The CEO of car rental company Hertz will step down following the company’s failed bet on electric vehicles (EVs), leading to a heavy loss in the last quarter.
Hertz announced on March 16 that Stephen Scherr will leave the company as CEO and board member at the end of this month. Gil West, former chief operating officer of Delta Airlines and GM’s Cruise, will succeed Mr. Scherr as the company’s new CEO.
Mr. Scherr, 59, joined Hertz in 2022 after the company recovered from bankruptcy and started to make a big bet on EVs. He previously served as chief financial officer at Goldman Sachs.
Mr. West “will be able to build upon the strategic projects begun during Stephen’s tenure, including improvements to technology, commercial partnerships, and the revitalization of our value brands,” said Colin Farmer, lead director of the Hertz board of directors.
“We took a bold move and are making a strategic adjustment to our fleet,” Mr. Scherr told CNBC at the time. “It’s really to respond to the reality, which is we’re trying to bring supply in line with demand, and we’re addressing a cost issue that happens to be related to the EVs in the context of damage and damage costs.”
Hertz took a $245 million charge from offloading the EVs and posted a bigger-than-expected loss of $348 million in the fourth quarter.
In late 2021, Hertz announced plans to order 100,000 Tesla Model 3s, aiming to build the largest EV rental fleet in North America. Shortly after his appointment, CEO Mark Fields revealed intentions to purchase 65,000 cars over five years in a $3 billion deal with Swedish EV company Polestar. However, Hertz paused its plans for Polestar EVs in February, as reported by the Financial Times.
In its filing with the Securities and Exchange Commission in January, Hertz said it will implement some initiatives to improve its profitability in its remaining EV fleets, including investing in EV charging infrastructure expansion and “more affordable access to parts and labor.”
EVs: Less Reliable, More Problems, Limited Charging Stations
A November 2023 study by Consumer Reports found that EVs were often less reliable than internal combustion engine vehicles, where manufacturers such as Toyota, Honda, and Subaru have had decades to engineer cars and trucks with high-reliability standards. The report revealed that EVs have 79 percent more problems than gas-engine cars.A poll from Yahoo finance and Ipsos in October 2023 found that 57 percent of Americans are not interested in purchasing an EV, citing price, travel range, and available charging stations as their major concerns.
One of the key obstacles for EVs in the United States is the lack of infrastructure, especially the limited availability of public charging stations.
According to a Pew Research Center survey in July last year, a majority of Americans expressed skepticism about the country’s ability to develop the necessary infrastructure to support EVs on the roads. Specifically, 53 percent said they were not too or not at all confident, while only 17 percent were extremely or very confident in this outcome. Another 30 percent indicated they were somewhat confident. The poll also found that the public interest in buying an EV declined by 4 percentage points from May 2022.
Meanwhile, automakers, including Ford, GM, Stellantis (formerly Chrysler), Mercedes, Honda, and others, are rethinking their investments in EV production. In 2023, Ford halted production of the electric Mustang Mach-E and paused its planned $12 billion investment in new EV production. GM announced that it would drop its production target of 500,000 EVs over the next 12 months.
A Gallup poll conducted last year found that only 4 percent of Americans own EVs. In 2023, EV sales reached nearly 1.2 million cars, accounting for 7.6 percent of total car sales in the United States, an increase from 5.9 percent in 2022, according to data from Kelly Blue Book.
