- The world’s third-largest car rental company is pushing for a quarter of its fleet to be electric by the end of next year as capital from the billions it raised after emerging from bankruptcy post- Covid is invested in electric vehicles from Tesla, GM and Polestar.
- Customers pay more, but electric vehicle rentals are expected to quadruple this year, while Hertz says it saves on gas, maintenance and marketing with electric vehicles, and has benefited from recent drops in electric vehicle prices .
- A partnership with Uber is leading to an increase in weekly rentals for rideshare drivers, with 50,000 Uber drivers renting an electric vehicle through Hertz.
Tesla Model 3 electric vehicles at a Hertz neighborhood location.
Hertz
Consumers may be on the fence about whether it’s time to buy electric vehicles yet, but car rental giant Hertz Global Holdings has taken the leap.
Markets lifted shares of Estero, Fla.-based Hertz after its recent earnings report as first-quarter revenue hit $2 billion and earnings per share of 39 cents easily beat forecasts of 21 cents per share. But behind the short-term numbers is the company’s long-term adjustment to major changes in transportation, tourism and energy: Hertz is going electric.
The company plans for 25% of its 500,000-vehicle fleet to be electric by the end of 2024, up from 10% now, as it accelerates purchases with its bids to buy 330,000 vehicles from Tesla, Polestar and General Motors. Those deals began rolling out last year, after Hertz’s first Tesla hit the road in 2021 and experiments with rental electric vehicles spread over the past decade. GM vehicles are starting to arrive in quantity now, Hertz CEO Stephen Scherr said on the company’s earnings call.
“At the end of [March]we had about 50,000 electric vehicles in our fleet, which comprised about 10 percent of all cars,” Scherr said.
Recent price drops in the market as Tesla waged a war for market share in a softer economy, although it recently raised prices again, have helped the rental car company buy.
“I think the drop in the price of electric vehicles is an encouraging proposition for us, because if I go 10% to 25% and go up from there, I’m obviously a happier and better buyer at a lower price. more than not,” Scherr said.
The company expects nearly 2 million electric vehicle rentals by 2023, about 5 times last year’s number, he said.
Over time, electric vehicles have the potential to redo the business model for car rental companies, according to Oppenheimer & Co. analyst Ian Zaffino.
For the rental car company, the depreciation expense for electric vehicles is lower than for internal combustion engine vehicles because Hertz keeps electric cars longer, and in part because they are cheaper to operate and anchor ridesharing programs, another area where Hertz keeps cars longer. Car rental companies like Hertz and rival Avis Budget Group are keeping them longer, Zaffino said, and at least for now, are charging a premium for many electric vehicles, though a Hertz spokeswoman declined to confirm an average price for electric or gasoline vehicles.
Uber deal, ride-sharing market benefits car rental companies
Popular with rideshare drivers who rent them by the week or month, it allows rental companies to save on routine expenses like cleaning and contain marketing costs, although Deutsche Bank analyst Chris Woronka notes that rideshare drivers pay a lower average daily rate than other customers.
A traditional vehicle loses up to 1.25% of its value each month, while electric vehicles lose between 0.85% and 1%, Zaffino said. Multiply that by the 200,000 to 300,000 vehicles the company sells in a given year and the savings are substantial, he said.
“The more valuable the vehicles are, the less expensive they are to maintain,” Zaffino said.
That helps Hertz, which also owns the Dollar and Thrifty brands, keep cars longer and buy fewer of them than it would otherwise, he said.
Hertz has also told analysts that the growing ride-sharing market for electric vehicles can be a buffer against the traditional quarterly spikes experienced in the leisure business.
As Covid reduced Hertz’s rental metrics by nearly 50 percent, the ride-sharing business was looking to recover from its own Covid-created crisis. So players like Uber and Lyft were ready to make deals with car rental companies like Hertz and Avis.
Hertz’s deal with Uber lets drivers rent electric vehicles for as little as $285 a week for a GM car like a Chevy Bolt EUV, rising to $334 and up for a Tesla Model 3 and up for an SUV Model Y.
The benefits of using an EV start with a $1 per trip credit to the driver for using an EV, said Uber spokeswoman Alix Anfang. Drivers also save on gas and depreciation. Additionally, the driver is eligible for higher fares with the company’s Uber Comfort Electric service, which sits between the mid-level Uber Comfort plan, which focuses on newer or more luxurious vehicles, and the Uber Black service , more expensive. The rental fees also cover the driver’s commercial insurance, he said.
“We have a great EV story to tell, some in fact,” Anfang said in an email. “We’re starting some driver education events to help us with our mission to get them into electric vehicles.”
A dedicated Uber charger at a BP Pulse electric vehicle charging station in central London, UK, on Monday, April 11, 2022.
Bloomberg | Bloomberg | Getty Images
Hertz says the average driver who rents an electric vehicle instead of a gas Hertz car will earn 10 to 15 percent more overall, and that 50,000 Uber drivers have rented an electric vehicle through Hertz , driving them more than 260 million miles. Uber says 4.1% of miles driven in the U.S. are in an electric vehicle, eight times more than the general population.
This is backed up by Tracy Lynn Young, who has driven for Uber in metro Atlanta for seven years. He pays $340 a week for his Tesla and says he can pay $1,800 to drive on a busy weekend, thanks in part to electric vehicle incentives and the curiosity of drivers who order a Tesla because they’ve never been in one. electric The incentives alone almost pay for the car, he said.
Bonus: Her charge costs $120 a week less than her gas used to, monthly maintenance included, and she’s saving on her own car, which she’d racked up 95,000 miles on in two years working as a carpool driver and salesman. real estate
“When they want convenience, they want a ride in a Tesla,” Young said. “A lot of people want a ride in a Tesla [so] they can experience it.”
Business trips account for half of Hertz rentals and they go electric
The company is also benefiting from the push for environmentally focused corporate management, Zaffino said. Hertz gets nearly half of its rentals from business travelers, and many companies are turning to electric vehicle rentals as part of broader plans to reduce their carbon footprint, he said.
Hertz is offering consumers incentives to assuage concerns about electric vehicle range and poor charging facilities, and to encourage them to test drive the new cars, the company said.
Hertz, which has a partnership with BP’s Pulse to build EV charging infrastructure at Hertz locations in major U.S. cities to serve both its customers and the public, does not charge customers for the top-up if the vehicles are returned at least 70 percent with a charge. , and the company offers an option where you can return the electric vehicle with a charge as low as 10 percent of capacity for an upfront fee of $35. It’s also offering 30 percent off May prepaid electric vehicle rentals, using the first part of the summer travel peak to promote its transition.
“I think adoption will continue to consolidate,” Scherr told analysts on the recent earnings call.
He pointed to on-road requirements in U.S. cities that will require the Uber and Lyft networks to be fully electric “at some date in the not-too-distant future,” five to seven years from now. “I would tell you that I think Hertz and our fleet of electric vehicles is the most affordable entry point for drivers to get into these electric vehicles and use them,” he said. “And needless to say, I’m happy because we have more of these rental electric vehicles at attractive rates, but perhaps more importantly, with attractive margins in terms of what we see happening.”
