Renting Out EVs
In one of the latest signs that rental companies are pushing into the EV age, Hertz (HTZ) is building out its electric fleet. The company announced it has agreed to purchase around 175,000 EVs from General Motors (GM) within the next five years. This will include EVs from GM’s four main brands: Chevrolet, Cadillac, Buick, and GMC.
For Hertz, it’s an opportunity to differentiate its offerings, while also boosting its ESG credentials with investors. The rental company says it anticipates offering the EVs across its different business lines, including ride-share drivers and corporate fleets, as well as leisure customers and business travelers.
Auto Maker Upside
This isn’t the first step Hertz has taken towards integrating EVs into its fleet. The company announced it would buy 100,000 Teslas (TSLA) last year, and also previously agreed to purchase 65,000 EVs from Polestar (PSNY). The Tesla deal in particular highlighted how rental-company demand can be a major benefit for automakers.
When the transaction closed in October, Tesla’s share price soared, pushing the EV maker’s valuation over $1 trillion. As car companies are trying to scale up production of plug-in cars, bulk orders of this kind are very significant.
Hertz says it’s aiming for one-quarter of its fleet to be electric by the start of 2025. Avis Budget Group (CAR) and Enterprise have expressed similar ambitions.
The economics behind EVs are fairly simple for rental companies, which can help you know what to expect as a consumer. While electric vehicles are more expensive than vehicles with gas-powered engines, they can also be rented for higher amounts. During a July conference call, Hertz told analysts that, at airport locations, Teslas have rented for $30 to $35 more per day than the average rate for premium rentals.
There are some lingering questions and potential challenges, however. A lack of electric chargers in some locations may make renting EVs difficult, especially given the potential for travel across long distances. Of course it’s also possible that people who rent EVs like the experience, boosting their popularity overall.
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