• by Tanya Gazdik , January 13, 2024

Photo by Tanya Gazdik/MediaPost

Hertz is backing away from its enthusiasm over electric vehicles. 

The rental car company is selling about 20,000 electric vehicles, including Teslas, from its U.S. fleet and instead will opt for gas-powered vehicles, it said on Thursday, citing higher expenses related to collision and damage for EVs.

"Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter," Hertz said in a regulatory filing last week.

Hertz previously said it aimed to convert 25% of its fleet to electric by the end of 2024.

The company earlier planned to order 100,000 Tesla vehicles by the end of 2022 and 65,000 units from Polestar over five years.

As recently as August, Hertz CEO Stephen Scherr launched a video series where he touted the company's support of EVs, saying it intended to purchase 175,000 electric vehicles from General Motors over the next five years as part of its commitment to the next generation of automotive technology.

The company, which claims to have the largest rental fleet of EVs in the United States, offers a range of models at various price points from General Motors, Tesla, Polestar, Kia and Hyundai.

Morgan Stanley analyst Adam Jonas said in a note Hertz's move was another sign that EV expectations need to be "reset downward” and that there are other "hidden costs to EV ownership.”

Hertz is selling some Tesla vehicles for as low as $20,000, nearly half the purchase price for the cheapest variant of the compact sedan, its used car website shows. It lists more than 700 EVs on sale, including BMW's i3, Chevrolet's Bolt and Tesla's Model 3 and Model Y SUVs.

The company’s decision to sell the vehicles is partly due to “unprecedented” price cuts by Tesla that undercut the cars’ resale value,  Scherr told The New York Times. 

Tesla vehicles plunged in value after the carmaker cut prices last year by about 30%. When the price of new vehicles is lowered, it drives down the value of used cars because buyers can get new models for less.