The CEO of Hertz Global Holdings, has handed in his key to the executive washroom. He’s stepping down after a disastrous move that saw the daily rental company add 100,000 Teslas to its fleet. The EVs didn’t prove as popular as expected with customers – but they did wind up experience far more repairs than anticipated. Adding insult to injury, Tesla’s big price cuts meant massive losses for Hertz when it tried to sell the vehicles off.
Hertz CEO Stephen Scherr steps down and will be replaced by…
Hertz Chief Executive Officer Stephen Scherr will retire at the end of the month, the rental-car company set to replace him with Gil West, a former executive with General Motors Cruise robocab subsidiary.
The 59-year-old Scherr joined Hertz several months after it emerged from bankruptcy in June 2021. He previously spent three decades with Goldman Sachs. As Hertz CEO he made headlines in November of that year by announcing plans to purchase 100,000 battery-electric vehicles from Tesla for fleet operations in the U.S. and other markets. Hertz later announced it would add even more EVs from Polestar and GM.
But the project quickly went off the rails due to lackluster demand by renters and high repair costs. Complicating matters, price cuts by Tesla hammered the residual value of those EVs when Tesla began cutting prices last year.
…Gil West, a former executive with GM’s Cruise subsidiary.
From bad to worse
Hertz has spent years struggling to rebuild its once-lofty position as the rental car industry leader. Hit hard by the COVID pandemic – which brought the global travel industry to its knees – the company filed for bankruptcy in May 2020 when it couldn’t meet a $400 million payment.
Many analysts thought Hertz had emerged from Chapter 11 the following year in a strong position. Among other things, it had generated substantial cash selling off much of its vehicle fleet while under bankruptcy protection, giving it a sizable war chest.
With Scherr taking charge, Hertz looked for ways to reposition itself and placed a big bet on electrifying that fleet.
A bet goes bad
Hertz hired Super Bowl-winning quarterback Tom Brady hype the availability of EVs at Hertz.
“The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America,” it said in a November 2021 statement.
At the time, only a handful of mainstream car companies, including Alamo, Turo and, in Europe, Sixt, offered EVs 00 and in limited numbers.
Hertz ordered 100,000 from Tesla – at the time a substantial share of the EV manufacturer’s production run. Months later, Scherr said Hertz would add more EVs to the fleet, including vehicles from Polestar, the Volvo spin-off.
To build awareness, the rental company turned to Tom Brady, the seven-time Super Bowl champion, to promote the move.
More EV News
- Want a Good Deal on a Tesla – Buy a Used One From Hertz
- EV Owners Increasingly Depend on EV Fast Chargers
- Tesla Gets $100 Million Order – for Fast Chargers
A triple whammy
Even with Brady’s high-profile ad campaign, demand proved to be far less than anticipated. While revenues were lower than projected, repair costs were significantly higher.
Making matters worse, Tesla began cutting prices in late 2022, further reducing the MSRP on key models like the Models 3 and Y the following year, in a bid to drive up demand and trip up new entrants into the EV market.
But while that helped Tesla drive up its share price – at peak topping $1 trillion – it meant Florida-based Hertz would take a heavy hit as it began selling off its EV fleet in the face of plummeting residual values.
The company last month missed its quarterly earnings target after announcing a $245 million charge related to the EV sell-down. The sell-off began in December and, since the beginning of this year, shares traded under the ticker HTZ have lost nearly a third of their value. The downturn accelerated late Friday as news of Scherr’s departure was announced. The stock has tumbled again in early Monday trading.
We are renting a car in San Diego next month from Hertz, which I still think is the best rental car company. We picked the cheapest car, since we won’t be driving much. What was the cheapest? A Polestar 2. Yes, even cheaper than whatever sub-compact crap mobile would normally occupy that space.