Electric Vehicles Are Bankrupting Hertz

Hertz’s ambitious push into electric vehicles is destroying its financial performance.

The company just reported an absurd $1.33 billion net loss for the third quarter of 2024—a grim earnings report that sent Hertz’s stock tumbling further south, bringing its decline for the year to a casual 68%.

Hertz’s woes are deeply tied to its decision to purchase hundreds of thousands of Tesla EVs—including 100,000 Model 3s and a follow-up order of Model Ys. Hertz also stocks the Polestar 2 in it's EV portfolio.

The value of these vehicles plummeted faster than anticipated, EVs as a category have proven more depreciation-prone than their internal combustion engine counterparts. This was made worse by Tesla's aggressive price cuts on new models, significantly impacting resale values. Further, Hertz reports repair costs on their EV fleet were much higher than expected, and they were rented to customers at lower rates compared to conventional vehicles—an absolute recipe to cook yourself.

To mitigate losses, Hertz has been selling off its EV inventory in large numbers. The company plans to offload approximately 30,000 EVs, primarily Teslas, before the end of 2024. However, this influx of vehicles on the used market has further suppressed EV resale values, intensifying the depreciation problem for Hertz.

Hertz’s ICE fleet also suffered from heavy depreciation. Many of these vehicles were purchased during the semiconductor shortage when supply constraints drove up prices, leaving Hertz with overvalued assets. The company attributed a $1 billion impairment charge in Q3 to the diminished value of its fleet.

Hertz’s aggressive foray into the EV market was intended to position the company as a leader in sustainable mobility, but it has instead created significant financial hurdles both operationally and for shareholders.

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