Hertz accelerates sales of Tesla vehicles as value crumbles
electrek.co
electrek.co
After finding damage in a car I was going over for a friend, I would avoid them personally even if it made sense for utility needs.
I know repairability isn't a huge deal for most people, but it is for fleets and me, I was surprised Herz made such a commitment as the concerns were well known.
Obviously this is just one aspect of the value crash.
They expected to save on maintenance but the higher repair costs seem to have destroyed that benefit.
https://ir.hertz.com/static-files/75a583c0-90e0-496a-8b45-9f...
> For context, collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle.
> Second, where a car is salvaged, we must crystallize at once any difference between our carrying value and the market value of that car. The MSRP declines in EVs over the course of 2023, driven primarily by Tesla have driven the fair market value of our EVs lower as compared to last year, such that a salvage creates a larger loss and, therefore, greater burden.
> Taking account of the impact on depreciation, collision and damage and RPU relating to our EV fleet, we estimate that had our fleet in Q3 been similarly sized but comprised solely of ICE vehicles our EBITDA margin would have been several margin points higher.
who pays for repairs when you crash into Hertz Tesla?
At the time, I found his claims hard to believe but I didn't have much conviction given his extremely strong track record up to that point.
The only record he had was ambition. Otherwise, his companies' record is filled with delays. And his personal record is filled with hostilities.
If you mean to say his ambitious and callous track record gave you hope that you will see rogue bullish auto driving, I understand you. I am still waiting for this to happen. I am expecting him to launch a self drive that is both bullish and dangerous and a mess on the roads.
Otherwise, his other claim that CURRENT vehicles (at the time) will be upgraded to self driving, was entirely a let-down and an opener for lawsuit and false advertising.
If they truly believed these cars would soon drive themselves, that’s entirely the fault of executives who didn’t do the minimum due diligence. Spending $100k to get a few consultants’ opinions would have been enough to pop that bubble.
That explains quite a lot, right there.
Mark Fields, who had spent ~30 years at Ford and was fired for not moving them fast enough into EVs, was the interim CEO while they searched for and found the Goldman guy for their permanent CEO. It was Fields that announced the deal with Tesla, although you have to wonder how much of it was already in place - he had been CEO for like 3 weeks at that point. Or, you know, maybe his thought process was "I'm not making this mistake twice" and the finance bros loved it and that's why they hired him.
EDIT: Not understanding the downvotes.
Board members and executives have a fiduciary duty to shareholders. They let their hubris get the best of them and that left the company with a fleet of assets that are depreciating rapidly, even by automotive standards. Thus the company is not returning as much value as it could if it had purchased more traditional vehicles.
"I have a fiduciary duty to shareholders" can't just be used by executives and board members to explain away budget cuts and massively upending peoples' lives with layoffs. It should cut both ways.
Or are we going to just finally admit that this excuse only serves to protect management and capital?
That resale value retention was harmed by two things that would not have been evident when they purchased the EVs:
1.) Tesla started cutting prices on new EVs.
2.) Incentives to purchase new EVs stayed high.
If we interpret fiduciary duty that broadly, I think I better start cutting grass instead.
Sounds like the executives who did the deal should have come to an understanding with Tesla about not doing things to massively dilute the value of the fleet.
Either they forgot to, or they bought the bullsh*t. Either way they're incompetent and don't deserve more money than most people will make in their entire lives within the span of a few years of work. Drag them in for a deposition to find out which one it was and recover some of the money.
Who's saying that engineers should be thrown in jail for making a mistake?
I'm saying that there's reason to believe that maybe Hertz's leadership didn't do their jobs. Lawsuits for that kind of thing are filed all. The. Time. in this country. If we're here to create value for shareholders by any legal means, and they don't do that, well... the monetary loss and resulting lawsuit is the risk that justifies the insane amount of money people in that level of the company make. Who knows, maybe the suit would be tossed.
If they don't want to deal with that, maybe a nice six-figure and full benefits compensation package would be more their speed.
It seems to me that sometimes somebody has to try a thing for us all to find out that it doesn’t work. If people with money in the company were sure it was a dumb idea all along, couldn’t they have sold their shares? Or even done fancy options trades to profit from their contrarian certitude?
Why would a court be involved in something like this, where management very clearly said what they were going to do, they did it, and it just didn’t work out the way they’d hoped?
If Tesla's lack of parts is the problem - and the article asserts that as a possible problem - then it's nothing to do with hindsight. Tesla either had the demonstrable ability to provide repair/replacement parts on time, or they didn't. You get that in writing and you have people actually dig to see if the supply chain was there. That's something you check before you ink the deal.
The article also mentions that there are other EVs in the fleet that haven't caused the financial problems. In other words, there's something about how Hertz structured the Tesla deal that was less-than-brilliant.
> Why would a court be involved in something like this, where management very clearly said what they were going to do, they did it, and it just didn’t work out the way they’d hoped?
Because they may not have done their due diligence in signing the deal with Tesla, and it's costing shareholders money. Making bets is one thing; making one that deals with something outside of your ken is another. Your job as a board or c-suite is to find the people to give you the straight dope on things you don't know about, not be distracted by new shiny from Silicon Valley.
I find it easier to believe that Hertz thought electric vehicles would be a big consumer draw but, as a sometimes renter, I have trouble seeing the appeal of dealing with something unfamiliar as a renter aside from maybe a one-time novelty.
I can see why car rental companies expect fossil fuel cars to be returned with a full tank, but for an electric car, they can charge it themselves. Being able to return the car without having to worry about recharging would make the electric cars more attractive.
The challenge here is that they didn't invest in building charging infrastructure at ALL of their locations (neighborhood centers, small airports, hotels, etc).
This is problematic because a renter that decides last minute to one-way their car from a prime location to a non-prime location without charging first essentially took that car out of rev service for the day. An ICE car would never have that problem.
This, of course, was fine when used EVs barely lost their value, but now that they depreciated like a rock since 2023, these cars are a cumulative black hole in forward revenue.
Interesting. I rent just about that often, but I try to get a car that I'm already familiar with. If I'm renting a car, I'm probably somewhere that I'm not familiar with and have my hands and brain full of other stuff that needs attention. The last thing I want to do is add "get used to a different car" to that list.
Most EVs, and Teslas particularly, have very different controls than the cars I am used to. I actively avoid them all mostly for that reason.
I make 2-3 long trips per year, and I rent a car for each. Why?
- I buy cheap, reliable transportation with a focus on commuting. You don't want to be in my car for several hours on a long trip.
- If I break down, the rental company takes care of it. I don't have to find a shop and wait for a part.
- I save a fortune. I know people who base their car-buying decision based off the couple of long trips they make per year. They end up paying 2x - 3x more for their car than I've paid for mine. They also typically have higher fueling costs and higher repair costs.
- When I do get an EV, I don't have one yet, I won't worry about range anxiety
That last point is what I never understood about Hertz - you should be pitching your rentals to EV owners as a solution for range anxiety on long distance trips. Easy peasy! You get sales. Not here's unfamiliar technology you're using in an unfamiliar place, figure it out! How did they ever think that was a smart idea?
It didn't happen to work out. However if it did, they would be hailed as visionary heroes.
Entirely? Like 100%?
The latter can still be fraud, but the bar is much higher. Hertz would have to show that Tesla actually promised self-driving in a contract.
It's only a problem if you are poor.
But more than one part can be guilty.
Big companies seem to be worse than you'd think at filtering out obvious nonsense vendor claims.
(Notably, people at Walgreens were going, "er, yeah, not sure about this, seems like bullshit", but they were overruled by the decision-makers).
https://insideevs.com/news/727657/tesla-fsd-unsupervised-202...
I'm sorry, I can't tell if this is sarcasm or not.
With a gas car I know I can get gas wherever cars go and that will take a few minutes. With an EV I would have to work out whether my hotel has EV charging/plan travels around chargers in an area not known to me.
Exactly. Most people rent a car when they're traveling, so they're likely to be in an unfamiliar place. Having to figure out and plan around charging the EV is added annoyance at that point. Sure, if you're familiar with the area and know where the chargers are and have some sort of regular schedule that allows you to use them, EVs work well. When I'm driving through rural Idaho with kids in the back who are getting a bit tired and bored, I don't want to have to find an EV charger. The kids aren't going to be happy about having to hang out for 30-40 minutes in some random charging station parking lot. And I'm not going to be terribly happy about extending my drive by that much when a 10 minute break would have done the job.
Until EV charging spots are as ubiquitous and fast as gas stations, you will not solve the problem of range anxiety. It's somewhat parallel to the situation when cars first came about -- there weren't a lot of gas stations. But cars at the time offered significant benefits over other methods of transportation, which made the tradeoff palatable. What do EV's bring to the table -- better acceleration (useless for most people), quietness (most noise while driving is not from the engine)? Most every 'feature' they have over ICE cars is something that ICE cars can have too, or don't matter for the vast vast majority of drivers. They're just another car, but with the added annoyance of using a fuel source that's not as commonly available.
The dealer told me that the price of all EVs is much lower in resale due to the incentives offered on new EVs.
I found it entirely preposterous that the difference between the 2018 leaf and 2024 leaf was really 29k for 60 additional miles of range. Materially that was really the only difference between the two models (and 30k miles, but still).
Other than comparing the major price changes in OEM prices of Teslas no other EV has had nearly as bad of a time as Leafs.
The depreciation of Teslas is a big problem for Hertz. But also they had a hard time with customer service. There's lots of stories of people having bad experiences with Hertz EV rentals. Personally I had a great experience.
Hertz going all-in on Teslas like they did was extremely dumb and short-sighted. I have many reasons why:
- Teslas are far from normal cars. Nothing about operating a Tesla is like any other car out there. Great if you're shopping for a car; terrible if you've just landed into ORD on a Monday morning after getting up at 4am and are sprinting to a 10am meeting. Hertz didn't do even the most basic ground work at understanding how their customers will rent these cars before spending an absolutely ludicrous amount of money on what was, essentially, a stupid flex.
- Hertz ordered the Teslas well ahead of building out a comprehensive charging solution to assuage range anxiety. They, then, did things like charge renters a "full tank" for returning the cars below 25% capacity despite their hotels, their customer sites or any of the areas they frequent having easily-accessible charging options. They should have allowed drivers to return them at whatever % they had left and handled charging logistics transparently.
- Teslas have a non-existent parts network, and becoming proficient enough to repair Teslas on-site required significant labor investments that, given the state of many of the Teslas I've rented, didn't seem to be made.
Hertz had the right idea. EVs are 100% the future. They should have slowed their execution of that idea way the hell down. $300M+ investment in charging solutions throughout the worldwide Hertz network, with a focus on 90%+ coverage in the US. Purchase used Bolts and A FEW partner EVs as upmarket vehicles (which few people rent because businesses won't expense cars at those classes) and design incentives to drive rentals, collect feedback and understand pain points. Shit, I don't know, maybe spending a few dollars on creating an actual dedicated rental type for EV tiers instead of lumping them in with the same tired rate codes from the 80s so that renters who expected an ICE don't get an EV and vice versa! Or, maybe, spending a few dollars tracking inventory levels so that those who DO rent Tesla EVs don't come to learn upon arrival that all of them are INOP (see point above).
But, no. Instead, Hertz is going to Hertz and sell these vehicles off to stop the bleeding and go back to the ICE-only strategy that already wasn't working for them.
Since the OEM surely do not sell cars loosing money, it's clear that current western prices are not competitive at all, to the point our automotive industry is DOOMED. Or our OEMs can make a Telsa for 10.000 or they are out of the game.
I might be wrong, but that's what I see.
Certainly, the typical contribution that your comments make to the Hacker News & the world around are much larger than mine.
If you had an email / IRC other reachable address in your profile, I would probably contact you to inquire about matters of direction (IE "approaches of things") and few exact questions, though I realize now that many exact questions that one tries to think on spot on abstract matters are easily doxa (least based on doxa) and writing questions specifically to know to ask them when one (not personally—in general) finds the right person to ask them, seems like a right approach... for question asking!
Damn the planet, internal combustion for the profit.
1) Charging complexity at Hertz, turnaround time for vehicles that are not fully charged. 2) Body Repairs. Tesla is still notorious for bad repair lead times and costs. 3) 2021 was near peak Tesla pricing.
edit just to add: This is much less of a problem for individual owners; I know people who are still happy with their Teslas, and a single person needing a single replacement car while theirs is awaiting repair is not a big deal. But a car company needing a thousand replacements while a thousand cars are sitting in storage is pretty bad for them.
Further, these were relatively early model 3 with not great initial quantity, and Hertz had a bad operational experience for various reasons that are causing them to unload a bunch all at once.
Finally, Musk’s antics are arguably causing brand damage.
All of these impact resale value.
It's really amazing to see.
I bought my Model 3 Performance in 2019 for ~$57K. If I were to buy today, it'd be $56K. Now, a $1K drop doesn't seem like a lot, but there's been a lot of inflation in the last 5 years, and the M3P today has a couple newer features that mine doesn't have, like a power lift trunk, heated steering wheel, adaptive suspension, a screen for the rear seats, and faster acceleration.
Accounting for inflation alone, the M3P today should be costing ~$70K. With all the added features, it really should be $75K. But it's only $56K.
https://www.tesla.com/blog/what-you-need-know-about-federal-...
It is more about what didn't change. Tesla hasn't changed, at least it has not kept up with the times. For those who want them, there are better/cheaper/more reliable electric cars on the market. Tesla's answer to the new market is largely just more of the same. Except the Tesla pickup, which was new but also just plain horrible. That fiasco has seriously tarnished the brand.
I, for one, bought a used electric car recently for over half off the MSRP and it’s been an excellent car. It’s quiet, it’s fast, if I sit in my garage for 5 minutes when I arrive and answer a text message blowing the air conditioning that’s fine. I even just charge with the 120V outlet. But if you don’t have the ability to charge at home or work, it’s going to be more annoying than visiting a gas station, so likely better to stick with ICE for now.
In America? I thought Uncle Sam put a stop to that.
The reason why rental cars are always "generally new" is because they make the most profit selling their cars when they are 1-2 years old.
Before 2020, Teslas kept their value and even appreciated. This was an unsustainable fluke due to high demand and low supply of EVs. (I know someone who sold their 1-year-old Tesla for a profit.) Given how car rental companies work, a fleet made of cars that hold their value or appreciate is ideal.
In 2021 this changed overnight, and clearly Hertz bet more than they should. I own two Teslas and, if I ran a car rental company, I would have had customer demand drive my transition over to EVs. (I've never rented an EV when traveling.)