The recent disclosures from Hertz about slowing its ambitious plans to add electric vehicles provides a sobering reminder of the challenges facing fleet EV adoption.
In a third-quarter earnings call Oct. 26, Hertz CEO Stephen Scherr discussed the higher-than-expected costs of operating and maintaining fleet electric vehicles, according to news reports. Compounding those costs, Tesla price cuts on new models are diminishing the resale value of used Teslas that are turned over much faster in rental fleets than among other fleets and retail EV buyers.
The combined cost challenges of EVs shaved earnings margins for the quarter. "Direct operating expense (DOE) increased 17% compared to the third quarter of 2022, largely in line with the increase in volume. On a per transaction day basis, meaningful benefits from the company's productivity initiatives in areas such as personnel, maintenance, refueling and facilities, were offset in part by higher year-over-year gross collision and damage," according to a Hertz news release.
Scherr explained that Hertz is slowing its “in-fleeting of EVs,” according to Carscoops. "The company now runs about 50,000 EVs in its fleet, with 35,000 of those supplied by Tesla, per CNBC. Although the company is still committed to buying 100,00 Teslas, and 175,000 EVs from GM, it is not on target for electric vehicles to make up a quarter of its fleet by the end of 2024," Carscoops reported.
Among highlights of third-quarter earnings reported by Hertz:
Total revenues of $2.7 billion
GAAP net income of $629 million, a 23% margin, or 92 cents per diluted share
Adjusted net income of $230 million, or 70 cents per adjusted diluted share
Adjusted corporate EBITDA of $359 million, a 13% margin
Operating cash flow of $851 million, adjusted operating cash flow of $215 million
Adjusted free cash flow of $313 million
Corporate liquidity of $1.7 billion at Sept. 30, including $594 million in unrestricted cash
Company used $50 million to repurchase three million common shares during the quarter
