Hertz CEO Scherr Is Replaced Following EV Woes

Car rental company Hertz has announced that CEO Stephen Scherr is stepping down at the end of March. The move follows a Q4 2023 earnings report detailing a drain of $245 million on its bottom line from the reduction in value of 20,000 EVs in its fleet that the company announced it was selling in January. That would seem to make Scherr at least in part a casualty of Tesla’s price war. But that sale—a third of its total EV fleet—followed what an analyst told CNN was a “horror show” of poor judgement as the company spent two years and lots of money trying—and largely failing—to get customers to rent EVs. There are lessons here for the entire EV industry.

An electrifying start

In 2021—under previous CEO, Mark Fields—Hertz announced that it was going to offer the largest EV rental fleet in North America, beginning with an order for 100,000 Teslas and with a major investment in its charging infrastructure. The company hired pro football superstar Tom Brady as a spokesperson in a series of “Hertz, Let’s Go!” advertisements that featured Brady using a Hertz EV.

Hertz went on to announce plans to buy 175,000 GM EVs and 65,000 Polestar EVs. Eventually, EVs made up more than 11% of the company’s total fleet, according to CNN.

But it turned out that many customers weren’t interested in renting the shiny new EVs.

An unsuccessful EV rollout

Why not? The number of EVs being sold in North America had been surging and there was every reason to believe that such interest would translate to increase EV rentals as well. In fact, one might suppose that for internal-combustion-engine (ICE) powered drivers who were EV-curious, renting an EV would be a good way to give the platform a try.

It didn’t happen that way.

As CNN’s Chris Isadore put it, “the problem for Hertz wasn’t necessarily that the cars were electric, and customers simply do not want to drive electric cars. The problem was how Hertz handled the fleet in general, according to industry analysts.”

Isadore goes on to quote Wedbush Securities analyst as saying that the Hertz rollout was “a horror show.”

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The article cites recharging challenges for traveling renters: worries about where to charge it before returning it and uncertainty as to how long it might take to recharge during a highly scheduled business trip could dissuade even an EV enthusiast from renting away from home. All this was exacerbated by Hertz enforcing recharging rules the way it enforced refueling rules on its ICE fleet: If you don’t bring it back full, it will cost you.

Tesla price-war casualty?

So, the company read the writing on the wall and decided to sell 100,000 Teslas—but it turned out to be a just the wring time. When EV purchasing slowed in 2023, Tesla began a price war, slashing the price of its EVs in order to maintain market share. That, of course, lowered the price one could expect for a used Tesla as well, leading to that $245 hit to the Hertz bottom line.

Hertz under Scherr has faced other challenges as well, but the failure of the company’s EV rollout and helplessness in the wake of Tesla’s price-slashing are the events that the EV industry as a whole will want to study and learn from.

Gil West, former Chief Operating Officer of Delta Airlines and GM’s Cruise unit will become Chief Executive Officer effective April 1, 2024.