Hertz to move EVs into ride share division
The firm is battling to get repair bills for its Uber drivers down
US rental car heavyweight Hertz is to begin moving EVs from its leisure fleet to its ride share fleet over the next few quarters to alleviate oversupply of the vehicles in the former.
The leisure fleet is Hertz’s standard rental fleet, whereas the ride share fleet is a joint venture (JV) with ride hailing service Uber, which allows Uber drivers to hire Hertz vehicles by the week.
Earlier in 2023 Hertz had slowed the supply of EVs into its ride share fleet because of higher incidences of damage among EV ride share drivers that was hurting the bottom line.
“With hindsight, this left leisure over-fleeted with EVs,” says CEO Stephen Scherr as his firm reports Q3 results. “As a result our total revenue per transaction day (RPD) for our electric vehicles in leisure dropped which contributed to the lower RPD performance for the company in the quarter.”
Hertz's total RPD fell from $67.48 in the year-ago quarter to $62.46 in the third quarter of 2023.
In previous quarters, collision and damage repairs on EVs were running at about twice the levels associated with comparable ICE vehicles, leading the firm to divert vehicles to its leisure fleet. But the firm has now improved its processes to underwrite drivers in the ride share scheme and is also targeting more experienced drivers that are less likely to have accidents with the scheme.
“We have activated a comprehensive end-to-end damage program from underwriting to collections,” says Scherr. “We are also developing additional easy-to-use educational tools on EV functionality. But perhaps most importantly, we are working with the relevant OEMs to improve outcomes based on vehicle performance.”
The total EV fleet represents about 11pc of Hertz’s total fleet, with around 80pc of these cars manufactured by Tesla.
"There is quite a bit of the cost element that relates to the Teslas as opposed to others. Our focus and our work with Tesla is to look at the performance of the car so as to lower the risk of incidents of damage,” says Scherr.
Over time the share of EVs that are Teslas will fall. Hertz has agreed to purchase 175,000 EVs from Detroit automaker GM over the next five years.
“There are elements of those cars that will likely speak to lower incidence of damage, but I think perhaps more importantly, it will speak to a lower cost of parts and labour,” says Scherr, noting that GM has a more mature parts-supply network and consequently lower repair costs.
Hertz began expanding its ride share business from the US to Europe earlier this year, and has seen a 50pc growth in that segment of the business since the start of the year. And this part of the business has a much higher demand for EVs than the leisure segment, with around 50pc of drivers wanting EVs.
“That demand is on the part of the driver… because the net economics to that driver, both by virtue of renting a car from Hertz around fuel and around incentives that are given to them by the rideshare or mobility companies, yields a better economic outcome from them,” Scherr says.