How the electric vehicle transformation began in the rental car industry

Tesla Model 3 electric cars at a site at Hertz Airport.

ER Davidson’s photo

Shortly after Hertz Global Holdings emerged from bankruptcy last summer, reorganized after the COVID-19 pandemic brought the rental car industry to a standstill, Estero, Florida, boldly announced a $4.2 billion deal to buy 100,000 all-electric Tesla vehicles ( EVs) before the end of 2022. Just like that, the race within the industry to transition to electric vehicles has been internal combustion engine (ICE) models.

While Hertz has been a bit off-putting, its two biggest competitors, Enterprise Holdings and Avis Budget Group, have since joined. But just as widespread adoption of electric vehicles among American drivers would take years, so changing a rental car would be a marathon rather than a sprint. “Companies with fleets our size can only run a dime, and next year it will be all electric,” said Sharky Laguana, president of the American Rental Car Association. “Our industry wants to move as fast as possible, but there are some serious and difficult limitations.”

The first step, Laguana said, “is just getting your hands on the damn things.”

The $56 billion US rental industry typically buys about a tenth of new cars from automakers each year, but with ongoing supply chain disruptions, especially shortages of core computer chips, the numbers are dwindling a lot. Laguana said the industry bought 2.1 million vehicles from OEMs in 2019, compared to just about 750,000 in 2021. Sales of electric vehicles in the United States doubled in 2021, but they still make up only about 4% of the total car and truck market in the United States. country.

Another major bump for car rental companies is the dearth of electric vehicle charging stations at airports and other rental locations, hotels, resorts, and office buildings, as well as along local roads and interstate highways. Then there is the challenge of educating and training corporate dealers and mechanics on electric vehicles, not to mention introducing drivers to the differences from vehicles powered by internal combustion engines.

Jeff Neiman, Senior Vice President, Operations Initiatives, said Hertz does not mention the total number of vehicles in its fleet, so it is unknown how many Teslas vehicles are available in the more than 30 markets that currently offer electric vehicles, which now also includes its first 65,000 Polestar 2s. – An EV brand jointly owned by Volvo and its Chinese mother, Gheely, which planned to go public through a SPAC deal – Hertz began buying in a five-year deal announced in April. However, Niemann said he is confident that electric vehicles will represent “more than 30% of our fleet by the end of 2024”.

Meanwhile, Hertz has several hundred thousand ICE models in the United States that will be leased for years to come, said Chris Woronka, an analyst at Deutsche Bank. However, “they decided they were going to carry the electric torch of the industry and would be very vocal about their plans and goals,” he said.

Look no further than the flood of Hertz TV spots, starring NFL star Tom Brady promoting rental Tesla cars, which aired during this year’s Super Bowl. Hertz has also created a dedicated area on its website to help educate drivers about electric vehicles.

Leasing of electric vehicles to companies that focus on environmental, social and corporate governance and carbon neutrality

Hertz’s primary goal, according to Woronka, is the corporate market. “A leisure customer might think it’s cool to drive an electric car, but the longer game is on the company’s side,” he said.

Besides comparing the costs of employees driving electric cars versus ICE cars — which are currently skewed by the national average of about $5 a gallon of regular gas — companies view electric vehicles as a quantifiable way to reduce greenhouse gas (GHG) emissions, and achieve goals Net zero and refinement of Environmental, Social and Governance (ESG) intentions among sustainability investors and advocacy groups.

“The initial research showed that companies would be willing to pay a premium for electric vehicles, as it helps them achieve some of their ESG goals,” Wronca said.

It’s no surprise that rental companies themselves have embraced the concept, said Sarah Forney, director of clean vehicles for the nonprofit Corporate Electric Vehicle Association (CEVA). While they certainly “want to have more seat backs in electric cars,” she said, “they also want to meet sustainability goals and greenhouse gas emissions reduction goals.”

Siemens USA, a subsidiary of the Germany-based group, is a key member of CEVA and was part of the launch of the Hertz EV program last fall. “We fully support our global decarbonization and ESG goals,” said Randall Ashterberg, North America Director of Travel Goods, “our fleet is achieving the largest emissions footprint from Scope 1 and we are already making progress on a robust transition strategy for electric vehicles.” Referring to the greenhouse gases produced by Siemens’ US fleet of nearly 10,000 vehicles. “In terms of corporate travel, we want to expand our employees’ use of electric vehicles.”

So far, Siemens has booked more than 100 rental cars with Hertz. “We’re not pushing as hard as we’d like, because they’re not ready,” Achterberg said, acknowledging the hurdles inherent in rolling out the electric car. Siemens is easing one stumbling block: It builds charging stations for electric vehicles and has committed to making one million of them in the United States over the next three years.

Experience Orlando EV rental early from Enterprise

Enterprise may not be as up front as Hertz with its EV rental program, but the privately owned company, headquartered in St. Louis, has been in the exploration phase since 2014. That’s the year it began participating in the Drive Electric Orlando Rental Pilot, a study Multi-year sponsored by the Electrification Alliance, a Washington, DC-based nonprofit that advocates for the adoption of electric vehicles, particularly among fleet owners.

The pilot, which was partially funded by the US Department of Energy, is stationed at Orlando International Airport, as well as the resorts and theme parks in the area. “We also have close partnerships with local regulators and policy makers, which is critical to making sure we do it the right way,” said Chris Havenriver, associate vice president for innovation at Enterprise. The company rented all-electric cars, including Chevy Volts and Nissan Leafs, to commuters, who were motivated by perks like free charging, parking, and valet parking.

“Although electric vehicles were so [then] As an afterthought in our work, the lessons learned are consistent with what we see today,” Havenriver said. Specifically, getting employees behind the wheel of electric vehicles is critical, “so that they can actively communicate with customers,” as in partnering with corporate entities. Others to invest in charging infrastructure.

Although rental companies have said they are building their own charging stations, another important partner is the US government, which allocated $7.5 billion in a bipartisan infrastructure bill last year to states to build a network of electric vehicle charging stations. Earlier this month, the Biden administration proposed regulations requiring stations built on federal highways to be no more than 50 miles apart.

Enterprise, like Hertz, focuses on its commercial leasing fleets and fleet management division, where business customers will appreciate lower maintenance and operating costs. “It’s about being a trusted advisor to these clients, and helping them understand how the EV operates and the benefits,” Haffenreffer said. But as with leisure charterers, figuring out how to get from Point A to Point B and how to charge a car is an increasing challenge, Havenriver said.

Avis in Parsippany, New Jersey, saw its stock rise in early November after it said it was getting into the electric car rental business a week after the collapse of the Hertz-Tesla deal, and although it fell along with the entire market, CEO Joe Ferraro told analysts during Conference call at the time, “You’ll see us move forward and be more proactive in electrical scenarios as the situation evolves.”

Since then, Avis has been very silent and declined to comment for this article. But Woronka said, “I take their word for it.” He cited the exposure of the company’s large rental car fleet as the reason. “They are not yet ready to pull the curtain on what they are doing,” he said.

American automakers are spending billions to increase their production of electric cars. General Motors aims to deliver 400,000 electric vehicles in North America by the end of 2023, and Ford has committed to delivering 600,000 electric vehicles by then. Given that renting an electric car is essentially an extended test drive, the rental market is seen as an important driver in President Joe Biden’s plan for half of all new cars and trucks sold in 2030 to be zero-emissions vehicles.

“From our perspective, the car rental market makes a lot of sense, especially as OEMs are getting into long-range electric vehicles,” said the Executive Director of the Electrification Coalition, Ben Proshazka. “What a great way to introduce consumers to new technology in a low-risk environment.”

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