Sixt, have also opted to dispose of their entire EV fleets.
In the wake of this debacle, CEO Stephen Scherr has decided to step down from his position, as reported by Bloomberg. His successor, Gil West, formerly the COO of GM’s robotaxi division, Cruise, will take the helm and join Hertz’s board of directors. Interestingly, West’s departure from Cruise followed an incident in which a pedestrian was dragged by a Cruise vehicle after being struck by another car, with authorities accusing the company of withholding crucial video evidence.
As Hertz navigates this tumultuous period, the company faces the daunting task of rebuilding its reputation and financial stability. The new CEO, Gil West, will need to carefully assess the company’s EV strategy and make necessary adjustments to ensure a more sustainable and profitable future. The lessons learned from this experience will undoubtedly shape the company’s approach to innovation and risk-taking in the highly competitive and rapidly evolving mobility industry.
