How Car Rental Can Play a Role in EV Revolution

With President Biden’s recent target of making 50% of all new vehicle sales electric by 2030, electric is the future. However, electric vehicles (EVs) comprise only about 2% of new vehicle sales today.

And in this context, Hertz made big news on Oct. 25 by announcing intent to buy 100,000 Tesla Model 3s for its consumer rental fleet, with as many as 50,000 units to rent to Uber drivers.

With this news, the electrification of rental fleets has left the starting gate — along with many questions on how to make the endeavor successful.

In the closing keynote at the International Car Rental Show, convened on Aug. 17, a panel of EV experts shared insights on the near future of the EV market as well as logistics and challenges for companies trying to rent EVs.

Future of EVs

The increased EV sales target is showing a shift in the U.S.’s policy environment.

“In our European operations, we’re seeing the policy and regulatory environments being very supportive of the EV transition, whether that’s through incentives, emission regulations, or internal combustion engine restrictions,” said Chris Haffenreffer, assistant vice president of innovation at Enterprise Holdings. “I think we are going to start seeing these types of actions in the U.S. at all levels of government.”

To support all these new EV models, charging infrastructure needs to be available.

“I think there needs to be a coordinated plan from the government on how the money will be spent and where it’s going to be spent to increase the infrastructure,” said Matt Daus, partner at Windels Marx Lane & Mittendorf and transportation technology chair at CUNY’s Transportation Research Center. “There needs to be a mobility plan on where charging stations are going to be, including where on highways or if they will be put in airports for rental car companies to use.”

Car Rental: Test Drive Electric

To start aiming toward 50% market share of EVs, there needs to be more interest from consumers. Currently, automakers are investing billions of dollars in creating new electric vehicles, but will consumers want to buy these new vehicles?

“In my view, that’s where car rental comes in,” said Jose Blanco, group chief sales officer at Europcar Mobility Group. “Putting people into the seats through the rental car channel is a great way for automakers to ensure that people are trying out these new vehicles. We found in our surveys that when consumers try them out, the likelihood of them buying the next electric vehicles is much higher.”

Some rental companies have been focusing on adding more green vehicles to their fleets. Last year, Europcar released a new program called Connect to help reshape its group and its new needs and regulations. According to Blanco, the company is planning to have green vehicles (electric, plug-in hybrids, or hybrids) make up one-third of its entire fleet by the end of 2023.

Enterprise Holdings will be making the transition to add more EVs over the next decade, according to Haffenreffer. “For us to make this transition, we need to make sure that we understand where the market is heading and what our customers are telling us. We want to build the right partnerships in the market. It’s a complex issue where policymakers, utility companies, charging companies, and OEMs all have a seat at the table.”

Additionally, Haffenreffer said that Enterprise has been following data in Europe to better understand what impact EVs will have on their business model and on the customer experience.

Currently, Enterprise has several thousand EVs at its different brands.

EV Challenges

One challenge for maintaining EVs as rentals is the process of recharging vehicles. Will the rental company rely on nearby public charging stations to charge vehicles? If they have their own charging infrastructure, what type of chargers will they invest in?

“If you have only level two chargers, it can take anywhere from six to 12 hours to fully charge a vehicle,” said Arun Kumar, managing director at AlixPartners Automotive & Industrial Practice. “From an operational standpoint, as rental companies load up their fleets with more EVs, they will have to move toward some kind of fast charging. You can’t have the car sitting to charge for eight hours in order to rent it out again.”

Another challenge is depreciation. For rental companies, depreciation of vehicles is an important part of the business model.

“When we discuss depreciation and EVs in car rental, we tend to get a bit nervous,” said Blanco. “It’s difficult to project in the future. What is the value of a technology that’s evolving every month?”

“As more automakers come out with more EV models, it’s going to be tough to forecast what that depreciation curve is going to be because every vehicle has different technology, mileage range, etc.,” said Kumar. “I think the challenge for the rental side is going to be even more challenging the next few years before things settle down from the standpoint of the new models and the consumer interest, and eventually the charging side that needs to be fixed before you can make it profitable to rent EVs.”