Quiver Quantitative - The Hertz Corporation's decision to offload 20,000 electric vehicles (EVs), including models from Tesla (NASDAQ:TSLA), signals growing concerns about the costs and demand associated with EVs in the rental market. Hertz (HTZ), recognized as the largest U.S. fleet operator of EVs, cited high repair costs and tepid demand for its rental EVs as the primary reasons for this move. This large-scale disposal of EVs, particularly popular models from Tesla, is poised to significantly impact the second-hand EV market and potentially deter potential buyers already cautious about high borrowing costs. Industry experts highlight the root of the high repair costs for EVs: a lack of widespread expertise in handling these vehicles and challenges in obtaining replacement parts due to their novelty. Hertz CEO.
Stephen Scherr has pointed out specific issues with Tesla vehicles, noting elevated repair costs stemming from damages. This situation is compounded by the fact that other car rental companies like Avis and Enterprise, as well as EV manufacturers like Tesla and Polestar (NASDAQ:PSNY), have not publicly commented on their EV strategies in response to Hertz's decision. Scherr also mentioned that Hertz had to limit the torque and speed on their EVs and offer them primarily to more experienced drivers to mitigate the risks of front-end collisions.
Market Overview: -Hertz, the largest U.S. rental car fleet operator of EVs, sells off 20,000 electric vehicles, citing high repair costs and weak demand. -This move raises concerns about the affordability, reliability, and future value of used EVs, potentially dampening consumer enthusiasm. -The incident also reflects a broader slowdown in EV sales growth and production.
Key Points: -Hertz's rationale: High repair costs, particularly for damaged Teslas, and tepid demand for rental EVs prompted the sale. -Negative perception impact: Analysts warn the move could dissuade potential EV buyers and hurt the technology's image. -Repair challenges: Lack of skilled technicians and readily available parts contribute to high EV repair costs. -Used-car market concerns: Hertz's discounted EV sale might further depress used-car values, especially for EVs. -EV sales slowdown: North American EV sales growth is projected to plummet from 72% in 2023 to 27% in 2024. -Silver lining: The Inflation Reduction Act's used EV tax credit could make Hertz's discounted vehicles more attractive. -Long-term outlook: High repair costs are seen as a temporary hurdle; infrastructure improvements could bring them down.
Looking Ahead: -Can the EV industry overcome affordability, reliability, and infrastructure challenges to regain momentum? -Will Hertz's move have a lasting impact on consumer sentiment towards EVs? -Will the used-car market adapt to the influx of discounted EVs?
The reliability of EVs compared to traditional gas-powered cars is also under scrutiny. A survey by Consumer Reports covering over 330,000 vehicles indicated that EVs from the past three years have 79% more problems than their conventional counterparts. One significant issue with many EVs is the inability to repair or assess battery packs after accidents, often leading to insurance companies writing off these vehicles, thus resulting in higher insurance premiums and negating some benefits of electric mobility.
The broader EV market is undergoing shifts, as evidenced by German rental firm SIXT's recent multi-billion euro deal with Stellantis (NYSE:STLA) to acquire up to a quarter of a million vehicles, including some EVs. This move comes at a time when legacy automakers are scaling back their EV production plans due to slowing demand. According to Canalys, EV sales growth in North America is expected to decelerate to about 27% this year from 72% in 2023. Hertz's decision to sell its EVs at potentially substantial discounts due to high mileage and cosmetic damage could further depress the value of used EVs, which have already seen a 33.7% drop between October 2022 and October 2023. However, Hertz could benefit from a $4,000 tax credit for some used EVs under the Inflation Reduction Act. Despite the current challenges, experts like Lynne McChristian from the University of Illinois believe that as the infrastructure evolves to support EVs, repair costs and other associated challenges will eventually decrease.
This article was originally published on Quiver Quantitative