You can now buy a used Tesla in fully working order for just about $14,000 (including the tax credit) because of Rental car giant Hertz’s decision to sell off 20,000 EVs, comprising about one-third of its global inventory for this type of car. The massive wave of listings across various online marketplaces has caused the used EV market, and particularly used Tesla market, to crash to a shocking new low.

Hertz explained that its EV fleet was marred with higher-than-expected repair costs, rapid depreciation, and low customer demand. It plans on reinvesting a portion of the proceeds from the sales into buying new gas-powered vehicles instead.

“The Company expects this action to better balance supply against expected demand of EVs. This will position the Company to eliminate a disproportionate number of lower margin rentals and reduce damage expense associated with EVs”, Hertz commented in an SEC filing published earlier this week.

Want a Cheap Tesla?

Hertz’s move may not be good for EV owners and the EV market overall but it’s certainly positive if you’re looking to buy a used Tesla. In its haste to dump 20,000 EVs it listed multiple clean-titled 2021 Standard Range Plus Tesla Model 3s with 60,000-80,000 miles for $17,700 and $18,300, not including the EV tax credit of $4,000.

https://Twitter.com/GuyDealership/status/1745610571959914675?s=20

These specific cars seem to have already sold but Hertz has by no means listed all 20,000 of the EVs that it plans to sell so prices may crash again soon. Hertz Car Sales only has about 530 Tesla Model 3s listed on its website. Many more will likely be listed over the coming weeks and months so keep an eye out if you’re in the market for a cheap used Tesla.

The Fall of Hertz’s Bold EV Bet

Just two years ago, Hertz unveiled ambitious goals to electrify its rental fleet, headlined by a commitment to buy 100,000 Tesla (TSLA) vehicles by the end of 2022. This announcement helped catapult Tesla’s market valuation above $1 trillion for the first time ever. It also marked a major reputational turnaround for Hertz, which had only recently emerged from bankruptcy.

However, this EV dream soon confronted challenging realities. Of that original 100,000 vehicle order with Tesla, Hertz had only acquired 35,000 cars as of October 2023 according to CEO Stephen Scherr. Furthermore, the company’s overall electric fleet was comprised of just 50,000 vehicles globally by this date, including other brands.

While reaffirming its plans of electrifying the company’s fleet, Scherr admitted that precipitous price cuts from the automaker led by Elon Musk quickly depleted resell valuations across Hertz’s EV assets. These rapid declines in value increased depreciation costs and directly harmed the company’s financial performance.

“The 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 a salvage creates larger loss and, therefore, greater burden”, CEO Scherr highlighted.

“Certain of these E.V.s became uneconomical for us”, he added.

At the same time, EVs proved to be more than twice as expensive to repair after collisions compared to gas cars, which resulted in higher parts and labor expenses for the business. Hertz also suggested that EV demand was slower than predicted, saddling the company with excess inventory amid weakening conditions in the automotive market.

The one-two punch of heavy depreciation and ballooning repair costs severely eroded Hertz’s profit margins on electric rentals. These challenges forced the company to offload these 20,000 EVs – predominantly Teslas – through 2024.

What Hertz’s EV Struggles Mean for The Industry?

Hertz’s difficulties highlight lingering growing pains for EVs as they go mainstream. Their complex engineering and expensive components (mostly the batteries) inherently elevates collision repair costs compared to legacy internal combustion engine vehicles. Battery supply chain issues also complicate mass adoption.

While demand exists and is effectively growing, consumer education still proves critical to properly leverage EV capabilities and charging networks. Hertz indicated that its rental customers struggled to fully utilize electric cars despite corporate efforts to provide adequate usage instructions.

Also read: Honda Unveils Futuristic EV Lineup Set to Revolutionize the Car Market

The auto industry may also be to blame for creating confusion in the form of aggressive price fluctuations. Tesla’s extended-range models have swung wildly in price over 18 months, distorting customer budgets and deteriorating resale projections.

Does This Signal Broader Issues for EVs?

Critics of government policies supporting EV proliferation pointed to Hertz’s selloff as evidence that eco-friendly vehicles cannot broadly succeed without a proper regulatory framework. Indeed, a key rental car company struggling to incorporate EVs feeds that narrative.

However, by the end of 2024, the percentage of electric vehicles sold in the US climb from 7.3% in 2022 to 9% in 2024. Consumer appetite persists backed by rising gas prices and climate change concerns. Moreover, every major auto brand is planning to unveil multiple new EV models over the next few years and has ambitious plans to push for zero-emission targets within the next few decades.

While Hertz’s business model clearly struggled to align with EV operating realities, broader macro fundamentals around electrification remain robust. This includes strong projected growth in charging infrastructure as well as improvements in battery life enabling longer ranges and lower prices.

Once early adopter incentives phase down and supply chains stabilize, the EV sector anticipates entering a sustained expansion phase. With diligent further adaptation, car rental ecosystems can hopefully overcome present hurdles and participate in that growth at scale.

The Road Ahead for Hertz

Despite offloading 20,000 EVs in the near term, Hertz (HTZ) claims that it will continue to execute its strategy around EV mobility while managing supply and demand imbalances. This includes expanding charging networks, pursuing deeper manufacturing partnerships for parts and service access, and refining policies around renter EV education.

A top priority for Hertz at this point would be to secure cheaper spare parts and look for ways to reduce the cost of performing repairs of all kinds to make sure leases of EV vehicles within its fleet are profitable.

The promise of EVs clearly captured imaginations not long ago when Hertz made the headlines with a tsunami-sized order. Two years later, practical growing pains show that the road to mainstream adoption remains bumpy but can still be navigated with proper care. For rental car giant Hertz, stubbornly sticking to its EV guns signals faith that enough smoothing of rough edges can still yield a clean vehicle future.