EV depreciation burn intensifies for Hertz

Hertz’s big gamble on 100,000 Teslas keeps costing the rental company lots and lots of money.

Driving the news: Hertz reported a Q2 loss of $1.44 per share and $2.35 billion in revenue for the quarter – weaker than analysts expected.

• The rental giant said that vehicle depreciation costs increased to $706 million, driven by plummeting used EV values.

• Per-unit depreciation improved to $600 a month, but still more than three times higher than a year ago.

Flashback: Earlier this year, Hertz saw the writing on the wall and decided to offload a large chunk of the Tesla fleet it committed to in 2021 – around 30,000 units.

Of note: Used cars are typically sold to dealers at wholesale auctions or sold consumer-to-consumer via private party transactions but Hertz lists its used rental vehicles directly on its website.

Moving forward: Although the used vehicles are being sold at a loss, Hertz has since decided to speed up the timeline of disbanding its Tesla fleet. The company hopes to complete its “refresh” in 2025 at which time, per-unit depreciation will be closer to $300 a month. 

• "We are accelerating our fleet rotation, enabling us to lower our depreciation and maintenance cost, improve our customer experience and increase pricing power," said CEO Gil West.

Zooming in: Used EV values continued to decline more than the market overall. In June, values were down 16.6% year-over-year, while non-EVs were down only 9.5% for the same period. This steep loss in residual value is taking a heavy toll on fleet operators who were early EV adopters like Hertz.

• Why the steep decline in values? Tesla’s price cuts. As the leading EV maker in the U.S., Tesla is often a bellwether for trends shaping the new and used EV markets.

• Tesla has been grappling with declining demand as several economic headwinds temper car buyers' purchasing power.

Bottom line: One company’s pain is a car buyer’s gain. Thanks to depreciation, used EVs are some of the cheapest cars on the market today.

Go deeper: Used car market opens door to broader EV adoption

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