Benzinga - by Anan Ashraf, Benzinga Editor.
EV giant Tesla Inc (NASDAQ:TSLA) and its CEO Elon Musk continue to promote the experience of renting the company’s vehicles through Hertz Global Holdings Inc (NASDAQ:HTZ) as a prime opportunity to test them before making a purchase. There’s just one problem: Hertz is currently looking to reduce its EV fleet.
What Happened: Tesla highlighted the advantages of renting a Tesla via Hertz on X, emphasizing the complete experience of the Tesla app, convenient fast charging, and ample storage space. Musk himself encouraged the idea, tweeting, “If you want to try a Tesla for a few days, you can rent one @Hertz.”
If you want to try a Tesla for a few days, you can rent one @Hertz https://t.co/NPDYB7496M— Elon Musk (@elonmusk) November 22, 2023
However, Hertz announced its intention to scale back its EV fleet, especially Tesla vehicles, during its third-quarter earnings call in October. The company cited higher collision and damage repair costs for EVs compared to traditional vehicles, impacting results in the last quarter and negatively affecting EBITDA.
What Hertz Said: Hertz CEO Stephen Scherr explained that the decline in the Manufacturer’s Suggested Retail Price (MSRP) of EVs, particularly Tesla, throughout 2023, led to a lower fair market value for Hertz’s EVs compared to the previous year. This decrease resulted in larger losses and higher burdens in the event of salvage, negatively affecting EBITDA. Scherr emphasized that if the entire fleet were traditional combustion engine vehicles, the third-quarter EBITDA margin would have been significantly higher.
Hertz expressed its plans to purchase EVs from other manufacturers with established part supply networks at lower price points. Although the company initially aimed for 25% of its fleet to be electric by the end of 2024, Scherr clarified that it’s not a rigid timeline.
Benzinga’s Take: Tesla and Musk appear unaware or undeterred by Hertz’s plans to reduce its Tesla fleet. It’s possible they are capitalizing on the time remaining with Tesla vehicles in the Hertz fleet.
"Well, let me just say at the start, there's no world in which we're going to buy Teslas to achieve a zero EBITDA margin," Scherr said. Unless the EBITDA margin generated on a car will be positive and attractive, Hertz will not be buying it, he added.
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