How the massive EV transition is starting in the car rental industry

Not long after Hertz Global Holdings emerged from bankruptcy last summer, reorganized after the Covid-19 pandemic stalled the entire car rental industry, the Estero, Florida-based company boldly announced a $4.2 billion deal to purchase 100,000 Tesla fully electric vehicles (EVs) by the end of 2022. Just like that, the race was on within the industry to transition to EVs from internal combustion engine (ICE) models.

While Hertz was first off the starting blocks, its two biggest rivals, Enterprise Holdings and Avis Budget Group, have since joined in. But just like the full-scale adoption of EVs among American drivers is going to take years, the rental car shift also will be a marathon, not a sprint. “Companies that operate fleets at our size cannot just turn on a dime and next year go all EV,” said Sharky Laguana, president of the American Car Rental Association. “Our industry wants to move as fast as it can, but there are some serious and challenging constraints.”

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

The $56-billion U.S. rental industry typically buys about one-tenth of auto manufacturers’ new cars every year, but with persistent supply-chain disruptions, especially the shortage of essential computer chips, the numbers are way down. The industry bought 2.1 million vehicles from OEMs in 2019, Laguana said, compared with only about 750,000 in 2021. U.S. sales of EVs doubled in 2021, but still only comprise about 4% of the nation’s total market for cars and trucks.

Another major speed bump for rental car companies is the paucity of EV charging stations, at airports and other rental locations, hotels, resorts and office buildings, as well as along local roads and interstate highways. And then there’s the challenge of educating and training companies’ agents and mechanics on EVs, not to mention familiarizing drivers on the differences from operating ICE vehicles.

Hertz does not state the overall number of vehicles in its fleet, said Jeff Nieman, senior vice president, operations initiatives, so it’s unknown how many Teslas are available in the more than 30 markets currently offering EVs, which now also include the first of the 65,000 Polestar 2s — an EV brand jointly owned by Volvo and its Chinese parent Gheely which has planned to go public through a SPAC deal — Hertz began purchasing in a five-year deal announced in April. Nieman did say, however, he is confident that EVs will represent “more than 30% of our fleet by the end of 2024.”

In the meantime, Hertz has several hundred thousand ICE models in the U.S. that will be rented for years to come, said Chris Woronka, an analyst at Deutsche Bank. Even so, “they’ve decided they’re going to carry the EV torch for the industry and be very outspoken about their plans and goals,” he said.

Look no further than the spate of Hertz TV spots, starring NFL superstar Tom Brady touting…