To start renting Teslas in early November, Hertz must have at least some in-house charging infrastructure in place, as well as employee training, renter’s rules, modification to its rental system, and a reconfigured website. Let’s not underestimate this logistics challenge. We’ll call this the car rental version of a restaurant soft opening. - Photo courtesy of Hertz

To start renting Teslas in early November, Hertz must have at least some in-house charging infrastructure in place, as well as employee training, renter’s rules, modification to its rental system, and a reconfigured website. Let’s not underestimate this logistics challenge. We’ll call this the car rental version of a restaurant soft opening.

Photo courtesy of Hertz

With Hertz announcing an agreement on Oct. 25 to purchase 100,000 Tesla Model 3s for its rental fleet, the 103-year-old rental company — fresh from bankruptcy — just created the market for electric rental vehicles.

Will this shot heard round the world be the start of a revolution? That’ll take some time to shake out. For right now, we can at least marvel in its scope and vision.

Car rental companies have dabbled in EV rentals, but not like this. There is sense of urgency to the announcement: Other electrification or carbon reductions initiatives stretch the timetable far enough into the future when the market will have changed dramatically, and no one will hold their feet to the fire on meeting the goal or not. The first Teslas will hit Hertz’s rental locations literally in a week or two — and Tom Brady is already on TV telling us about it.

According to Hertz, the goal is to fleet the 100,000 Teslas by the end of 2022. That even beats Jeff Bezos’ moonshot to fleet 100,000 Rivian vans for Amazon by 2024. Hertz’s press release disclaimer: Ordering could be affected by semiconductor chip shortages “or other constraints.”

The Tesla order will comprise more than 20% of Hertz’s global fleet. That puts Tesla on par — or even surpassing — Hertz’s second largest supplier, General Motors, which made up 21% of Hertz’s global fleet in 2019. The FCA brands, now under Stellantis, were second at 18%.

Clearly, Hertz has been planning this for a long time and chose to keep the cat in the bag until the initiative was underway on the ground. (Does this have Mark Field’s fingerprints? This deal would have to predate his hiring, which happened only a few weeks ago. Though Mark Fields is deeply educated on Tesla and has been a frequent commentator on Tesla’s challenges and opportunities in his time post-Ford.)

To start renting Teslas in early November, Hertz must have at least some in-house charging infrastructure in place, as well as employee training, renter’s rules, modification to its rental system, and a reconfigured website — to go along with a bunch of new Teslas. Let’s not underestimate this logistics challenge. We’ll call this the car rental version of a restaurant soft opening.

Can Hertz get the infrastructure in place by the end of next year to support 100,000 Teslas? Electrification is the hottest topic in commercial, corporate, and government fleets. Ask any fleet manager going through the process about their biggest challenge, and they’ll all say infrastructure, many with battle-hardened stares.

Those fleets are stressing over installing a managed Level 2 depot charging network in one location for a test run of 25 EVs. Imagine dealing with airports, working with numerous utilities, ripping up pavement, and managing increased electricity loads in 65 global markets by the end of 2022 to support an average 1,500 new electric vehicles in each of those markets.

(Shameless plug: Join us in San Jose Nov. 10-12 for the Fleet Forward Conference. We’ll have in-depth discussions on fleet electrification, particularly the infrastructure part.)

Hertz says it will install a combination of Level 2 and DC fast charging at those locations, though any high-volume store will require more expensive DC fast chargers to be able to charge in 15 to 25 minutes. For the renter that returns the vehicle near empty, eight to 10 hours of dwell time with Level 2 charging will kill rental days and utilization.

There will be tremendous buzz at each location that rents them — the kind of buzz Teslas generate. Hertz is carving out mindshare in a market not known for first adoption. Renters new to EVs can take them on an extended test drive. And Tesla owners want to rent Teslas. When they slide behind the wheel of the rental, they will get their digital presets from their personal Teslas to come with them. And this market is growing exponentially.

But don’t sleep on the new EV renter education part. Range anxiety will play a smaller (but still measurable) role. Staff must learn to budget the time to instruct novices on how to operate these technology rockets on wheels. It’s a safe bet Hertz won’t opt for Full Self-Driving on their orders. Will Hertz create a new insurance product specific to Tesla rentals?

There is still a big question on EV’s values in the wholesale market, a major factor for rental operators that turn over their vehicles every six to 18 months. In this regard, Hertz chose the right partner — the Model 3 is a superstar at holding value. I’d expect Hertz to retail those de-fleeted Teslas themselves, so true valuation of those units might be difficult.

Ironically, this might be the best time to buy EVs for rental fleets. While all OEMs have suffered in the global semiconductor chip shortage, Tesla seems not to have suffered as much. This has allowed Tesla models to price at near normalcy compared to mainstream marques that are selling into rental at well over MSRP today.

In a general sense, it’s essential for fleet buyers of EVs to continue to get the same incentives and credits as consumers to make the holding costs work.

Question is, will Tesla have capacity to supply the other major car rental companies with its electric models at anywhere near the volume of this deal? Tesla’s sales into corporate, commercial, and government fleets have been growing. Will Hertz’s hoovering of Teslas for its own fleet leave other fleets high and dry?

As the largest EV fleet buy ever, the cycling of these vehicles will be watched closely. With fewer maintenance costs, will Hertz hold them in fleet longer? How will the batteries hold up?

There are many questions to be answered as this initiative unfolds. Hertz will soon be trading on the Nasdaq exchange. Those earnings calls will be required listening.

At the closing keynote panel for 2021 International Car Rental Show, the message was, “EVs will be finally coming to rental fleets, so be prepared.” As of this Hertz announcement, they’re already here.

Author

Chris Brown
Chris Brown

Digital Editor

As editor of Automotive Fleet (digital), Auto Rental News, Fleet Forward, and Business Fleet, Chris Brown covers all aspects of fleets, transportation, and mobility.

View Bio

As editor of Automotive Fleet (digital), Auto Rental News, Fleet Forward, and Business Fleet, Chris Brown covers all aspects of fleets, transportation, and mobility.

View Bio
0 Comments