Rental car giant Hertz (HTZ) -) is reducing its electric vehicle fleet by about a third, with plans to sell around 20,000 EVs, including Teslas, throughout the year.
The move comes on the heels of a year that saw record levels of EV adoption amid cooling consumer demand, and just a few years after Hertz announced plans to purchase 100,000 EVs from Tesla, 175,000 from General Motors (GM) -) and 65,000 from Polestar.
The rental car company — which before planned to have EVs account for 25% of its global fleets — said that it plans to reinvest proceeds from the EV sales into gas-powered cars.
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"It's really to respond to the reality, which is we're trying to bring supply in line with demand," CEO Stephen Scherr told CNBC. "This is about the numbers, it's about the financial performance and the operational integrity of the business."
Scherr said in the wake of the extreme EV price cuts led last year by Tesla, Hertz's own Teslas have depreciated in value more quickly.
"That's obviously a cost to the business. We need to face that reality," he said.
Hertz said in a filing that the sales will add around $245 million in depreciation expenses to its fourth-quarter earnings.
Before the sales began, EVs made up 11% of Hertz's fleet. The company expects the reduction in EVs to lower its operational expenses and depreciation costs, driving up to $300 million in incremental free cash flow aggregated over 2024 and 2025.
"At some point, the reality of EVs and Teslas being the best-selling car will render them the best rental car. It's not yet," Scherr said.
Shares of Hertz fell following the announcement, tumbling another 4.9% by midday Friday. Shares of Tesla (TSLA) -) likewise fell, falling another 4% by midday Friday.
Wedbush Securities analyst Dan Ives said the move represented more of a problem for Hertz than for Tesla.
"It's a black eye for Hertz, not for Tesla. I think they clearly miscalculated in terms of the way it's going to play out," Ives told CNBC. " I don't view it as much of a negative for Tesla; I think the way Hertz went about it, from the marketing of the vehicle to the distribution was a disaster."
Contact Ian with tips via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
Related: Hertz to sell 20,000 EVs, buy gas-powered vehicles amid rental-demand slump
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