Hertz has decided to halt its procurement of tens of thousands of electric cars from Polestar this year, indicating a setback in its electric vehicle (EV) expansion strategy. The rental giant’s decision follows a significant decline in EV resale values, leading to a reassessment of its electric ambitions.
Shift in Plans:
Initially, Hertz agreed to purchase 65,000 Polestar cars over five years, valued at approximately $3 billion, aiming for EVs to constitute 25% of its rental fleet by 2024. This deal was part of Hertz’s broader initiative to embrace electric mobility.
However, Hertz announced last year that it would sell some of the Tesla cars it acquired due to plummeting EV resale values and unanticipated repair costs, deviating from its original EV targets.
Pause in Agreement:
Hertz approached Polestar’s CEO last autumn, seeking to temporarily suspend their agreement to procure a specified number of EVs throughout 2024.
Polestar agreed to waive Hertz’s obligation to purchase the allocated number of cars for the year, provided Hertz commits to retaining its current Polestar vehicles for a longer duration and refrains from selling them prematurely or at reduced prices.
Future Prospects:
While there is an intention to resume large-scale sales to Hertz in the future, the actual recommencement of sales will be subject to review, potentially starting in 2025.
Hertz’s initial 2022 deal with Polestar signaled growing acceptance of EVs but is now underscored by Hertz’s reevaluation of the market due to recent challenges and uncertainties.
Market Dynamics:
The slowdown in EV sales growth globally reflects consumer skepticism and higher-than-expected prices, leading carmakers like Renault to revise investment plans and delay initiatives.
Polestar, despite selling about 54,000 cars worldwide last year, continues to face significant losses, prompting Volvo Cars to divest its stake in the company to Geely and refrain from further financial injections.
Hertz’s decision to pause its procurement of Polestar electric vehicles highlights the complexities and challenges facing the EV market, particularly amidst fluctuations in resale values and consumer sentiment. The future of EV adoption and rental fleet strategies remains subject to ongoing market dynamics and strategic reassessments.
Source: Adapted from FT.com