Car rental company Hertz (HTZ) reported that it lost an additional $200 million due to its electric car deployment.
In its first-quarter earnings report, Hertz said it had “increased” its previous plans to reduce its electric vehicle fleet by an additional 10,000 electric vehicles, which resulted in the company being charged a $195 million depreciation charge to write off the value of the electric vehicles held for sale.
The company had previously announced that it would sell 20,000 electric vehicles from its fleet, meaning it will now have 30,000 electric vehicles in its fleet by the end of 2024. Adding today’s charge to the $245 million write-down it took in the fourth quarter, the company has now lost $440 million on its EV move.
Hertz’s electric vehicle fleet, which once included 60,000 electric vehicles, will be reduced in half to 30,000 electric vehicles. A third of Hertz’s electric vehicle fleet came from Tesla (TSLA), with the rest coming from Polestar (PSNY), Volvo (VLVLY), and Chevrolet (GM).
For the quarter, Hertz reported an adjusted loss of $1.28 per share, which was wider than analysts’ expected loss of $0.44. Hertz reported an adjusted net income loss of $392 million, more than double its expected loss of $147 million.
Hertz shares were down 20% in midday trading.
Hertz’s loss per unit (DPU) jumped to $592 in the first quarter, compared with $498 last quarter and more than double the $253 in the first quarter of last year. Hertz attributed the DPU deterioration to losses from sales of gas-powered vehicles, as well as losses from the market value of the electric vehicles in its fleet and from the divestiture of other electric vehicles.
Hertz’s EV bet didn’t just come at a financial cost. Last month, Hertz’s then-CEO Stephen Scherr, who spearheaded the plan to go all-electric, was replaced by Gil West, the former COO of GM’s autonomous cruise unit and before that COO of Delta Air Lines.
“Fleet and direct operating costs weighed on this quarter’s performance,” Hertz CEO Gil West said in a statement. “We address both issues – providing the right vehicle supply at an acceptable capital cost while increasing productivity and reducing operating costs.”
Hertz was an early adopter of electric vehicles, announcing in 2021 that it would purchase 100,000 Teslas as part of a marketing campaign featuring former NFL quarterback Tom Brady. At the time, Hertz, just months away from bankruptcy, was up 10%, while Tesla shares were rising at the same time. Tesla reached a market capitalization of over $1 trillion for the first time.
Hertz also entered into an agreement with Polestar to purchase 65,000 of its electric vehicles in February 2022, with Hertz informing Polestar in February 2023 that it would suspend future purchases of its electric vehicles.
While Hertz is reducing its offering of electric vehicles in its fleet, retail electric sales are still growing, albeit at a slower rate. GM Chief Financial Officer Paul Jacobson said this this week after the automaker’s earnings report, claiming that electric vehicles are still popular among its retail customers, but fleet operators such as large corporations, government agencies and car rental chains are scaling back purchases.
“We’ve obviously seen a lot of weakness in the fleet, particularly on the EV rental side, but we’re seeing [retail] Customers responded,” Jacobson said.
Pras Subramanian is a reporter for Yahoo Finance. You can keep following him Twitter and further Instagram.
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