Hertz has backed out of plans to buy 50,000 electric cars from Polestar, saying the rapidly falling price of electric vehicles made it too risky.
Like other companies – and a growing number of consumers – the rental giant fears it will buy electric cars only to find their price will drop soon after.
Companies with large fleets need to be sure that tens of thousands of cars don't suddenly lose value – because that can cost them millions of dollars.
Another factor driving Hertz's turnaround is simply that many customers don't want to rent electric cars for long trips because they're worried about the range and lack of charging stations.
In December, Hertz said it was selling tens of thousands of Teslas for the same reasons.
In April 2022, Hertz agreed to buy 65,000 cars from Polestar over five years. So far it has bought 13,000 of them – but it doesn't want the rest.
The rental company Hertz has withdrawn its plans to buy 50,000 electric cars from the electric car manufacturer Polestar. A Polestar vehicle is pictured in front of a rental station
Polestar CEO Thomas Ingenlath (pictured) told the Financial Times this allowed Hertz to exit the deal last fall
The move was part of Hertz's strategy to ensure a quarter of its rental fleet will be electric by the end of 2024 – a goal the company has since abandoned.
Polestar's CEO told the Financial Times that last fall allowed Hertz to exit the deal on the condition that the company agreed to keep the 13,000 cars it had already purchased for at least a year before selling them sold.
The electric vehicle maker fears a “fire sale” that could dramatically reduce the value of used Polestar cars by flooding the market with significant supply.
These fears seem justified. Tesla suffered exactly that when Hertz announced in January that it would sell 20,000 of its cars, some of which were listed on its used car site for as little as $17,000.
The average value of a used Tesla fell by more than $1,000 in the first half of January, revealed last month.
Hertz also offered Polestar the right of first refusal to buy back the cars if the company wanted to remove them from its fleet, Polestar CEO Thomas Ingenlath said.
He told the Financial Times that Polestar had a “clear intention” to revive the deal with Hertz and continue selling cars to the rental company in the future.
Although it appears the deal was officially put on hold last year, the about-face was only reported this week.
Today, Hertz reported its fourth-quarter results and blamed the poor results on “headwinds” in electric vehicles.
Hertz CEO Stephen Scherr previously flagged the issue during the company's third-quarter earnings call in October.
“Decreases in manufacturer suggested retail prices for electric vehicles throughout 2023, driven primarily by Tesla,” have reduced the fair market value of our electric vehicles compared to the previous year, so a rest will result in a greater loss and therefore “The burden is greater ” he said during the third quarter earnings conference call in October.
Over the last year, Polestar shares have fallen 87 percent
Meanwhile, Hertz shares have fallen 50 percent. During Hertz's fourth-quarter earnings call on Tuesday, the company's CEO blamed the poor results on “headwinds” from electric vehicles
Volvo bought the Swedish company Polestar in 2015 and soon established it as a specialized electric vehicle brand. Volvo has been producing Polestar models ever since.
The news of the deal's cancellation comes days after it was announced that Volvo would stop financing Polestar and instead hand responsibility to its parent company, Chinese car group Geely.
Geely has several other brands under its umbrella, including Lotus, Smart and Zeekr.
This also comes after Polestar announced plans to cut around 15 percent of its workforce and months after the beleaguered automaker began producing the Polestar 4.
Over the last year, Polestar shares have fallen 87 percent. Hertz shares are down 50 percent.