Stephen Scherr’s journey as CEO of Hertz ended abruptly on Friday, after a tenure of nearly two years. He leaves behind a company grappling with the fallout of an unsuccessful venture into electric vehicles (EVs). The company will now seek to navigate its recovery under the leadership of Gil West, a former executive at Delta Air Lines and General Motors’ Cruise division.
Scherr joined Hertz in February 2022, bringing with him three decades of experience from Goldman Sachs. He played a pivotal role in guiding the company out of bankruptcy. Hertz had initiated its foray into electric vehicles the year before Scherr’s arrival, making headlines with its order of 100,000 Tesla Model 3 vehicles. Upon taking charge, Scherr ambitiously expanded the company’s commitment to electric vehicles by ordering an additional 65,000 EVs from Polestar, a Swedish manufacturer.
However, the company’s enthusiastic embrace of electric vehicles soon met with challenges. A tweet from a user named FermiLevels highlighted the lack of interest in renting EVs, expressing frustration over being assigned an electric vehicle against their preference and questioning their loyalty to Hertz.
By December 2023, it became evident that Hertz’s aggressive push towards electric vehicles was not yielding the desired results. The company decided to offload 20,000 electric vehicles into the used-car market, initiating a gradual liquidation process set to continue into 2024. Hertz announced plans to reinvest some of the proceeds from these sales into purchasing vehicles with internal combustion engines, aiming to better align its fleet with customer demand.
The resale value of fleet vehicles is crucial to the profitability of rental car companies. However, Tesla’s decision to significantly reduce its prices had an adverse impact on the resale value of not only Tesla vehicles but the entire electric vehicle market. This development saw the secondary-market prices of top-selling electric vehicles drop by nearly a third in 2023.
Another challenge faced by Hertz was the high cost of repairing electric vehicles. Scherr pointed out in an October conference call that collision and damage repairs for electric vehicles could cost about twice as much as those for comparable vehicles with internal combustion engines.
Consumer demand for electric vehicles in the rental market also posed a problem. Many customers are hesitant to try an electric vehicle for the first time during a business trip or vacation, especially when it involves navigating unfamiliar areas and dealing with the inconvenience of recharging stations.
There have been numerous accounts of customers being unpleasantly surprised to receive an electric vehicle when they did not request one. Some reported receiving cars that were only half-charged or lacked a charging cable. In response to such issues, Senator Tom Cotton proposed legislation to prevent rental car companies from forcing electric vehicles on their customers.
In a statement released on Friday, Hertz vice chair Tom Wagner expressed gratitude for Scherr’s contributions over the past two years, including his efforts on several key strategic initiatives, though subtly hinting at the electric vehicle strategy not being among them.