Hertz is replacing its entire fleet of electric vehicle (EV) rentals with gas-powered cars, the company said last week.
Citing collision and damage expenses, the car rental giant said it will be selling its 20,000 EVs — including Teslas — at heavily discounted prices and replacing them with internal combustion engine (ICE) vehicles.
“Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter,” Hertz said in a regulatory filing Thursday.
The decision is seen as a major reversal of a recent company strategy aimed at converting 25% of Hertz’s cars to EVs by the end of this year, reports Reuters.
Last year the company boasted it was recognized by the Biden administration for its “efforts to expand access to electric vehicles across the country.” Hertz promised to “electrify” customers’ travels, claiming that demand for EV rentals was “growing.”
But market appetite for EVs has been plummeting. Last month Ford cited declining demand as the reason for its decision to halve monthly production of its flagship EV, the all-electric F-150 Lightning pickup truck. The company instructed its suppliers to arrange for an expected monthly output of 1,600 Lightnings at its assembly plant in Dearborn, Michigan, a 50% cut from its original goal of 3,200 units.
Also because of decreasing consumer demand in the EV market, Ford has decided to halt $12 billion in EV investments and postpone further manufacturing milestones. The carmaker projected a $4.5 billion deficit for 2023, primarily as a result of losing $32,000 on each EV sold in the second quarter.
In January 2022, Kumar Galhotra, who currently holds the position of COO at Ford, confidently stated there is a strong demand for an all-electric F-150 among consumers. However, Ford CEO Jim Farley himself said in August that he encountered a “reality check” during his road trip across many western states in the F-150 Lightning.
“Charging has been pretty challenging,” Farley remarked, saying that in one instance, it took a total of 40 minutes to charge the battery of the vehicle, resulting in a mere 40 percent increase in its charge. “It was a really good reality check — the challenges of what our customers go through.”
Toyota CEO Akio Toyoda revealed in 2022 that there is a “silent majority” of automakers who oppose an EV-only future but are reluctant to voice their disapproval.
In a November letter to Joe Biden, more than 4,000 car dealerships cited the lack of consumer demand for EVs. The dealers were protesting a rule by the Environmental Protection Agency (EPA) which would require that two out of three cars be electric by 2032. The House of Representatives last month voted to block the EPA rule.
One of the reasons for falling demand is, as Hertz noted, the costs of collisions and damages.
Authorities are recommending additional safety precautions for EVs in response to an increasing number of reports of EV batteries exploding after collisions. In the UK, repair shops are required by government guidelines to “quarantine” EVs that sustain even minor battery damage, meaning that the EVs must be kept at least 15 meters apart from other vehicles. To reduce the risk of combustion, government representatives have proposed requiring wider parking places for EVs. They have also recommended installing thermal monitoring cameras to spot EVs that are about to experience a “thermal runaway.”
Once EVs combust it can be difficult to put out the flames. Some statistics show that after the initial combustion, 13% of electric vehicles suffer another fire.
These safety issues and their ensuing costs have also caused an insurance crisis in which several car insurers are either tripling premiums or denying insurance for EVs altogether.
Average insurance rates for EVs have increased 72%, the Telegraph recently reported, compared to a 29% increase for gas-powered vehicles. Some EV owners are being offered premiums of more than $120 a week, while others are receiving quotes twice or even three times higher than the previous year.
Some car insurers have made the decision to stop insuring EVs completely. John Lewis Financial Services ceased providing insurance coverage for electric vehicles in September, whereas Aviva only recently reinstated their insurance offerings for the Tesla Model Y after previously discontinuing them earlier last year.
But skyrocketing insurance premiums are only one of the rising costs for EV owners.
According to a survey released in January 2023, “[t]ypical mid-priced ICE (internal combustion engine} car drivers paid about $11.29 to fuel their vehicles for 100 miles of driving. . . . That cost was around $0.31 cheaper than the amount paid by mid-priced EV drivers charging mostly at home, and over $3 less than the cost borne by comparable EV drivers charging commercially.”
The cost disparity becomes much more pronounced when considering electric vehicle (EV) drivers who require frequent recharging at charging stations, which is expected to cost $14.40 every 100 miles.
EVs continue to increase in cost also due to the fact that certain governments are looking to impose extra charges on EV users in order to make up for the revenue lost from fuel taxes.
A number of US states that advocated for “sustainable” and “environmentally friendly” vehicle alternatives are implementing extra registration fees for owners of electric vehicles (EVs). Illinois Democrats, for example, proposed implementing a $1,000 yearly registration charge for electric vehicle (EV) owners as a means of recovering the revenue lost from fuel taxes. Following criticism, the Prairie State ultimately decided to impose a $251 yearly registration cost on electric vehicle (EV) owners, which is $100 higher than the fee for owners of internal combustion engine (ICE) vehicles.
Approximately 19 states have implemented an additional yearly registration cost for electric vehicles (EVs), which varies from $50 to $235. Notably, states like Michigan and Georgia have set their fees towards the higher end of this range.
Even for EV owners willing to pay extra to “fight climate change,” however, EVs continue to disappoint.
Volkswagen announced in July that its e-Golf would need to be driven for 77,000 miles in order to surpass the environmental effect of its fuel-powered rivals. The figure overshoots Volvo’s own 2021 prediction that EVs only achieve environmental benefits after covering a distance of 30,000 to 68,400 miles, which generally takes around four to nine years.
Based on Volvo’s data, EVs are found to be 70% more environmentally detrimental compared to ICE cars, primarily due to the impact of their batteries. EV batteries require heavy cobalt and lithium mining, which is undertaken in Africa and South America and creates large greenhouse gas emissions.
