Hertz plans to sell a third of its electric car fleet and return to investing in traditional cars following weak demand and high battery repair costs. The sale of 20,000 began last month and will continue throughout 2024. The change of course by Hertz, which announced its intention to purchase 100,000 Teslas in 2021, reflects the slowdown in demand for electric cars in the United States. The announcement penalizes Hertz shares which, in the trading before the market opening, lost 2.30%.
Supply and demand balance
“The company plans to reinvest part of the proceeds from the sale of electric vehicles in the purchase of cars with internal combustion engines to meet customer demand,” reads the note released by the company to break the news. Hertz also stated that it “expects this action to better balance the supply with respect to the expected demand for electric vehicles”, weaker than expectations. After the stock dropped 32% over the past year, Hertz shares fell more than 5% in early trading on Wall Street.
The electric car market
For the company, the return to petrol cars marks a real about-face in terms of market strategy. In 2023, Tesla made a price cut, which consequently lowered the residual value of the cars in the fleet. Furthermore, the market is not yet able to establish whether or not consumers are willing to buy used electric cars. So, with its decision Hertz expects to improve its cash flow and earnings this year and next. Within this period, therefore the end of 2025, the company expects an improvement in financial results thanks to the increase in daily revenues and the reduction of depreciation and operating expenses.
2024-01-11 17:20:05
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