When Hertz emerged from bankruptcy and went public in 2021, the rental car company made a multi-billion-dollar bet that the future of mobility pointed toward mass electrification and that the time too pivot was immediate.

Hertz, the second-largest rental car company in the US, made a bulk purchase of 100,000 Teslas that year – estimated to cost around $4.2 billion and deemed the largest single purchase of EVs ever. No other rental car company had invested as aggressively in electric cars.

That bet turned costly and was ultimately short-lived. By 2023, less than two years into its EV shift, Hertz had waved a white flag, stating in a 10-K filing at the time that it would “significantly reduce the size” of its global EV fleet.

The result – nearly half a billion in write-downs and disposal losses alone – suggests American drivers are still reluctant to adopt an entirely new powertrain nearly three decades after the first mass-produced EV, General Motors’ EV1, was put on the market. But, as a radiant spot, consumers have shown that they’re willing to pay for an electric car – for the right price.

Here’s what Hertz lost and what the rental company’s EV gamble says for the future of electrification.

A ‘risky’ bet gone wrong

Hertz’s EV pivot wasn’t made on a blind hunch – 2021 was a critical year for the electric car industry. The US market share grew faster than anticipated, and the Biden administration set a goal through an EO to make half of the passenger vehicles sold in the country zero-emission.

then-interim CEO Mark Fields said in October 2021 that EVs were “now mainstream” and that the “rising global demand and interest” had just begun.

Hertz committed to expanding its EV fleet with a massive order of 100,000 Teslas – as well as orders from other EV brands such as Polestar and GM – and entered into an exclusive partnership with Uber, making part of the fleet available to a ride-hailing driver network.

Still, despite markers of growing EV demand, Hertz’s pivot was “risky without a doubt,” Ivan Drury, director of insights at Edmunds, told Business Insider.

In the US, pure EVs were still a niche interest, and the infrastructure, such as charging networks, had yet to keep up with the demand Hertz was prepping for. For context, Enterprise, which eclipses Hertz’s overall fleet size by four to five times, only cites “several thousand EVs” in its global fleet.

“Not even the rental agencies themselves were prepared for, ‘How do you charge 30 cars when you don’t even have a single level-3 charger on hand?'” Drury said.

Among other “risk factors” Hertz outlined: low residual values due to volatile pricing of new EVs, frequency of damages and collisions partly due to the “lack of familiarity by drivers,” cost of maintenance and repairs, and consumer sentiment regarding the reliability and safety of EVs.

in 2023, cracks in Hertz’s electric car experiment began to show. The “supply of EVs exceeded customer demand,” the company disclosed to investors.

Hertz made the decision that year to offload some of its electric cars, and as a result, recorded a $245 million write-down due to the value of the EVs being lower than anticipated.

By the end of 2024, Her

Why Electric Cars Are Losing value So Quickly

Electric vehicles (EVs) are dropping in price faster than gasoline cars, and this is causing some problems for owners and companies like Hertz. Several factors are contributing to this trend.

What’s Happening with EV Prices?

EVs used to hold their value well, but now they’re losing a significant amount of money soon after they’re driven off the lot. according to data from Cox Automotive,EVs depreciate much faster than other types of vehicles. In January 2024, EVs were losing 40.8% of their value after one year, compared to 29.3% for gasoline cars.

Why Are EV Prices Falling?

Several things are causing this drop in price:

• More Choices: There are now many more EV models available, giving buyers more options and increasing competition.
• Tax Credits: Government tax credits can make new EVs cheaper, which lowers the price of used evs.
• Range Anxiety: Some people worry about how far an EV can travel on a single charge, and this can make them hesitant to buy a used one.
• Charging concerns: Finding places to charge an EV isn’t always easy, which also makes some buyers nervous.
• Battery life: People are concerned about the lifespan of EV batteries and the cost of replacing them.

Hertz and the EV Sell-Off

Rental car company Hertz made a big bet on EVs, but it didn’t work out as planned. They bought a large number of EVs, but demand wasn’t strong enough. They ended up selling off their EV fleet at a loss.

“Hertz really misjudged the market,” said Jesse Drury, a research analyst at Cox Automotive. “They thought demand would be much higher than it was.”

The low resale value of EVs actually helped Hertz sell them quickly. While it might discourage people from buying new evs, it attracts buyers looking for a good deal on a used one.

“That’s the one benefit for them – is that EVs right now in the used market: fastest-selling powertrain type,” Drury said.

Today, Hertz’s EV used inventory is very small. Hertz announced that they had sold off most of their EV fleet by the end of 2024.

“Hertz is in the midst of a disciplined transformation under new leadership, delivering strong results and returning the company to EPS profitability,” a Hertz spokesperson said. “We completed the EV fleet reduction a year ago, and we are now focused on continuing our momentum as we execute our transformation strategy.”