Hertz hurts. The company expected a challenging first quarter, but got more than it bargained for, reporting an adjusted net loss of $392 million on Thursday. Despite the increase in demand for rental cars, Hertz says it has been hurt by its existing fleet of electric vehicles mainly from Teslas– which are unreliable and more expensive than their gas-guzzling counterparts.
The car rental company plans to sell an additional 10,000 electric vehicles than initially planned, aiming to sell a total of 30,000 by 2024. charged $195 million due to the depreciation of its EVs, a blow that became even more acute Tesla to lower its prices. Hertz said its vehicles had monthly depreciation costs of $592 per car, considered high in the industry. At $1.43 billion, Hertz has nearly halved its market capitalization from six months ago. The stock is down more than 40% this year and is currently trading at $4.68.
“Fleet and direct operating costs weighed on this quarter's performance,” Hertz CEO Gil West said Thursday profit statement. “We are addressing both issues: obtaining the right supply of vehicles at an acceptable capital cost, while at the same time increasing productivity and reducing operating costs.” West, who joined the rental company on April 1, was called in to right the sinking ship.
Hertz's tough time reflects the EV industry's troubles and Tesla's broader story of sales slowdowns amid growing competition and safety issues. Tesla announced this on Wednesday halve profits in the first quarter due to declining demand and shareholder skepticism about CEO Elon Musk's fixation on fully autonomous cars, an ongoing project that has yet to come to fruition. Last week Tesla remembered that all its cyber trucks from 2024 due to concerns about the faulty accelerator pedal. It also announced that this would happen lower prices on three of its models by $2,000.
A failed bet on Tesla
But before Tesla was a thorn in Hertz's side, it was actually its saving grace. The pandemic has been eradicated the tourism and travel industry in early 2020, causing Hertz to go bankrupt. But the company was able to rise thanks to gaining meme stock status Injection of $5.9 billion of new capital from private equity firms Knighthead Capital Management and Certares Management.
Within months of emerging from bankruptcy, Hertz commissioned 100,000 Teslas to be added to his fleet and collaborated with Uber to add 50,000 electric vehicles to the network within two years. Hertz had lofty goals of making 25% of its fleet electric by the end of 2024. This move was so big that it pushed Tesla over the line to become a $1 trillion company.
“Our approach is very strategic and very deliberate in terms of how we want to disrupt ourselves and hopefully disrupt the industry,” said Mark Fields, Hertz's interim CEO at the time, told Bloomberg at the time. “Instead of asking why, we ask why not.”
But by the end of 2023, Hertz's expectations for electric cars had turned: Tesla was already cutting prices to meet declining demand, and then CEO Stephen Scherr said the cost of repairing Teslas would be high goods. twice the cost of filling up cars with petrol. Hertz announced in January that it would sell 20,000 of the cars in favor of gas-powered vehicles. The rental company seemed unable to avoid Tesla's setbacks. By the end of that month Tesla nearly 200,000 cars recalled about three models with self-driving capabilities about problems with the display of the rear-view mirrors that could increase the risk of accidents.
Hertz recently made management changes to stem the flow. In March, Scherr, who led Hertz's effort to pursue electric vehicles, said resigned from his role as CEO, paving the way for West, the former chief operating officer of General Motors' robotaxi division, to take the helm.
While Hertz is still feeling the heat from its electric cars, analysts say these issues have been years in the making.
“The execution and marketing of EVs has been a horror show across the board,” said Daniel Ives, an analyst at Wedbush Securities. told CNN in March. “It's a black eye that they couldn't recover from.”
This story originally ran Fortune.com
