The more likely goal at HertzThe Hertz filing today about selling off 1/3 of the old Tesla cars was a kick in the pants for EV's because of the way that the media presented it. Of course it was.
Hertz has a right to be pisssed as the value of their inventory plummeted because Tesla dropped the price of their cars by $20k in 2023. The amount of depreciation was unprecedented.
But, the depreciation is DONE. Dumping cars doesn't change the fact that EV's got a whole lot cheaper in 2023. In fact, EV's dropped so much in price that ICE sales have fallen off a cliff in recent months. Not true you say as ICE sales have recovered in a big way as reported by the media!!!
Here is the truth.
Ford and GM and Chrysler (Stellantis) report a sale, the moment that their vehicles leave the factory. The Dealers MUST buy the cars that the manufacturers send them. The Dealers have to put the "sold" cars on their lots and try to sell them. When the cars eventually get sold, the manufacturer reimburses the Dealer with kickbacks. A perfect example of this is the amazing discounts below the retail price that we see every year (except during covid) as the manufacturers offer year end clearance prices in order to open up the lots for the next model year. The "savings" on big ticket items like pickup trucks are often as much as $15,000. The Dealers don't eat that as the manufacturers kick back the discount to the Dealers. If the old shell game didn't exist, the Dealers would never play.
This year, inventories for ICE vehicles are up 40% YoY. In the past month, inventories are up 8%. The steep increase in inventories is unprecedented. Who is going to buy all those vehicles and how much will the price need to be discounted to clear them out?
If you were Hertz, what would you do?
I would blow out my tired Tesla inventory and load up on cash so that I can be ready and waiting for when the Big 3 DUMP their inventory.
The used Tesla's will be easy to sell as the price has dropped so much already. Everybody loves a deal and used Tesla's are an amazing deal. Even better for the public is that the good old US government will subsidize the price of a used EV to the tune of $4,000. You can't go wrong.
Hertz also owns Dollar and Thrifty. What do you think their buying power is. If Ford or GM or Stellantis want to blow off half a million cars, all they have to do is make a call and take their pants down.
Everybody wins. The auto makers get to live another day. The money that Hertz had to eat from depreciation losses on their EV fleet will be made up by skewering the Big 3. The public will eat up the used EV's with the tax credit as a bonus.
It's all good. I expect we will see the game repeated next year. The game of hide the growing inventory problem for unwanted ICE vehicles is not going to stop or even slow down. The real question is when will the music stop and there are no more chairs.
As a footnote, of course Hertz has experienced insurance issues. Every kid (young or old) can rent a Ferrari /Maserati beating Tesla for a day for a few extra dollars. What do you think happens when those "kids" get behind the wheel of the 0-60mph in 3 or 4 second Tesla vehicle? The best case scenario for the car rental company is that they have to pay a lot more for tire replacements. How many more accidents happen as unsuspecting drivers hit the "gas" during "fun day with a Tesla"? The driver has already paid a small fee for the extra insurance so they are off the hook. As soon as the claims pile up, the insurance companies walk away and suddenly Hertz et al can't insure the Teslas without paying huge insurance premiums. What a surprise. Who could have seen that coming?