Car rental operator Hertz (HTZ) reported it lost another $200 million due to its EV gamble.
In its first quarter earnings report, Hertz said it “upsized” its prior EV fleet drawdown plans by an additional 10,000 EVs, which led to the company incurring a $195 million charge to vehicle depreciation for writing down the value of EVs held for sale.
The company previously said it would sell off 20,000 EVs from its fleet, meaning it will now dispose of 30,000 EVs in its fleet through the end of 2024. Add today’s charge to the $245 million write-down taken in Q4, and the company has now lost $440 million on its EV gambit.
Hertz’s EV fleet — which once stood at 60,000 EVs, will be cut down to half that at 30,000 EVs. A third of Hertz’s EV fleet was from Tesla (TSLA), with the rest coming from Polestar (PSNY), Volvo (VLVLY), and Chevrolet (GM).
For the quarter, Hertz reported an adjusted loss of $1.28 a share, wider than the $0.44 loss analysts were expecting. Hertz reported an adjusted net income loss of $392 million, more than double the $147 million loss expected.
Hertz stock was down 20% in midday trading.
Hertz’s depreciation per unit (DPU) soared to $592 in the first quarter, jumping from the $498 it saw last quarter and more than double the $253 it reported in Q1 last year. Hertz blamed the deterioration in DPU on losses from the sales of gas-powered vehicles as well as on losses from the market value of EVs in its fleet and from the disposition of other EVs.
There weren’t just financial costs to Hertz’s EV bet. Last month, Hertz’s then-CEO Stephen Scherr, who spearheaded the plan to go all in on EVs, was replaced by Gil West, former COO of GM’s Cruise autonomous unit and, prior to that, COO of Delta Air Lines.
“Fleet and direct operating costs weighed on this quarter’s performance,” Hertz CEO Gil West said in a statement. “We’re tackling both issues — getting to the right supply of vehicles at an acceptable capital cost while at the same time driving productivity up and operating costs down.”
Hertz was an early adopter of EVs, announcing in 2021 that it would buy 100,000 Teslas in a marketing campaign starring former NFL quarterback Tom Brady. At the time, Hertz, which was only a few months out of bankruptcy, saw its stock jump 10%, with Tesla shares jumping in sympathy. Tesla went on to top $1 trillion in market capitalization for the first time.
Hertz also struck a deal with Polestar in February 2022 to buy 65,000 of its EVs, though Hertz informed Polestar in February 2023 that it would be pausing future purchases of its EVs.
While Hertz is paring back its EV offerings in its fleet, EV sales are still growing at the retail level, although at a slower pace. GM CFO Paul Jacobson said as much this week following the automaker’s earnings report, claiming that EVs were still popular among its retail customers, but fleet operators, such as large corporations, government entities, and car rental chains, are cutting back purchases.
“We’ve obviously seen a lot of softness in fleet, particularly on the rental side for EVs, but we see [retail] customers responding,” Jacobson said.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
Read the latest financial and business news from Yahoo Finance
Source: finance.yahoo.com