Hertz is pumping the brakes on plans to electrify more of its rental car fleet after EV repair costs came in higher than the company anticipated, and after Tesla price cuts reduced the resale value of the majority of electric cars in its fleet by about one-third.
CEO Stephen Scherr said on the company’s third-quarter earnings update on Thursday, “our in-fleeting of EVs will be slower than our prior expectations.”
The rental car company reported lower than expected margins for the period ending September 2023, and the CEO said EV repairs were one challenge. “Our direct operating expenses remained controlled in the quarter as they grew with transaction volume. On a unit basis, we achieved productivity gains across most categories of auto. The exception remained vehicle damage costs, particularly those on our EVs.”
Scherr also said, “MSRP declines in EVs over the course of 2023, driven primarily by Tesla, have driven the fair market value of our EVs lower as compared to last year, such that as salvage creates a larger loss and therefore greater burden.”
Shares of Hertz closed down by around 10% on Thursday at $9.04 following the third-quarter update. Tesla shares also dipped around 3% on Thursday to close at $205.76.
Hertz also disclosed on Thursday that about 80% of the battery electric cars in its fleet are Teslas today. About 11% of Hertz’s entire fleet is comprised of electric cars now. With around 50,000 electric cars in its fleet currently, that means Hertz has around 35,000 Teslas in its fleet now.
That number is far shy of the 100,000 Tesla electric cars Hertz originally said it was ordering from Tesla by the end of 2022.
Hertz Global Chief Executive Officer Stephen Scherr said Hertz is still “committed” to buying 100,000 cars from Tesla and 175,000 EVs from GM, but is not on target to have EVs represent a quarter of its fleet by the end of 2024 any more as previously hoped.
“Our focus and our work with Tesla is to look at the performance of the car so as to lower the risk of incidents of damage,” Scherr said. “And we’re in very direct engagement with them on parts procurement and labor and the like.”
As Hertz buys up more EVs from GM and other automakers down the line, Scherr said on the company’s Q3 call, the company expects those electric vehicles to have a “lower incidence of damage,” and “a lower cost of parts and labor.”
“Remember, in the likes of GM and other OEMs, there’s decades of establishment of a broad national parts supply network. There’s an aftermarket of parts that that is there that is less mature obviously in the context of Tesla,” Scherr said, adding that margins and other EV issues would improve as Hertz looks to “diversify” that part of its fleet.
On October 25, 2021, Hertz first announced plans to grow its fleet of battery-electric vehicles with “an initial order of 100,000 Teslas by the end of 2022.” Tesla hit a $1 trillion market cap for the first time after the Hertz announcement.
A commercial featuring repeat Super Bowl champion Tom Brady, alongside parked Tesla Model 3 electric sedans in a Hertz garage, accompanied the announcement.
Tesla CEO Elon Musk waited until November 2, 2021, a week later, to inform Tesla shareholders in a post on Twitter, the social network he now owns and has rebranded as X, that Hertz had not signed any contract with Tesla for the high-volume order.
Musk frequently says that electric cars require less maintenance than counterparts with internal combustion engines (including plug-in hybrid electrics). That’s a big potential selling point for electric cars, and a reference to items like motor oil, oil filters, engine air filters, transmission fluid, spark plugs and other items requiring annual maintenance or scheduled replacements.
But electric vehicle owners can face unique maintenance needs, as well. Nikhil Naikal, CEO of Kinetic, a startup that is not affiliated with Hertz or Tesla but provides repairs for electric and autonomous vehicles, told CNBC on Thursday:
“The reality of electric vehicles is that they can be 1,000 pounds heavier or more than gas vehicles, and they move faster, with higher torque. Since they’re extremely zippy and heavier, it’s just physics — the ability to overcome inertia so quickly is going to effect their suspension systems, the brakes and steering columns. It’s counter-intuitive, but even with fewer moving parts they are susceptible to requiring more maintenance. They especially require tire-swapping, because the tires wear out more quickly from that high torque and weight.”
But the first full trading week of the month saw stocks caught in November rains.
The S&P 500 and Dow Jones Industrial Average each lost more than 1%, while the Nasdaq Composite shed around 3% — that’s its largest weekly loss since the tech-heavy index slumped 10% in the week ended April 4.
A few months ago, tariffs were the shadows that stalked stocks. Now, it’s fears that artificial intelligence-related stocks are trading at prices disconnected from what the firms are actually worth.
“You’ve got trillions of dollars tied up in seven stocks, for example. So, it’s inevitable, with that kind of concentration, that there will be a worry about, ‘You know, when will this bubble burst?‘” CEO of DBS, Southeast Asia’s largest bank,Tan Su Shan told CNBC.
“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months,” Solomon said Tuesday at the Global Financial Leaders’ Investment Summit in Hong Kong.
That said, a pullback isn’t necessarily bad for stocks. It could even present “buying opportunities” for investors, according to Glen Smith, chief investment officer at GDS Wealth Management.
After all, earnings have been “reassuring” despite worries about tech stocks’ high valuations, Kiran Ganesh, multi-asset strategist at UBS, told CNBC. That means the rain might not last and the rally could find a way to run a little longer.
— CNBC’s Lee Ying Shan, Hugh Leask and Lim Hui Jie contributed to this report.
China rolls back curbs on rare earths. Beijing said Friday that it would suspend some restrictions on exports of rare earth elements. The move follows talks between U.S. President Donald Trump and his Chinese counterpart Xi Jinping on Oct. 30.
Nexperia impasse shows signs of easing. The Chinese Commerce Ministry said in a statement Sunday that it had taken steps to allow exports of certain chips from Nexperia’s China facility. Shares of Nexperia parent Wingtech Technology climbed Monday.
U.S. government on track to end shutdown. The Senate on Sunday night stateside passed the first stage of a deal that would end the shutdown. The procedural measure allows other votes essential to the agreement to be held starting on Monday.
[PRO] Chinese sectors benefiting from AI. Earnings season in the country is underway, and while it’s spotlighting some AI-related sectors that have seen growth of up to 57%, others are facing a decline because of fierce price competition.
Fundraisers and fraudsters are presenting themselves as family office representatives, seeking to dupe gullible investors — and then there are also imposters who are in it just for an “ego boost,” several industry veterans told CNBC.
An information vacuum seems to have encouraged imposters. In many markets, genuine single family offices, or SFOs, are exempt from registering so long as they manage only family money. That privacy norm often makes verification hard, said industry experts.
China has rolled back a number of restrictions on its export of critical minerals and rare earth materials to the United States, in a sign that a trade truce between the world’s two largest economies is holding.
China’s Ministry of Commerce said Friday that it would suspend some export controls on critical minerals used in military hardware, semiconductors and other high-tech industries for a year.
The suspended restrictions, first imposed on Oct. 9, include limits on the export of certain rare earth elements, lithium battery materials, and processing technologies.
The export relaxations follow talks between U.S. President Donald Trump and Chinese President Xi Jinping in Busan, South Korea, on Oct. 30.
Beijing also reversed retaliatory curbs on exports of gallium, germanium, antimony and other so-called super-hard materials such as synthetic diamonds and boron nitrides. Those measures, introduced in December 2024, were widely seen as retaliation for Washington’s expanded semiconductor export restrictions on China.
China classifies such materials as “dual-use items,” meaning they can be used for both civilian and military purposes.
Beyond military applications, these critical minerals are used across the semiconductor industry and other high-tech sectors — sectors at the heart of U.S.-China trade tensions.
Beijing has also suspended the stricter end-user and end-use verification checks for exports of dual-use graphite to the U.S., which were imposed in December 2024 alongside the broader export ban.
China dominates global production of most critical minerals and rare earth elements and has increasingly used its export policies as leverage in trade disputes.
As part of the latest China-U.S. trade deal, the U.S. has agreed to several concessions, including lowering tariffs on Chinese imports by 10 percentage points, and suspending Trump’s heightened “reciprocal tariffs” on Chinese imports until Nov. 10, 2026.
The U.S. will also postpone a rule announced Sept. 29 that would have blacklisted majority-owned subsidiaries of Chinese companies on its entity list.
But the first full trading week of the month saw stocks caught in November rains.
The S&P 500 and Dow Jones Industrial Average each lost more than 1%, while the Nasdaq Composite shed around 3% — that’s its largest weekly loss since the tech-heavy index slumped 10% in the week ended April 4.
A few months ago, tariffs were the shadows that stalked stocks. Now, it’s fears that artificial intelligence-related stocks are trading at prices disconnected from what the firms are actually worth.
“You’ve got trillions of dollars tied up in seven stocks, for example. So, it’s inevitable, with that kind of concentration, that there will be a worry about, ‘You know, when will this bubble burst?‘” CEO of DBS, Southeast Asia’s largest bank,Tan Su Shan told CNBC.
“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months,” Solomon said Tuesday at the Global Financial Leaders’ Investment Summit in Hong Kong.
That said, a pullback isn’t necessarily bad for stocks. It could even present “buying opportunities” for investors, according to Glen Smith, chief investment officer at GDS Wealth Management.
After all, earnings have been “reassuring” despite worries about tech stocks’ high valuations, Kiran Ganesh, multi-asset strategist at UBS, told CNBC. That means the rain might not last and the rally could find a way to run a little longer.
— CNBC’s Lee Ying Shan, Hugh Leask and Lim Hui Jie contributed to this report.
China consumer prices pick up in October. The consumer price index, released Sunday, showed a 0.2% growth year on year. It beats analysts’ expectations of zero growth and is the first month since June that prices rose.
U.S. government on track to end shutdown. Enough Democratic senators had agreed to vote for a deal that would fund the U.S. government through the end of January, a person familiar with the deal told CNBC.
Another missed jobs report. The ongoing U.S. government shutdown — which is now the longest ever — means the Bureau of Labor Statistics couldn’t release its monthly employment data. Here’s what economists would have expected the report to show.
[PRO] Stocks that could bounce after sell-off. Using CNBC Pro’s stock screener tool, we found several names that are oversold, according to their 14-day relative strength index. This implies they could be due for a recovery in prices.
Fundraisers and fraudsters are presenting themselves as family office representatives, seeking to dupe gullible investors — and then there are also imposters who are in it just for an “ego boost,” several industry veterans told CNBC.
An information vacuum seems to have encouraged imposters. In many markets, genuine single family offices, or SFOs, are exempt from registering so long as they manage only family money. That privacy norm often makes verification hard, said industry experts.
