Hertz Global Holdings (HTZ) -), the U.S. rental car giant, is planning to dump around a third of its global fleet of electric vehicles amid a slump in resale prices and a surge in repair costs.
The group said it would sell around 20,000 EVs this year and reinvest the proceeds to buy traditional gas-powered cars. Hertz said EVs currently comprise around 11% of its overall fleet, and the sales add around $245 million in depreciation expenses to its fourth-quarter earnings.
Hertz, which had earlier stated a goal of having EVs account for around 25% of its global fleet by the end of this year, has agreements in place to buy around 100,000 cars from Tesla (TSLA) -) and a further 175,000 from General Motors (GM) -).
However, today's move could put those plans into question as resale values for EVs continue to slide amid ongoing price cuts for new vehicles from Tesla and delayed schedules for ramping-up EV production by GM and Ford (F) -).
"The Company expects this action to better balance supply against expected demand of EVs," Hertz said in a Securities and Exchange Commission statement. "This will position the Company to eliminate a disproportionate number of lower-margin rentals and reduce damage expense associated with EVs."
"The Company continues to implement a series of initiatives that it anticipates will continue to improve the profitability of the remaining EV fleet," the statement added. "These initiatives include the expansion of EV charging infrastructure, growing relationships with EV manufacturers, particularly related to more affordable access to parts and labor, and continued implementation of policies and educational tools to help enhance the EV experience for customers."
Hertz shares were marked 4.05% lower in mid-day Thursday trading following news of the EV sales to change hands a $8.97 each, a move that extends the stock's six-month decline to around 53%.
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