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

Tesla Model 3 electric vehicles at a Hertz airport.

Photo by E. R. Davidson

Shortly after Hertz Global Holdings emerged from bankruptcy last summer, reorganized after the Covid-19 pandemic brought the entire car rental industry to a standstill, the Estero, Florida-based company has 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 switch to vehicles electric internal combustion engine (ICE) models.

While Hertz was the first to start, its two biggest rivals, Enterprise Holdings and Avis Budget Group, have since joined. But just as the large-scale adoption of electric vehicles by American drivers is going to take years, the rental car shift also will be a marathon, not a sprint. “Companies that operate fleets our size can’t just turn a penny and next year go all-electric,” said Sharky Laguana, president of the American Car Rental Association. “Our industry wants to move as fast as it can, but there are serious and difficult constraints.”

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

The $56 billion U.S. rental industry typically buys around a tenth of automakers’ new cars each year, but with ongoing supply chain disruptions, particularly chip shortages essential IT, the numbers are down. The industry bought 2.1 million vehicles from OEMs in 2019, Laguana said, compared to just about 750,000 in 2021. Sales of electric vehicles in the United States doubled in 2021, but still represent only about 4% of the country’s total market for cars and trucks.

Another major obstacle for car rental companies is the scarcity of electric vehicle charging stations, at airports and other rental locations, hotels, resorts and office buildings, and along roads. local and interstate highways. And then there’s the challenge of educating and training company agents and mechanics on electric vehicles, not to mention familiarizing drivers with the differences with using ICE vehicles.

Hertz doesn’t report the total number of vehicles in its fleet, said Jeff Nieman, senior vice president, operational initiatives, so it’s unclear how many Teslas are available in the more than 30 markets currently offering electric vehicles, which now also include the first of 65,000 Polestar 2s – an electric vehicle brand jointly owned by Volvo and its Chinese parent company Gheely that has planned to go public via a SPAC deal – Hertz has started buying under a deal to five years announced in April. Nieman, however, said he was confident electric vehicles would make up “more than 30% of our fleet by the end of 2024”.

In the meantime, Hertz has several hundred thousand ICE models in the United States that will be leased for years to come, said Deutsche Bank analyst Chris Woronka. Even so, “they decided to carry the torch of electric vehicles for the industry and be very upfront about their plans and their goals,” he said.

Look no further than Hertz’s series of TV spots, featuring NFL superstar Tom Brady touting Tesla rentals, 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.

Rent electric vehicles from companies focused on ESG and carbon neutrality

A primary target for Hertz, according to Woronka, is the enterprise market. “The leisure customer might think it’s cool to drive an electric car, but the longest game is on the business side,” he said.

Beyond comparing the costs of employees driving EVs versus ICE cars — currently skewed by the national average of about $5 for a gallon of regular gasoline — companies see EVs as a quantifiable way to reduce their greenhouse gas (GHG) emissions, achieve net zero goals, and build their environmental, social and governance (ESG) authenticity with sustainability investors and advocacy groups.

“Initial research showed that corporate accounts would be willing to pay a premium for electric vehicles,” Woronka said, “because it helps them achieve some of their ESG goals.”

Unsurprisingly, rental companies themselves are embracing this concept, said Sara Forni, director of clean vehicles for the nonprofit Corporate Electric Vehicle Alliance (CEVA). While they “certainly want to have more butts in EV seats,” she said, “they also want to meet their sustainability goals and their greenhouse gas emission reduction goals.”

Siemens US, a subsidiary of the Germany-based conglomerate, is a flagship 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 Achterberg, Head of North America Travel Products, “and our fleet has the largest Scope 1 emissions footprint and we are already making progress with a strategy aggressive transition to electric vehicles”, referring to GHGs produced by Siemens’ U.S. fleet of nearly 10,000 vehicles. “On the business travel side, we want to expand the use of electric vehicles by our employees.”

To date, Siemens has booked more than 100 electric vehicle rentals with Hertz. “We’re not pushing as hard as we’d like because they’re not ready,” Achterberg said, acknowledging the inherent hurdles in his EV rollout. Siemens is alleviating a stumbling block: It’s building electric vehicle charging stations and has pledged to manufacture one million in the United States over the next three years.

Enterprise’s First Orlando Electric Car Rental Experience

Enterprise may not be as forward-thinking as Hertz with its electric vehicle leasing program, but the privately owned, St. Louis-headquartered company has been in the exploratory phase since 2014. That’s the year where she began participating in the Drive Electric Orlando Rental Pilot. , a multi-year study sponsored by the Electrification Coalition, a Washington, D.C.-based nonprofit that advocates for electric vehicle adoption, particularly among fleet owners.

The pilot project, partly funded by the US Department of Energy, focused on Orlando International Airport and also included resorts and theme parks in the area. “We also had close partnerships with local regulators and policymakers, which was key to making sure we were doing this 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 travelers, who were enticed by perks like free charging, parking and valet parking.

“Even if electric vehicles were [then] an afterthought in our business, the lessons learned are consistent with what we see today,” Haffenreffer said. invest in charging infrastructure.

Although rental companies have said they are building their own charging stations, another key partner is the US government, which in last year’s bipartisan infrastructure bill allocated $7.5 billion dollars to the States to create a network of charging stations for electric vehicles. Earlier this month, the Biden administration proposed regulations that would require stations built on highways with federal dollars to be no more than 50 miles apart.

Enterprise, like Hertz, is focused on its commercial rental fleets and fleet management division, where business customers will appreciate lower maintenance and operating costs. “It’s about being a trusted advisor to these customers, helping them understand how to operate an EV and the benefits,” Haffenreffer said. But like leisure travel renters, figuring out how to get from point A to point B and how to charge the car is increasingly difficult, Haffenreffer said.

Avis, based in Parsippany, New Jersey, saw its shares soar in early November after announcing it was getting into the electric vehicle rental business a week after the Hertz-Tesla deal broke down. and although it has come down with the broader market, CEO Joe Ferraro told analysts on a conference call at the time: “You’ll see us going forward being much more active in electric scenarios at as the situation evolves.”

Avis has been quiet since then and declined to comment for this article. But Woronka said, “I take them at their word.” He cited the car rental company‘s large corporate fleet exposure as the reason. “They’re just not ready to pull the curtain on what they’re doing yet,” he said.

US automakers are spending billions to ramp up production of electric vehicles. General Motors aims to deliver 400,000 electric vehicles in North America by the end of 2023, and Ford has pledged to deliver 600,000 by the same date. Considering that renting an electric vehicle is essentially an extended test drive, the rental market is seen as a major driver in President Joe Biden’s plan to have half of all new cars and trucks sold in 2030 be vehicles. zero-emission vehicles.

“From our perspective, the rental car market makes a lot of sense, especially as OEMs move into longer-range electric vehicles,” said Ben Prochazka, executive director of the Coalition for electrification. “What a great way to expose consumers to new technologies in a low-risk environment.”

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