Hertz, the well-known rental car company, is having significant financial difficulties after dramatically overestimating consumer demand for electric vehicles (EVs) in its fleet, according to a new report from Morningstar Research.
The company’s aggressive adoption of EVs has not been met with the anticipated level of customer interest, leading to substantial losses and a significant impact on its stock performance.
The company’s recent first-quarter earnings report revealed a substantial loss, largely attributed to higher operating costs and its miscalculation of EV demand.
Hertz has decided to expand its EV disposition plan, selling 30,000 EVs in 2024 instead of the initially planned 20,000, a 50% increase. This move has resulted in substantial charges to write down the value of the EVs held for sale, directly impacting Hertz’s bottom line.
The financial repercussions of this overestimation are evident in Hertz’s quarterly results.
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The company reported a net loss of $186 million, a severe contrast to the net income of $196 million in the same period last year. The loss per share was significantly higher than analysts’ expectations, underlining the severity of the situation.
Hertz reported a loss that was nearly three times worse than analysts expected as it accelerated sales of electric vehicles to reduce its fleet of Tesla models that have weighed on profits for the past year. https://t.co/yVyORgGv9N
— Bloomberg (@business) April 25, 2024
Hertz’s struggles can be largely attributed to the overestimation of consumer demand for electric rental cars.
The company’s experience suggests that consumer interest in electric rental cars may not be as strong as initially anticipated, and that a forced transition to EVs could prove challenging for rental car companies.
As a result of these missteps, Hertz’s stock performance has suffered significantly, with shares falling to an all-time low and experiencing a substantial year-to-date plunge.
The company’s struggles are not unique, as rival Avis Budget Group has also experienced a similar drop in its shares over the same period.
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Hertz’s financial woes can be largely attributed to its overestimation of consumer demand for electric vehicles in its rental fleet. The company’s aggressive adoption of EVs has not been met with the anticipated level of customer interest, leading to substantial losses and a significant impact on its stock performance.
