Car rental company Hertz Global (NYSE:HTZ) has penned its biggest quarterly loss of the year after running up a billion-dollar non-cash impairment charge related to its fleet of Tesla Inc (NASDAQ:TSLA) electric vehicles.
“The size of the impairment charge was largely due to the decline in fleet residual values over the last year or so,” said Hertz.
Hertz’s net losses tallied $1.3 billion in total, causing a negative 52% margin, or $4.34 loss per diluted share.
Hertz, in October 2021, announced plans to get up to a 100,000-strong fleet of Teslas onto its rental network by the end of 2022, plus new EV charging infrastructure.
At the time, this amounted to 20% of Hertz’s entire rental stock across EVs and combustion engines.
The residual value of this fleet has declined far faster than anticipated due to a fall in global EV demand, which has forced Tesla and other major EV manufacturers to slash their prices.
In April, Tesla cut retail prices by an average of 4% across major markets such as the US, China, Germany and the Middle East.
“Vehicle depreciation of $937 million increased significantly compared to the prior year period,” said Hertz. “DPU (depreciation per unit) for the third quarter of 2024 was $537. The company expects to substantially complete the fleet rotation by the end of 2025, at which time it expects that DPU could normalize to under $300.”
Although the net loss was due to a non-cash charge, Hertz's cash position was weakened nonetheless.
As of 30 September, Hertz had $501 million in cash and cash equivalents compared to $764 million as of 31 December, 2023.
Hertz shares are currently swapping for $3.38, which is over 77% lower than their 2021 initial public offer price.