It seemed like a good idea at the time. Now we know better.
hertzwhich was hit by bankruptcy and the pandemic, announced plans to buy 100,000 Teslas in late 2021 splashy move This has certainly helped Elon Musk’s electric vehicle maker, whose market cap topped $1 trillion for the first time.
Hertz also saw its market value rise, and the car rental giant hired NFL star Tom Brady to show off its new Tesla fleet.
“How do we democratize access to electric vehicles? This is a very important part of our strategy,” interim CEO Mark Fields said at the time. “Tesla is the only manufacturer that can produce electric vehicles on a large scale.”
But Hertz paid close to list prices for the Teslas, rather than asking for a big discount like car rental companies often do. This decision would come back to bite.
Last year, Musk’s electric vehicle maker cut prices across its entire lineup to boost sales. This not only upset individual customers who had recently purchased a Tesla at a higher price, but also reduced the resale value of Hertz’s used electric vehicles.
“Increased cost” of electric vehicles
In January this year, the rental giant announced it was selling 20,000 electric vehicles, citing costly depreciation, weak demand and expensive repairs. The company took a $245 million hit and suffered its biggest quarterly loss since the pandemic.
“The increased costs associated with electric vehicles remained,” Hertz CEO Stephen Scherr said at the time. “Efforts to combat it proved more difficult.”
This week Hertz announced that Scherr would be replaced by Gil West, former COO of General Motors’ cruise robotaxi division. While Scherr took over the company after the Tesla deal, Hertz continued to focus on electric vehicles under his leadership, placing large orders for them with GM and Polestar.
The ill-fated EV push followed a difficult period for Hertz, culminating in billionaire activist investor Carl Icahn selling his sizable stake in the car rental company in 2020, just days after it filed for bankruptcy. In 2014, Icahn began purchasing his stake in Hertz, which presented difficulties. He called Hertz “A great brand” that he hoped would “return to its former glory,” and three of his allies soon had seats on the board while the search for a new CEO began.
After selling his stake, Icahn said, “Yesterday I sold my stock position at a significant loss, but that doesn’t mean I don’t continue to believe in the future of Hertz.”
The following year, the company announced its decision to buy Teslas. Now it welcomes another new CEO, once again tasked with turning things around.