A Hertz Tesla electric vehicle is displayed during the Hertz Corporation IPO at the Nasdaq Market site at Times Square in New York City on Nov. 9, 2021.BRENDAN MCDERMID/Reuters
When Hertz Global Holdings Inc. HTZ-Q announced in mid-January that it is selling off a third of its electric vehicles, its reasons for the move landed like a flurry of punches to an EV owner’s gut.
Some of the vehicles suffered from poor residual value due to Tesla price cuts (ooff!), were involved in more accidents than gas-powered cars (bam!) and they were costly to repair (awkk!). Perhaps most troubling, Hertz said demand for EVs was lower than expected (waaah!).
The car rental company announced in 2021 bold plans to electrify its fleet. But with about 20,000 of its EVs about to arrive at U.S. used-car lots, these plans appear to be in tatters.
The reversal arrives at an awkward time for the EV industry. Some legacy auto manufacturers, including Ford Motor Co. F-N and General Motors Co. GM-N, are scaling back their own lofty EV sales goals.
Demand, they are discovering, is soft because consumers are facing high borrowing costs. Prospective buyers also may be worried about inconsistent charging infrastructure and concerned by the limited range EVs can travel on a single charge. Reports about frozen charging stations during a cold snap this winter in Illinois didn’t help their appeal among drivers considering making the switch to electric.
None of this is good news for EV enthusiasts, who are counting on widespread adoption to accelerate the expansion of charging networks. But does Hertz’s shift signal collapsing interest in EVs? At worst, it’s a hiccup near the start of a monumentally complex energy transition.
EVs comprised 7.6 per cent of U.S. sales in 2023, according to auto services company Cox Automotive. That’s up considerably from 5.9 per cent in 2022, but suggests that today’s drivers are largely unfamiliar with a type of vehicle that can be overwhelming to the uninitiated.
When I bought my EV, a Hyundai Ioniq 5, nearly two years ago, I faced a steep learning curve. Everything from starting it, to charging it, to adjusting its regenerative braking features sent me manically flipping through the owner’s manual in search of answers. It didn’t take hours to gain confidence. It took weeks.
It can be hard to take your eyes off the battery’s state-of-charge, which tells you how much range is remaining, without getting worried. EVs are also heavier than gas-powered cars and they deliver the sort of acceleration that can slap the back of your head against the headrest, which could explain why Hertz said EVs are involved in more collisions than gas-powered rentals.
I’ve always felt comfortable in my EV, despite nagging uncertainties at the start. But if I had been introduced to the vehicle with a short-term rental – perhaps while on vacation far from my home turf and immersed in another language – I’m sure I would have suffered at least one meltdown.
My advice for anyone who needs to rent a car, but feels nervous about taking the leap into the EV world: Stick with a gas-powered rental for now.
You will save yourself from a learning experience that involves downloading new apps, finding charging stations and discovering that an EV’s real range is affected by the vagaries of speed, terrain and temperature. Given tepid demand for EV rentals, I’m guessing that many drivers feel the same way.
Even today, with 24,000 kilometres of EV bliss on my odometer – no battery uh-oh moments and a ballpark estimate of $2,500 in net gas savings – I would think twice before renting a battery-powered car away from home.
The challenge of dealing with a different charging network in an unfamiliar location might not be worth the hassle right now, when EVs are still a novelty outside of hotbeds such as Norway, Quebec and California. Who needs the stress?
I am in no way suggesting that EVs shouldn’t be bought, driven and embraced. They are exceptional: They’re clean, quiet and cheap to operate. I’ll never return to owning a gas-powered car and I have yet to meet anyone who regrets going electric.
I’m merely arguing that troubling signals from the rental market might not mean a whole lot elsewhere.
Indeed, EV sales are grabbing significant market share, aided by policy incentives and sales mandates. By 2026, battery electric vehicles and plug-in hybrids will account for 42 per cent of European new passenger vehicle sales and 52 per cent of sales in China, according to BloombergNEF, a division of Bloomberg LP that provides research and analysis on the energy transition.
The United States is a notable laggard. But even there, EVs will account for a substantial 28 per cent of vehicle sales by 2026.
Meanwhile, sales of vehicles with internal combustion engines, despite Hertz’s intention to replace some of its EVs with gas-powered cars, have begun a long-term decline. BloombergNEF estimates that, by 2026, sales of gas-powered cars will be 39 per cent below their peak in 2017.
No one is suggesting that the transition to EVs is going to be perfectly smooth, though.
“Many EVs remain too expensive. Automaker targets could also stymie market growth. Another concern we’ve had is the lack of public charging infrastructure build-up,” Corey Cantor, an electric vehicle analyst at BloombergNEF, said in an e-mail.
Even so, near-term setbacks aren’t likely to affect the rise of EVs over the longer-term, especially as cheaper models emerge and the charging infrastructure improves.
When rental car companies can’t keep up with demand for EVs, the transition from gas-powered cars will no longer be under way. It’ll be over.