Rental company lost $1.3 billion in Q3 and took a $1 billion impairment charge due in large part to the heavy depreciation suffered by its electric car fleet
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- Hertz’s third-quarter financial figures contained bigger losses than expected and sent its stock tumbling.
- The rental company is still feeling the ill effects of a disastrous EV program that has limited its earnings this year.
- As a result, it’s planning to sell off another 30,000 EVs, which will hit the used car market by year’s end.
Hertz’s third-quarter financial results released this week show it’s still reeling from its decision to bet big on EVs. Heavy depreciation on its fleet of electric cars – and ICE models – played a major role in Hertz reporting a net loss of $1.33 billion, compared with a $629 million profit in Q3, 2023, news that sent its share price even lower.
Tesla’s Price Cuts and EV Depreciation
The rental giant splashed out on EVs a few years ago, purchasing around 100,000 Tesla Model 3s and following up with another substantial order for Model Ys without knowing that the value of those cars would soon fall far below predicted levels. Electric cars in general have proved to be more depreciation-prone than combustion-powered vehicles, but Tesla CEO Elon Musk had a role to play in Hertz’s misery when he cut the price of new Teslas, lowering the value of the company’s fleet.
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But Hertz’s ICE cars must shoulder some of the blame. They’ve also suffered heavy depreciation because some were bought during the semiconductor crisis when vehicle production was limited and prices were high. The agency’s Q3 results include a $1 billion impairment charge related to its fleet’s lower value.
The EV Sell-Off
In an effort to stanch the bleeding, Hertz has been offloading EVs en masse. Earlier this year, it sold 20,000 units, followed by another 10,000, with plans to ditch 30,000 more by the end of 2024. Most of these vehicles are expected to be Teslas, and their arrival on the used market is poised to put further downward pressure on resale values, compounding the depreciation problem for both Hertz and the wider EV market.
As reported by Bloomberg, the sell-off is part of a broader plan to align its EV fleet to a number that its customers want to rent. The company expects to complete this fleet overhaul by the end of 2025, but until then, monthly depreciation costs remain sky-high at $537 per vehicle—nearly double the $284 average from Q3 2023. Hertz hopes to reduce that figure to $300 in the coming years, but for now, it’s another sore spot on a balance sheet full of them.
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Fleet depreciation wasn’t the only bad news in Hertz’s Q3 report. Its core rental business also underperformed, revenue of $2.6 billion being 5 percent less than analysts expected. Hertz’s stock price is down 68 percent this year, and fell 12 percent when the third-quarter numbers dropped.
“There is still work to be done,” said Hertz CEO Gil West. “But I am confident that the enhancements achieved over the course of this quarter demonstrate that we are on the right track.”
