On Thursday, shares of Hertz Global plummeted 24%, marking their biggest one-day percentage drop on record. The company reported a larger-than-expected quarterly loss, underscoring its difficulties in the EV rental business. In response to Hertz’s disappointing results, peer Avis Budget Group also saw a 7% decrease in its shares.
Hertz, headquartered in Estero, Florida, disclosed that it incurred a $588 million expense in vehicle depreciation costs during the quarter, with $195 million related to EVs held for sale. Newly appointed CEO Gil West attributed the weak quarterly performance to fleet and direct operating costs. Excluding certain items, the company reported a loss of $1.28 per share, significantly higher than the expected loss of 44 cents per share on Wall Street.
As a result of weak demand and high repair costs, Hertz announced plans to streamline its operations by selling an additional 10,000 EVs. This brings the total planned sales for the year to 300,000. However, despite these efforts to reduce expenses and increase revenue, Hertz has seen its market value drop by around 50% this year.
The challenging economic conditions faced by these rental companies in the EV market underscore the broader struggles of the transportation industry in adapting to changes in consumer demand and operating expenses. As more consumers turn towards sustainable forms of transportation like electric vehicles (EVs), traditional car rental companies are struggling to keep up with changing trends and remain competitive in an increasingly crowded marketplace.
Despite these challenges, Hertz is not giving up on its EV rental business entirely. Instead, it is focusing on improving its operations and reducing costs through strategic initiatives like streamlining its fleet and reducing overhead expenses through automation and digitalization.
In conclusion, Hertz’s disappointing quarterly results have had a ripple effect on both itself and peer Avis Budget Group’s stock prices. The company’s struggles are indicative of broader challenges facing traditional car rental companies as they adapt to changes in consumer demand and operating expenses associated with sustainable transportation options like EVs.