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Problems and turmoil continue at the Hertz car rental company.
The company, which announced in January that it would sell 20,000 electric vehicles from its fleet, or about a third of the electric vehicles it owned, now replaces the CEO who helped build that fleet, making him the company’s fifth boss. company in just four years. years.
The company announced that Stephen Scherr, who joined the company two years ago after nearly 30 years at Goldman Sachs, will leave his position at the end of this month. He will be replaced by Gil West, former chief operating officer of Delta Air Lines and General Motors’ cruise unit.
In the most recent quarter, Hertz took a $245 million hit to its profits due to a drop in the value of the electric vehicles it sold.
While the number of electric vehicles purchased by American customers rose 40 percent last year to surpass one million for the first time, there was less demand than some traditional automakers had expected as they moved to offer electric vehicles. . Tesla, the leader in electric vehicle sales in the United States, started a price war for electric vehicles a little over a year ago, driving down the value of new and used electric vehicles, like those in Hertz’s fleet. And falling prices hurt Hertz’s bottom line by reducing the money he could expect to make from reselling the vehicles.
But the problem for Hertz wasn’t necessarily that the cars were electric and that customers simply didn’t want to drive electric cars. The problem was how Hertz managed the fleet overall, according to industry analysts.
“The execution and commercialization of electric vehicles [by Hertz] It was a horror show across the board,” said Daniel Ives, a Wedbush Securities analyst who follows the electric vehicle market. “It’s a black eye they couldn’t recover from.”
Part of the problem for Hertz was that even people who wanted to buy an electric vehicle wouldn’t necessarily want to rent one while traveling, when they couldn’t necessarily plug it in to charge like they would in a private home. There may not be a charging station or enough time for a car rental customer to charge an electric vehicle, Ives said.
By sticking to charging rules the same way Hertz has applied refueling rules, it may have deterred customers from wanting to rent an electric car. Without building any charging infrastructure at its rental locations, Hertz could have hurt its own business.
“They don’t want to take a 20-minute detour at five in the morning to find a charging station,” Ives said.
Hertz had announced that it would buy 100,000 electric vehicles from Tesla in October 2021, just before holding its initial public offering after emerging from bankruptcy. The hope was that the promise of being at the forefront of growing demand for electric vehicles would attract investors and drive up its stock price.
It later announced plans to buy up to 175,000 electric vehicles from General Motors and 65,000 electric vehicles from Polestar, the electric vehicle company jointly owned by Volvo and its Chinese parent company Geely. But Hertz’s total EV fleet only reached 60,000 before he decided to retire. Still, that was enough to account for 11 percent of his fleet.
Even without the drop in the value of the cars it bought, Hertz struggled with collision and damage repairs on an electric vehicle that ran about twice as hard as a comparable combustion engine vehicle, Scherr told investors on a call from 2023.
Other problems beyond electric vehicles
But even without the $245 million hit by problems with its electric vehicles, Hertz would have lost money in the fourth quarter and for the full year. That compares with earnings at rival Avis Budget Group, which reported record revenue and the second-best adjusted operating profit in its history.
And electric vehicles weren’t the only black eye for Hertz. In December 2022, the company agreed to pay $168 million to resolve 364 claims related to the company. Falsely reporting rental cars as stolen. These cases sometimes led to Hertz customers being arrested and even imprisoned. While Hertz said a “significant portion” of that expense would be covered by insurance, it was another blow to his reputation.
Scherr was not the one who decided to make the big bet on the demand for electric vehicles from rental car customers. That was his predecessor, Mark Fields, former Ford CEO who was named interim CEO in October 2021, just weeks before Hertz announced plans to buy 100,000 Teslas, the largest order ever placed for Tesla by a buyer only.
Fields’ predecessor as CEO, Paul Stone, remained Hertz’s president and chief operating officer, positions he held until he resigned last September. Stone had taken over just days before Hertz presented filed for bankruptcy in May 2020. While the entire car rental industry was hit by the pandemic and falling demand for travel and rental cars, rivals Avis Budget and privately held Enterprise were able to weather the storm without declaring bankruptcy.
While Hertz, which has been renting cars since the days of the Model T, was once the world’s largest car rental company, in 2023 its revenue was 22 percent less than that of its publicly traded rival, Avis Budget. .