By Chris Isidoro, CNN
NEW YORK (Reuters) – Riots and turmoil continue at rental car company Hertz.
The company, which announced in January that it would sell 20,000 EVs from its fleet, or about a third of the EVs it owned, now replaces the CEO who helped build that fleet, making him the company’s fifth boss in just four years. .
The company announced that Stephen Scherr, who joined the company two years ago after nearly 30 years at Goldman Sachs, will step down at the end of this month. He will be replaced by Gil West, former chief operating officer of Delta Air Lines and General Motors’ Cruise Unit.
In the last quarter, Hertz lost $245 million in profits due to falling prices for the electric cars it was selling.
While the number of electric cars purchased through U. S. consumers rose 40% last year to reach 1 million for the first time, demand has been lower than some classic automakers expected when they offered electric cars. Tesla, the Leader in Electric Vehicles Vehicle sales in the U. S. The U. S. government sparked a price war for electric cars just over a year ago, driving down the price of new and used EVs, such as those in Hertz’s fleet. And lower prices hurt Hertz’s bottom line as they cut the money. Maybe you just expect to make a profit from the resale of the cars.
But the challenge for Hertz isn’t necessarily that cars are electric and that consumers simply don’t need to drive electric cars. The factor is how Hertz controlled the fleet overall, according to industry analysts.
“[Hertz’s] production and marketing of electric cars has been a horror show across the board,” said Daniel Ives, an analyst at Wedbush Securities who tracks the electric vehicle market. “It’s a black eye that they haven’t been able to get out of. “
Part of the challenge for Hertz is that even other people who wanted to buy an electric vehicle wouldn’t necessarily have to rent one on the road, when they don’t necessarily have the option to plug it in to qualify it the way they would. . There may not be a charging station, nor enough time, for a rental car visitor to rate an electric vehicle, Ives said.
By complying with charging regulations in the same way that Hertz enforced refueling regulations, the company likely would have dissuaded consumers from not renting an electric car. Without building charging infrastructure on its rental sites, Hertz could have hurt its own business as well.
“You don’t need to drive 20 minutes at 5 a. m. to locate a charging station,” Ives said.
Hertz had announced that it would buy 100,000 electric cars from Tesla in October 2021, just before its IPO following its exit from bankruptcy. The hope that the promise of being at the forefront of the growing demand for electric cars will attract investors and lift its share price.
It then announced plans to buy up to 175,000 electric vehicles from General Motors and 65,000 electric vehicles from Polestar, the electric vehicle company jointly owned by Volvo and its Chinese parent company Geely. But Hertz’s total fleet of electric cars only reached 60,000 before retiring. . Still, that was enough to make up 11% of its fleet.
Even without the decline in the number of cars purchased, Hertz struggled to fix collisions and damage to an electric vehicle that performs about twice as much as that related to a comparable combustion engine vehicle, Scherr told investors on a 2023 call.
But even with the $245 million affected by the disruptions to its electric vehicles, Hertz would have lost cash in the fourth quarter and for the full year. That compares with the profits of rival Avis Budget Group, which posted record cash inflows and the second-best adjusted operating profit in its history.
And electric vehicles weren’t the only problem for Hertz. In December 2022, the company agreed to pay $168 million to settle 364 claims such as the misdeclaration of rental vehicles as stolen. These cases have resulted in the arrest or even imprisonment of Hertz customers. Hertz said a “significant portion” of those expenses would be covered by insurance, dealing another blow to its reputation.
Scherr isn’t the one who has to bet big on the demand for electric cars from rental car customers. That was his predecessor, Mark Fields, a former Ford CEO who was named interim CEO in October 2021, just weeks before Hertz announced plans to buy 100,000 Teslas, the largest order ever placed by Tesla through a single buyer.
Fields’ predecessor as chief executive, Paul Stone, remained Hertz’s chairman and chief operating officer, positions he held until his resignation last September. Stone had taken over just days before Hertz filed for bankruptcy in May 2020. While the entire car rental industry was affected following the pandemic and falling demand and rental vehicles, rivals Avis Budget and privately held Enterprise were able to weather the typhoon without filing for bankruptcy.
While Hertz, which has been leasing cars since the time of the Model T, was once the world’s largest car rental company, in 2023 its profit will be 22% lower than that of its public rival Avis Budget.
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