AFP, April 26 (Editor Zhou Ziyi) American car rental operator Hertz (Hertz) is facing huge losses. Although the company had previously anticipated a bad first quarter, the results seemed worse than expected: on Thursday (April 25), the company reported an adjusted net loss of $392 million for the first quarter.

Although demand for rental cars is indeed increasing, Hertz said that the devaluation of electric vehicles has hit its electric vehicle fleet, which is mainly composed of Tesla cars.

Hertz claims in this quarterly report that electric cars are unreliable and more expensive than fuel-hungry cars.

The electric car dilemma

Earlier this year, due to high maintenance costs, Hertz decided to drastically reduce the size of its electric vehicle fleet in the US and plans to sell about 20,000 electric vehicles. In the first quarter earnings report, Hertz announced that it will sell an additional 10,000 electric vehicles to the initial electric vehicle downsizing plan, which means that it will handle a total of 30,000 vehicles by the end of 2024, directly “halving” the size of the original 60,000 tram fleet.

This caused the company to incur $195 million in vehicle depreciation expenses in the first quarter by writing down the value of electric vehicles being sold. Hertz added that the average monthly depreciation cost per vehicle was 592 US dollars, up from 498 US dollars in the previous quarter, and more than double the 253 US dollars in the first quarter of last year, which is considered very high in the industry.

According to reports, one-third of Hertz's electric vehicle fleet comes from Tesla, and the rest are from Polestar (Polestar), Volvo, and Chevrolet.

Hertz CEO Gil West said in Thursday's earnings report, “Fleet and direct operating costs have dragged down this quarter's results, and we are trying to provide the right vehicle supply at an acceptable cost of capital while increasing productivity and reducing operating costs.”

West, who took office on April 1 of this year, was called in to save the “sinking” company. West was previously the chief operating officer of GM's driverless taxi division.

Hertz's difficult times reflect the plight of the electric vehicle industry and Tesla's slowing sales amid increased competition and security issues.

By Thursday's close, Hertz shares were down nearly 20%. Since this year, the stock has fallen by more than 40%. Currently, it is reported at 4.68 US dollars per share, and its market value has been reduced by almost half from six months ago.

Betting on Tesla ended in failure

Although Tesla is now a “thorn in the eye” of Hertz, the two had a very “close” relationship a few years ago.

At the beginning of 2020, the COVID-19 pandemic hit the tourism industry hard and caused Hertz to go bankrupt. After more than a year of restructuring, Hertz announced that it had successfully stepped out of bankruptcy protection.

Within a few months of getting out of bankruptcy, Hertz ordered 100,000 Tesla cars to join its fleet and partnered with Uber to supply up to 50,000 Tesla cars to its Uber drivers within two years through a Hertz lease agreement. This large order has also propelled Tesla into a company worth more than 1 trillion dollars.

Hertz had an ambitious goal of 25% of electric vehicles by the end of 2024. Mark Fields, Hertz's interim CEO at the time, also said bluntly, “Our approach was very strategic and very careful because we wanted to disrupt ourselves and disrupt the entire industry.”

However, Hertz's hopes for electric vehicles have changed since the end of 2023. At that time, Tesla had already begun to cut prices drastically to deal with the dilemma of slowing customer demand for electric vehicles. Stephen Scherr, the then CEO of Hertz, was already dissatisfied, saying that Tesla's repair costs were double the cost of refueling a car.

In January of this year, Hertz announced it would sell 20,000 electric vehicles and buy traditional gasoline-powered cars to replace them. However, bad luck continued after that. At the end of January, Tesla recalled nearly 200,000 cars with autonomous driving functions, saying there might be safety hazards.

Although Hertz is still feeling the popularity of electric vehicles, analysts believe that these potential problems stemming from electric vehicles have actually been in the works for years.

Daniel Ives, an analyst at Wade Bush Securities, also stated in March of this year that “the execution and marketing of electric vehicles is a complete horror show.”