Car rental industry in massive transition to electric vehicles., Electric Vehicle News Bitesize
Car rental industry in massive transition to electric vehicles., Electric Vehicle News Bitesize

Car rental industry in massive transition to electric vehicles. Subscribe to Electric Vehicle News Bitesize Podcast for FREE!

Shortly after Hertz Global Holdings emerged from bankruptcy last summer and restructured after the Covid-19 pandemic brought the entire car rental industry to a standstill, the Estero, Florida-based company boldly announced a $4.2 billion deal to acquire 100,000 Teslas by the end of 2022. This started the industry race to transition from internal combustion engine models to electric vehicles.

While Hertz was the first to start, two of its biggest rivals, Enterprise Holdings and Avis Budget Group, have followed suit. But just as it will take U.S. drivers years to fully adopt electric vehicles, it will also take U.S. drivers years to switch to rental cars — a marathon, not a sprint. “Companies running fleets of our size can’t just drop a dime and go all-electric next year,” said Sharky Laguana, president of the American Automobile Rental Association. “Our industry wants to move quickly, 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. leasing industry typically buys about one in 10 new cars from automakers each year, but that number has fallen sharply amid ongoing supply chain disruptions, especially shortages of vital computer chips. According to Laguana, the industry purchased 2.1 million vehicles from OEMs in 2019, up from around 750,000 in 2021. Electric vehicle sales in the U.S. doubled in 2021, but still only account for about 4% of the total national car and truck market.

Another major hurdle for rental car companies is the lack of electric vehicle charging stations at airports and other rental locations, hotels, resorts and office buildings, and along local roads and highways. Then there’s the challenge of educating the companies agents and mechanics, not to mention familiarizing drivers with the differences from operating an internal combustion engine.

Hertz doesn’t disclose the total number of vehicles in its fleet, said Jeff Niemann, Senior Vice President of operations planning, so it’s unclear how many Teslas are in the more than 30 markets where EVs are currently offered, including the first that includes 65,000 Polestar 2s – the electric car brand jointly owned by Volvo and its Chinese parent company Gheely. Hertz started buying as part of a five-year deal announced in April. However, Niemann said he believes EVs “will make up more than 30% of our fleet by the end of 2024”.

Deutsche Bank analyst Chris Woronka said Hertz now has hundreds of thousands of ICE models in the U.S. that will be leased out over the next few years. Still, “they decided to bring the electric vehicle torch to the industry and were very open about their plans and goals,” he said.

Just look at the Hertz TV commercial where NFL superstar Tom Brady ran an ad for a Tesla taxi during this year’s Super Bowl. Hertz has also created a dedicated section on its website to educate drivers about electric vehicles.

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

In addition to comparing the cost for employees to drive an electric vehicle versus an internal combustion engine — which currently averages about $5 per gallon of regular gasoline nationwide — companies are viewing EVs as a quantifiable opportunity to reduce greenhouse gas emissions, to achieve goals and Build environmental, social and governance (ESG) credibility among sustainability investors and stakeholders.

“The initial research has shown that corporate accounts are going to be willing to pay a premium for EVs,” Woronka said, “because it helps them achieve some of their ESG objectives.”

Not surprisingly, rental companies themselves are embracing this concept, said Sara Forni, director of clean vehicles for the nonprofit Corporate Electric Vehicle Alliance. While they certainly “want to get more butts in Electric Vehicle seats,” she said, “they also want to meet their sustainability goals and greenhouse gas emissions reduction targets.”

Siemens Americas, a subsidiary of the German conglomerate, is a flagship member of CEVA and was part of the Hertz Electric Vehicle program launched in Autumn. “We fully support our global decarbonization and ESG goals,” said Randall Achterberg, North American travel merchandise manager Siemens. “In business travel, we want to expand the use of electric vehicles by our employees. “

Siemens has booked more than 100 electric car rentals with Hertz to date. “We didn’t try as hard as we wanted because they weren’t ready,” Achterberg said, acknowledging the inherent barriers to Electric Vehicle adoption. Siemens is removing a stumbling block: It is building charging stations for electric vehicles and has pledged to install 1 million charging stations in the U.S. within the next three years.

Enterprise’s electric car rental program may not be as advanced as Hertz’s, but the St. Louis-based privately held company has been in the exploratory phase since 2014. That year, it began participating in the Drive Electric Orlando Rental Pilot, a multi-year study sponsored by the Electrification Alliance in Washington, D.C. Nonprofits that advocate for the adoption of electric vehicles, especially among fleet owners.

Funded in part by the U.S. Department of Energy, the pilot project is centered around Orlando International Airport and also includes nearby resorts and theme parks. “We also have strong partnerships with local regulators and policymakers, which are critical to making sure we’re doing it the right way,” said Chris Haffenreffer, vice president of innovation at Enterprise, which offers free charging, parking and valet parking for Chevrolet Volts and Nissan Leafs.

“Even though EVs were previously an afterthought in our business, the lessons learned are consistent with what we see today,” Haffenreffer said. Namely, getting employees behind the wheel of EVs is crucial, “so they can communicate actively with customers,” as is partnering with other entities to invest in charging infrastructure.

While rental companies say they are building their own charging stations, another key partner is the U.S. government, which allocated $7.5 billion in last year’s bipartisan infrastructure bill to create a network of electric vehicle charging stations. Earlier this month, the Biden administration proposed rules that would require stations to be built on the federal highway no more than 50 miles apart.

Enterprise, like Hertz, is focusing on its commercial-rental fleets and fleet-management division, where business customers will value the lower maintenance and operating costs. “It’s about being a trusted advisor to those customers, helping them understand how to operate an Electric Vehicle and the benefits,” Haffenreffer 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 increasingly challenging, Haffenreffer said.

New Jersey-based Avis saw its stock rocket in early November after it said it was getting into the Electric Vehicle rental business a week after the Hertz-Tesla deal broke, and though its come back down along with the entire market, CEO Joe Ferraro told analysts during a conference call at the time, “You’ll see us going forward much more active in electric scenarios as the situation develops.”

Avis has been tight-lipped since then. But Woronka said, “I take them at their word.” He cited the rental car company’s sizable corporate fleet exposure as a reason. “They’re just not ready to pull back the curtain yet on what they’re doing,” he said.

U.S. automakers are spending billions to boost production of electric vehicles. GM is aiming to deliver 400,000 electric vehicles in North America by the end of 2023, and Ford has pledged to deliver 600,000 by then. Given that renting an electric vehicle is essentially an extended test drive, the rental market is seen as a key driver in President Joe Biden’s plan to see half of all new cars and trucks sold by 2030 be zero Emission cars.

“From our point of view, the rental car market makes a ton of sense, especially as OEMs get into longer-range electric vehicles,” said Electrification Coalition executive director Ben Prochazka. “What a great way to get consumers exposure to new technology in a low-risk setting.”

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Car rental industry in massive transition to electric vehicles., Electric Vehicle News Bitesize
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