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Why Hertz is betting its future on electrification

Hertz is looking sharp once again, with a new CEO and several strategic moves to electrify its rental-car fleet and prepare for a zero-emissions future. 

Hertz rental car location at JFK

The Hertz rental car facility at JFK International Airport in New York. Image via Shutterstock/Roman Tiraspolsky

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Corporations are increasingly leaning into climate-conscious investments as part of future growth plans. Electric vehicles, in particular, have stolen much of the spotlight. 

Notably, car rental company Hertz is leveraging EVs as part of its electric (pun intended) comeback strategy, although the road ahead isn’t yet smooth. 

The Corporate Electric Vehicle Alliance (CEVA) aims to speed up electrification by facilitating purchases for at least 330,000 EVs over the next five years. Hertz, along with Amazon, Best Buy, DHL and T-Mobile, are among the companies participating in the goal, as GreenBiz previously reported.

Recall that less than two years ago, Hertz’s business was in the red. It filed for bankruptcy in May 2020 after succumbing to astonishing debt, a steep drop in rental car demand during the COVID-19 pandemic and a standstill of the travel and leisure sector. 

After either laying off or furloughing more than 20,000 employees, the horizon looked grim for the iconic American brand. Analysts’ outlook for the company’s future were mixed. 

Fast forward to today, and Hertz is looking sharp once again. Hertz in early February tapped a former Goldman Sachs executive to be its next CEO. Just last week, it co-led a $19 million Series A funding for UFODrive, a self-service EV rental car company and e-mobility service provider in Europe. That development builds on announcements in October, when Hertz emerged from bankruptcy and inked splashy deals with both Tesla and Uber in a bid to electrify its rental-car fleet and prepare for a zero-emissions future. 

In what stands as the largest single purchase of EVs (at least to date), Hertz placed an order for 100,000 Tesla vehicles to be delivered by the end of this year. The company made the deal barely four months out of bankruptcy, signaling its ambition to lead in the sustainable transportation revolution. 

“The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America and a commitment to grow our EV fleet and provide the best rental and recharging experience for leisure and business customers around the world,” said Mark Fields, who in October was Hertz’s interim CEO, in a press release

Shortly after, Hertz announced a follow-up partnership with Uber to add up to 50,000 Teslas to Uber Network by 2023. The move, according to Fields, signified the company’s commitment to "becoming an essential component of the modern mobility ecosystem" and “being an environmentally forward company."

Hertz is positioning itself to help accelerate the mass-adoption of EVs in the U.S. over the next several years. It can offer customers Tesla vehicles to rent, which means access to the expansive Tesla Supercharger network, and it offers gig-drivers incentives through Uber’s Green Future program.

"Climate change is an urgent global challenge we must all tackle together, and now is the time to drive a green recovery from the pandemic," said Uber CEO Dara Khosrowshahi in a statement. "This combines the power of Tesla, Hertz and Uber to help accelerate the transition to zero-emissions mobility."

The rental titan’s resurgence, however, can in part be chalked up to easy-money, COVID-era economics. According to the Wall Street Journal, two-thirds of the largest publicly traded American companies reported fatter profit margins in 2021 compared to the same period pre-pandemic. In other words, companies could afford rising costs because they were letting customers foot the bill.

Those looking to rent a vehicle felt this acutely. Thanks to inflationary pressure plus the global chip shortage, car and truck rental prices surged by almost twofold during the pandemic — something that ultimately may have helped Hertz get back on its feet in time for the new year.

An electrified fleet, however, cannot stand upright on its own, according to Dan Sharplin, CEO of mobility-software and technology company Flash, which equips parking lots and public garages with EV charging capabilities

"One of the key things in 2022 is the emergence of a new type of driver for these electric vehicles," Sharplin told GreenBiz. "Someone who doesn’t have captive charging available to them, someone who’s rented a car and is an overnight guest at a hotel [for example]." 

A rental company especially requires a robust and accessible charging infrastructure for customers without access or knowledge about vehicle charging. 

"It won’t be acceptable for a customer to pick up a fully charged vehicle, go on a two- or three-day trip and struggle to get that vehicle charged," Sharplin continued. "How are they going to get charged in a reliable, predictable way? How are you able to enforce charging that item?"

About 80 percent of EV drivers charge their vehicles in their own home. For renters, that may not be possible. Some experts predict a lack of charging stations could threaten to put a ceiling on widespread EV adoption, and by extension, on Hertz’s comeback strategy.

Moving forward, part of Hertz’ challenge will be tackling the matter of EV charging for its customers living in apartments or other locations without parking spaces that boast charging capabilities. A study by the National Renewable Energy Laboratory estimated that the U.S. will need to build about 380 EV charging ports per day for nine years to meet the goal of 35 million EVs by 2030. Over the previous decade, the U.S. installed a mere 30 ports per day. That’s quite a gap to make up. 

Nonetheless, the Flash chief anticipates the shift to electrification to continue to balloon in 2022. 

"Automakers worldwide have burned the boats on internal combustion engines," Sharplin said. "They’re all in with the EV strategy, and dead serious about connecting it into the digital fabric of people’s lives … and [automakers] are working very hard to support fleet customers."

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