Tesla and Hertz 100000 electric vehicles will become a turning point in the field of car rental

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Focus
1 so far, many major players in the car rental industry have not made significant commitments to make electric vehicles an important part of their fleet.
The transaction between 2 Hz and Tesla will put pressure on competitors such as Avis Baji group and enterprise holdings to consider adopting electric vehicles more seriously.
3 enterprise is planning to lead the fleet transformation in the next few years, but its research shows that mileage anxiety and lack of public charging facilities are still the main concerns of consumers.
Analysts believe that the government’s review of car rental emissions and consumers’ interest in electric vehicles will continue to grow.
Tencent technology news on October 26, the economic status of the car rental industry has given companies, including the multinational car rental group Avis budget group and Enterprise Holdings, the world’s largest car rental operator, multiple reasons to slow down the adoption of electric vehicles. Think about it. Every time renters forget to fill up the gas when they return the car, they will lose a lot of money.
But in the United States on Monday, the most awesome reason for the car rental companies was to request them to transform the electric vehicle faster and take it as an important part of its fleet. The global chain car rental brand Hertz’s transaction of ordering 100000 electric vehicles from Tesla sends a signal to major car rental companies that they need to formulate electric vehicle strategy as soon as possible, and may be earlier than their original plan.
For John Healy, an automotive analyst at North Coast research, it is not surprising that Hertz is the first of the few large rental car companies to make a big bet on electric vehicles.
After experiencing the era of industry integration, three companies have seized 95% of the car rental business of the airport terminal. They are enterprise with Alamo and national, Hertz with dollar and thrity, and the new company after the merger of Avis and budget. But so far, only Hertz has paid the most attention to electric vehicle betting, and its focus is limited to the niche market of luxury car tenants using high-end services (such as ultimate choice). “The electric vehicle industry has not improved much,” Healy said
Ultimate choice service provides consumers with high-end electric vehicles of brands such as Porsche and Tesla, but compared with 100000 vehicles ordered from Tesla, the number of high-end electric vehicles in Hertz’s fleet is only “hundreds”. “They are trying to make money by renting cars instead of satisfying this niche market,” hilly said of major competitors. Hertz believes that rich car renters and the “conspiracy” factor of electric vehicles are sufficient reasons for these companies to try on marginal business, “but that’s all.”.
Energy transformation and Tesla leasing
A spokesman for Enterprise Holdings said: “our focus is not simply to increase the number, but to work thoughtfully with industry partners and stakeholders to promote the long-term survival and growth of electric vehicles, including ensuring that the power grid and charging infrastructure are ready.”
The spokesman added that the company began to cooperate with a top consulting company in Europe this year to better understand how to transform its business model, operation and infrastructure to use more electric vehicles to participate in operation. In the United States, the company has launched thousands of electric vehicles, provided them to employees and put them into rental fleets in specific markets to test electric vehicles. In the next few years, the company’s fleet will begin a large-scale transformation.
If the demand is not enough to justify investing a lot of money in the electric vehicle fleet, Hertz’s deal may be a signal that the time has come. However, the huge economic obstacles that the car rental industry needs to overcome are related to people’s hesitant attitude towards electric vehicles so far.
With Hertz preparing to re IPO after the restructuring of private equity investors, and with mark fields, the former CEO of Ford Motor Company, as the interim CEO, the news of the deal with Tesla gives it another way to stand out in the field of integrated car rental. In the final analysis, however, the electric vehicle fleet is a problem that major rental car companies need to solve as part of their commitment to sustainable development and new economic thinking.
Car rental was once considered a “bargain”
Dan ives, an analyst at Wade Bush securities who studies Tesla, said that car rental fleets have always been regarded as “bargains” because of their large-scale bulk purchases. “Hertz spent more than $4 billion ordering electric vehicles, and Tesla has never been considered before. This is not only a turning point in the market’s interest in electric vehicles, but also a turning point in raising awareness of Tesla’s production capacity. The company’s factories are expanding around the world and in the United States.”
The car rental industry buys 1.5 million to 2 million cars a year, accounting for a large part of new car sales. “For Tesla, this is 2 million cars that have never appeared on the radar,” Ives said. After the transaction was announced, Tesla’s market value soared to $1 trillion. Jonathan smoke, chief economist of Cox automotive, said: “this is also a clear signal from Tesla that they can deliver a large number of new cars.”
The model Hertz ordered from Tesla is a model 3 sedan, but outside the luxury car market, the size of electric vehicles available for rent is always a problem because these cars are too small to meet the preferences of many tenants. But that is changing as more cross-border electric vehicles and other hybrid vehicles are produced. In the second quarter of this year, cross-border multifunction vehicles accounted for 50% of electric vehicle sales.
Carbon emission and car rental industry

North Shore research analyst Healy said that although the carbon footprint of the car rental industry is not the main concern of the U.S. government, the pressure is expected to increase in the future. People who pay attention to the industry are always talking about President Biden’s hope that the car rental company is committed to using electric vehicles. “The government’s push is uncertain, but it is likely not to disappear,” he said
The business model of car rental agencies is sustainable, such as the carbon compensation plan of Enterprise Holdings and its long-term research cooperation in the field of biofuels. The company has been reporting the carbon emission levels of scope 1 and scope 2 for many years, but the emission of scope 3 occurs in the exhaust pipe of its fleet. Avis Baji group also provides carbon compensation and carbon footprint estimation for enterprise customers, and lists the acquisition of Zipcar as part of its sustainable development plan. The company reports that it has more than 21000 hybrid vehicles in its global fleet.
In recent years, shareholders’ equity advocates focusing on ESG (environmental, social and corporate governance) have been putting pressure on car rental companies to increase the procurement of electric vehicles. A 2020 climate resolution by Hertz shareholders included electric vehicles as part of a broader discussion on climate change. Hertz’s standard car rental business currently has only three hybrid vehicles to choose from at specific locations leased by consumers, and there is no pure electric vehicle. Although Hertz has taken measures to improve the energy efficiency of its operating facilities, the impact of the company’s fleet has not been fully addressed.
Driss lembachar, transport and infrastructure manager of the sustainable development ESG risk assessment business of Morningstar, a consultancy, said that from a regulatory perspective, the ultimate responsibility for emissions and compliance with fuel economy standards mainly lies with automobile manufacturers, and car rental companies have less exposure to automobile emissions than automobile manufacturers. However, the fuel efficiency, service life and renewal of the car rental company’s fleet are very important to investors, because these aspects will affect the company’s attractiveness and customer satisfaction.
Sales of electric vehicles continued to rise
According to the data of the industry Trade Organization Alliance for automotive innovation, the sales of zero emission vehicles (including battery powered, plug-in hybrid and fuel cell electric vehicles) in the United States continued to rise. In the second quarter of 2021, the sales of zero emission vehicles exceeded 168000, an increase of 33% over 122000 in the same period of 2020. The report points out that the sales of zero emission vehicles accounted for 3.8% of the auto market in the second quarter of 2021, the highest proportion ever. By 2025, the automotive industry will invest $330 billion in electrification. It is expected that more than 130 zero emission vehicles and 30 hybrid models will be listed in the next five years.
A spokesman for Enterprise Holdings said that one of the challenges is how to transform to rental electric vehicles in addition to large enterprises or rental fleet transactions. The company’s research found that mileage anxiety is still the biggest concern of consumers, as is the lack of public charging facilities. She pointed out that short distance leasing accounted for only 20% of Enterprise Holdings’s business.
For car rental companies, the initial cost of adopting electric vehicles is not only the purchase price of vehicles, but also the construction of charging infrastructure, which has always been the main reason for the slow transformation to electric vehicles. At present, the economic situation of car rental business makes it more attractive to continue to use fuel vehicles. According to the data provided by analyst Healy, even if the rental car returns the car without filling up the gas, the rental company can make money. Although this accounts for only about 5% of the total revenue, it is a revenue with high profit margin. Although a business model can be developed to require tenants to “charge” electric vehicles, there is no ready-made practice.
In terms of electric vehicle fleet management, car rental companies will experience a steep learning curve, which is an unknown factor. The charging time of electric vehicles must be considered as part of the terms of car rental, and other basic questions still cannot be answered: how many charging stations do they need and how many charging stations must be fast charging. Fueling a fuel vehicle takes two minutes or less, but charging an electric vehicle may take several hours, and this time difference may play an important role in meeting customer needs.
Enterprise Holdings points out that about 25% of vehicles complete turnover, cleaning and re leasing within 1 hour, which provides a unique charging demand for large fleet operators. In recent years, as Tesla customer service has received close attention, the analysis of old electric vehicles shows that they can present a unique overview of maintenance and service.
Hans Werner Kaas, senior partner of McKinsey, said in 2019 that the maintenance of electric vehicles may not be so frequent on the whole, but the cost is higher. Moreover, due to the higher kerb quality and acceleration of electric vehicles, the equipment including driving control and tires may need more frequent maintenance or replacement. This may offset the potential economic advantages that electric vehicles provide to rental car companies in terms of traditional engine maintenance, but the residual value of the vehicle may be better preserved. At least so far, all unknown factors related to the unit economy of electric vehicles have priority over the potential economic benefits.
“Their view is that there is not enough infrastructure and no coveted customers want it, so why change anything? The view has always been ‘we will wait and see, but now is not the time,'” Healy said

For Hertz, it is a good time to announce its better positioning relative to its competitors in the process of returning to the public market for initial public offering (IPO). In modern history, major car rental agencies tend to follow each other, whether in marketing or charging customers for various services. With the field integration among the three companies, Avis BAGI group and Enterprise Holdings will face the pressure to take action in the field of electric vehicles.
Extended test drive of Tesla
This may also be the situation faced by Tesla, but they may be behind Hertz, or major carmakers, including general motors and Ford, plan to produce a large number of electric vehicles in the next few years. Before increasing overseas car purchases, car rental companies have always focused on American carmakers. “I think Avis Baji group and Enterprise Holdings need to respond. Car rental has always been an imitation business for the past 50 years, which will not change,” Healy said
Analyst Ives cites the proverb commonly used in the automotive industry: there will never be only one batch order. “I would be shocked if Hertz’s other competitors didn’t call Tesla,” he said
With the change of consumption pattern and people’s increasing interest in electric vehicles, if car rental companies act too slowly, they will face the risk of losing their business. Healy expects that more consumers will be willing to pay extra to try electric vehicles in the future. “If I could rent a Tesla at Hertz for $40 a day, but Avis BAGI didn’t, I might try. Even if only one customer would respond, Hertz would be in a better position in terms of profit margin,” he said
For Tesla, the deal is a good way to introduce this technology to consumers who have never driven electric vehicles, especially when the sales price of electric vehicles has fallen to a level where there is more room for large-scale adoption than traditional vehicles. “Every consumer who rents a car may become a buyer, which is actually more like an extended test drive,” Ives said
If the car rental industry is still hesitant, it is not because these companies lack the funds to buy electric vehicles. “The industry has never been as profitable as it is now,” said Healy. His statistics show that when the shortage of chips limits automobile production, the fleet size has only increased by 15% compared with the demand, and the demand has now returned to the previous level of 80% – 85%. The value of cars on their balance sheets has also been rising, in sharp contrast to their expectation that used cars will usually depreciate.
The upcoming quarterly results should show the record profitability of taxi companies. In the current market with strong demand and Limited car supply, car rental companies can charge twice the normal pricing in the past. “If you need this van in Florida, you have to pay $100 a day instead of $75,” Healy said. These companies don’t have much else to buy, even though their balance sheets are strong and the industry is controlled by the big three, making more integration less likely.
Healy said that more changes are taking place in the whole automobile industry and began to get attention from the subsidiary businesses of automobile manufacturers. He mentioned the auction field and pointed out that Manheim, the largest auction house, recently said in an investor demonstration that it would refit 127 electric vehicle charging stations at 53 auction points and need to diagnose the battery condition to correctly evaluate the value of electric vehicles to be auctioned. “We are beginning to see changes among similar companies in the industry,” Healy said. (reviewed by Tencent technology / Jinlu)