How the mass transition of EV in the car rental industry begins

Tesla Model 3 electric vehicles at Hertz Airport.

Photo by ER Davidson

Not so long after that Hertz Global Holdings went bankrupt last summer, reorganized after the Covid-19 pandemic halted the entire car rental industry, the Estero, Florida-based company boldly announced a deal worth $ 4.2 billion for the purchase of 100,000 fully electric vehicles (EVs) Tesla by the end of 2022. That’s right, the industry continued the race to switch to EV from models of internal combustion engines (ICE).

While Hertz was first in the starting blocks, his two biggest rivals, Enterprise Holdings and Avis Budget Group, have since joined. But just as the full introduction of electric vehicles among American drivers will take years, replacing rental cars will also be a marathon, not a sprint. “Companies that operate a fleet of our size can’t just shell out a penny and go all electric next year,” said Sharkey Laguana, president of the American Car Rental Association. “Our industry wants to move as fast as possible, but there are some serious and challenging constraints.”

The original, Laguana said, “just falls into the hands of damn things.”

The US $ 56 billion rental industry typically buys about a tenth of carmakers’ new cars each year, but with constant supply chain disruptions, especially a shortage of basic computer chips, numbers are declining. The industry bought 2.1 million vehicles from OEMs in 2019, Laguana said, compared to only about 750,000 in 2021. Sales of electric vehicles in the United States doubled in 2021, but still account for only about 4% from the common market of cars and trucks in the country.

Another major speed for car rental companies is the shortage 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 is the challenge of training and training agents and mechanics of electric car companies, not to mention introducing drivers to the differences between driving ICE vehicles.

Hertz does not specify the total number of vehicles in its fleet, said Jeff Niemann, senior vice president, operational initiatives, so it is not known how many Tesla are available in more than 30 markets currently offering EV, which now include the first of 65,000 Polestar 2s – brand EV, jointly owned by Volvo and its Chinese parent Gheely, which plans to go public through the SPAC deal – Hertz began buying in five-year deal announced in April. However, Niemann said he was confident that “electric cars would represent” more than 30% of our fleet by the end of 2024. “

Hertz, meanwhile, has several hundred thousand ICE models in the United States that will be leased for years to come, said Chris Voronka, an analyst at Deutsche Bank. However, “they have decided to carry the EV torch for the industry and will be very candid about their plans and goals,” he said.

Look no further than Hertz’s many TV spots aired during this year’s Super Bowl, starring NFL superstar Tom Brady advertising Tesla’s rentals. Hertz has also created a special area on its website to help drivers learn about electric vehicles.

EV leasing to corporations focused on ESG, carbon neutrality

The main goal for Hertz, according to Voronka, is the corporate market. “The leisure customer may think it’s cool to drive an electric car, but the longer game is on the corporate side,” he said.

Beyond comparing the costs of electric car operators with ICE cars – currently distorted by the national average of around $ 5 per gallon of ordinary gas – companies see EVs as a quantitatively measurable way to reduce greenhouse gas (GHG) emissions and achieve net zero targets and complement their environmental, social and governance (ESG) integrity among investors in sustainable development and advocacy groups.

“Initial research has shown that corporate bills will be willing to pay a premium for electric cars,” Voronka said, “because it helps them achieve some of their ESG goals.”

Not surprisingly, rental companies themselves are embracing this concept, said Sarah Forney, director of clean vehicles for the NGO Corporate Electric Vehicle Alliance (CEVA). While they certainly “want more ass in electric car seats,” she said, “they also want to achieve their sustainability goals and greenhouse gas reduction goals.”

Siemens US, a subsidiary of the German-based conglomerate, is a leading member of CEVA and was part of the launch of the Hertz EV program last fall. “We fully support our global decarbonisation targets and the ESG,” said Randall Achterberg, North America’s travel goods manager, “and our fleet is making the biggest impact on Scope 1 emissions and is already making progress with an aggressive transition strategy. EV “, referring to GHGs produced by the American fleet of Siemens of nearly 10,000 cars. “In terms of corporate travel, we want to expand the use of electric cars by our employees.

To date, Siemens has booked more than 100 EVs for rent with Hertz. “We are not pushing as hard as we would like because they are not ready,” Achterberg said, acknowledging the inherent obstacles to the launch of EV. Siemens is easing a stumbling block by building charging stations for electric vehicles and pledging to produce a million of them in the United States over the next three years.

The early experiment for car rental on the Orlando EV of the Enterprise

Enterprise may not be as cutting-edge as Hertz with its EV rental program, but the St. Petersburg-based private company. Louis, has been in the research phase since 2014. This is the year in which he began participating in Drive an Electric Orlando Rental Pilota multi-year study sponsored by the Electrification Coalition, a Washington-based nonprofit that advocates for the adoption of EVs, especially among fleet owners.

The pilot project, partly funded by the US Department of Energy, focused on Orlando International Airport and included resorts and theme parks in the area. “We also had a close partnership with local regulators and politicians, which was crucial to make sure we were doing it the right way,” said Chris Haffenreffer, assistant vice president of innovation at Enterprise. The company rented all-electric cars, including Chevy Volts and Nissan Leafs to passengers, which were boosted by benefits such as free charging, parking and valet service.

“Even though the electric cars were [then] as a delay in our business, the lessons learned are in line with what we see today, “Haffenreffer said. Namely, getting employees behind the wheel of EVs is crucial” so that they can communicate actively with customers, “as is also partnering with other entities to invest in charging infrastructure.

Although rental companies have said they are building their own charging stations, another important partner is the U.S. government, which last year set aside a $ 7.5 billion infrastructure bill in the United States to build a network of charging stations. EV. Earlier this month, the Biden administration proposed regulations that would require stations built on interstate lines with federal dollars to be no more than 50 miles apart.

Enterprise, like Hertz, focuses on its commercial fleet and fleet management division, where business customers will appreciate lower maintenance and operating costs. “It’s about being a trusted advisor to these clients, helping them understand how to manage EV and the benefits,” Haffenrefer said. But as with leisure travel renters, figuring out how to get from point A to point B and how to charge the car is becoming more challenging, Hafenrefer said.

Based in Parsipani, New Jersey, Avis began to tolerate its shares in early November after it said it started renting electric cars a week after the Hertz-Tesla deal fell through, and although it is returning together with the whole market, CEO Joe Ferraro told analysts during a conference call at the time: “You will see how we will be much more active in electrical scenarios in the future as the situation develops.”

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

American carmakers are spending billions to increase production of electric cars. General Motors aims to deliver 400,000 EVs to North America by the end of 2023, and Ford is committed to 600,000 by the same time. Given that EV rental is essentially an extended test drive, the rental market is seen as an important driver in President Joe Biden’s plan half of all new cars and trucks sold in 2030 will be zero-emission vehicles.

“From our point of view, the rental car market makes a lot of sense, especially as OEMs are entering longer-range electric vehicles,” said Ben Prohazka, executive director of the Electrification Coalition. “What a great way to get consumers exposed to new technologies in a low-risk environment.”

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