If you’ve been wanting to try an electric vehicle, renting can be an affordable option. But finding one may soon become much more difficult.
Electric vehicles have been financially disastrous for rental companies, especially Hertz, which in January scaled back plans to acquire 100,000 Teslas after the cars’ resale values plunged much faster than the company had expected.
Hertz’s experience had a chilling effect on its industry, and many rental car companies are now trying to sell off electric vehicles at deep discounts. It may be a while before they start buying again.
Last year more than 4 per cent of the cars sold by manufacturers to rental companies were electric, according to S&P Global Mobility. So far this year, that number is just 1.4 per cent.
Hertz and other rental car companies found that offering customers electric vehicles at a profit was more difficult than they had expected. Most rental car complexes at airports lacked chargers. Many renters were not prepared for how quickly electric cars accelerated, leading to more accidents and higher insurance premiums.
And some companies found they couldn’t get spare parts for such cars as quickly as they could for gasoline cars.
“They thought EVs would be more simple and straightforward and cheaper to maintain,” said Karl Brauer, an executive analyst at iSeeCars.com, an online car search site. “They’re finding that’s not true.”
The biggest problem for the rental companies was the rapid depreciation of cars made by Tesla, the leading manufacturer of electric cars. The company, led by Elon Musk, sharply cut prices on new models last year to prop up sales. That pushed down the prices for used Teslas.
“Elon Musk opens his mouth and the industry takes a dive,” said James Iovino, who listed about nine electric vehicles on the car sharing website Turo before getting out of the business a month or so ago after EV prices dropped.
A study released last month from iSeeCars.com found that used electric vehicles had lost value faster than the average used gas car had this year and, in May, cost less on average than used petrol cars for the first time.
Resale values are a critical part of the financial calculus for rental companies because they generally sell cars before they accumulate too many miles. Rental car companies record losses when they sell cars for less than they expected. In the first three months of the year, the diminished value of Hertz’s electric fleet lowered its profit by $195 million (€178 million).
The car hire companies “are 100 per cent dependent on residual values”, said Shay Natarajan, a partner at Mobility Impact Partners, a private equity firm that invests in sustainable transportation. “It’s just a very difficult business model.”
But some rental car companies say they are not dumping battery-powered cars because of the recent drop in prices.
Enterprise Mobility had several thousand electric vehicles available in the United States, Canada and Europe, and would add more depending on market demand, said Mike Wilmering, a spokesman for the company. Enterprise is also working on making more chargers available to its customers.
Hertz said it “learned a lot as a first mover in the EV rental market, and, as we align our fleet with consumer demand, we’re focused on continuously enhancing the rental experience, which includes making it easy and rewarding for all customers”.
Refuelling has been another issue. Many rental companies expect customers to recharge electric vehicles to about 70 per cent before returning them. That means customers must plan to stop at a charger near the end of their trips, which is not always easy to do when people are trying to catch flights and there aren’t enough fast chargers near the rental car drop-off point.
Rental companies don’t want to be responsible for charging because they like to get cars back on the road quickly. It can also be difficult for rental companies to install chargers at airports.
“Airports are notorious for being unfriendly for electric infrastructure development,” said Raghu Iyengar, an executive at Volkswagen of America whose duties include sales to rental companies.
People who rent Teslas have access to its supercharger network, the largest fast-charging system in the United States. But most superchargers work only with Tesla cars. People who rent cars made by other car manufacturers must use chargers offered by other operators, each with its own mobile phone app for payment. And in some countries, especially in rural areas, there are few or no fast chargers.
“The potential that rental companies can have in reshaping consumer behaviour and helping to promote adoption is critical,” said Stephanie Valdez-Streaty, director of industry insights at Cox Automotive. “But there’s a long way to go.” – This article originally appeared in The New York Times
