I wonder how many of these 100,000 cars purchased were due to Elon's false claims that self driving would have been available and INCREASED the value of the cars.
At the time, I found his claims hard to believe but I didn't have much conviction given his extremely strong track record up to that point.
A corporation like Hertz has the resources to evaluate Musk’s claims before committing to buy 100,000 cars.
If they truly believed these cars would soon drive themselves, that’s entirely the fault of executives who didn’t do the minimum due diligence. Spending $100k to get a few consultants’ opinions would have been enough to pop that bubble.
Perhaps. But it was pretty obvious at the time that they were wild lies. Not excusing Tesla but one would hope that very well-paid execs would get it--but that may be optimistic.
Well paid executives learned to rely on vendor statements and vendor litigation. They don't question it. If you offer them a magic wheel, they will buy your magic wheel (after you have the right bonding and insurance backings).
According to the Bloomberg Businessweek story, Hertz top management were a couple of finance bros from private equity. They appointed a Goldman CFO as CEO, one with no background in automotive/transport industry. The whole Tesla bet appeared to be part of a executive fever dream to rebrand Hertz as a vanguard of the future.
It's exciting in the same way fireworks or a train accident or a raging city fire are exiting. We're expecting to see some crazy big booms given the reagents at play.
Sounds like it's time for some lawsuits against the board/management from shareholders.
EDIT: Not understanding the downvotes.
Board members and executives have a fiduciary duty to shareholders. They let their hubris get the best of them and that left the company with a fleet of assets that are depreciating rapidly, even by automotive standards. Thus the company is not returning as much value as it could if it had purchased more traditional vehicles.
"I have a fiduciary duty to shareholders" can't just be used by executives and board members to explain away budget cuts and massively upending peoples' lives with layoffs. It should cut both ways.
Or are we going to just finally admit that this excuse only serves to protect management and capital?
I don’t know, but I suspect people may be reacting negatively because, as they say, hindsight is 20/20. The bet didn’t work out, but that doesn’t mean it was a self-evidently stupid thing to try from the perspective of 2020/2021.
It seems to me that sometimes somebody has to try a thing for us all to find out that it doesn’t work. If people with money in the company were sure it was a dumb idea all along, couldn’t they have sold their shares? Or even done fancy options trades to profit from their contrarian certitude?
Why would a court be involved in something like this, where management very clearly said what they were going to do, they did it, and it just didn’t work out the way they’d hoped?
If Tesla's lack of parts is the problem - and the article asserts that as a possible problem - then it's nothing to do with hindsight. Tesla either had the demonstrable ability to provide repair/replacement parts on time, or they didn't. You get that in writing and you have people actually dig to see if the supply chain was there. That's something you check before you ink the deal.
The article also mentions that there are other EVs in the fleet that haven't caused the financial problems. In other words, there's something about how Hertz structured the Tesla deal that was less-than-brilliant.
> Why would a court be involved in something like this, where management very clearly said what they were going to do, they did it, and it just didn’t work out the way they’d hoped?
Because they may not have done their due diligence in signing the deal with Tesla, and it's costing shareholders money. Making bets is one thing; making one that deals with something outside of your ken is another. Your job as a board or c-suite is to find the people to give you the straight dope on things you don't know about, not be distracted by new shiny from Silicon Valley.
There are a lot of reasons to think the execs who made the decision were stupid--and yes, it's easier with hindsight. But the reflexive "they should have been sued" or even tossed in jail you get here for a lot of things gets pretty dangerous and can very easily be extended to engineers who make a mistake. It does encourage the others perhaps but probably isn't what you want to do in general.
> There are a lot of reasons to think the execs who made the decision were stupid--and yes, it's easier with hindsight. But the reflexive "they should have been sued" or even tossed in jail you get here for a lot of things gets pretty dangerous and can very easily be extended to engineers who make a mistake.
Who's saying that engineers should be thrown in jail for making a mistake?
I'm saying that there's reason to believe that maybe Hertz's leadership didn't do their jobs. Lawsuits for that kind of thing are filed all. The. Time. in this country. If we're here to create value for shareholders by any legal means, and they don't do that, well... the monetary loss and resulting lawsuit is the risk that justifies the insane amount of money people in that level of the company make. Who knows, maybe the suit would be tossed.
If they don't want to deal with that, maybe a nice six-figure and full benefits compensation package would be more their speed.
Sounds like the executives who did the deal should have come to an understanding with Tesla about not doing things to massively dilute the value of the fleet.
Either they forgot to, or they bought the bullsh*t. Either way they're incompetent and don't deserve more money than most people will make in their entire lives within the span of a few years of work. Drag them in for a deposition to find out which one it was and recover some of the money.
> Hertz top management were a couple of finance bros from private equity. They appointed a Goldman CFO as CEO, one with no background in automotive/transport industry. The whole Tesla bet appeared to be part of an executive fever dream to rebrand Hertz as a vanguard of the future.
Mark Fields, who had spent ~30 years at Ford and was fired for not moving them fast enough into EVs, was the interim CEO while they searched for and found the Goldman guy for their permanent CEO. It was Fields that announced the deal with Tesla, although you have to wonder how much of it was already in place - he had been CEO for like 3 weeks at that point. Or, you know, maybe his thought process was "I'm not making this mistake twice" and the finance bros loved it and that's why they hired him.
It’s not this simple, typically. Diligence can mean requesting internal documents or statements, which doesn’t prevent a thoroughly dishonest partner from just plain lying about their capabilities. It doesn’t seem inconceivable to me that Hertz performed that kind of diligence, perhaps not recognizing the kind of shyster they were dealing with.
Yes, should have been blindingly obvious at the time to anyone who did minimum investigation that full autonomy within the (short) lifetime of a rental car was a complete fantasy.
I find it easier to believe that Hertz thought electric vehicles would be a big consumer draw but, as a sometimes renter, I have trouble seeing the appeal of dealing with something unfamiliar as a renter aside from maybe a one-time novelty.
I rent a car around 6 times a year and I like trying out a different vehicle as often as I can. Adding car charging time into my short vacation in an unknown place, and being on the hook for returning it charged, etc. Might as well not deal with the hassle!
Exactly. I might rent a Tesla once just to see what it was like. But figuring out how to return a car fueled is enough hassle as it is. Rarely rent a car these days. Uber/Lyft has covered a lot of the edge cases in the US but still do it a few times a year.
Exactly. Given the lower "fuel" cost and lower cost for employees to spend time "refueling" they should have accepted anything above like 20% with no cost. Their costs for recharging on industrial electric should have been like a dollar or two on an average battery, they should just leave them plugged in most of the time pulling little power. Dumb they weren't always guaranteed to be like 90+% and free over 20% charged on return.
I'm surprised that Hertz didn't build chargers on premises for this fleet.
I can see why car rental companies expect fossil fuel cars to be returned with a full tank, but for an electric car, they can charge it themselves. Being able to return the car without having to worry about recharging would make the electric cars more attractive.
They invested significant capital in doing exactly that...at their prime locations (airports).
The challenge here is that they didn't invest in building charging infrastructure at ALL of their locations (neighborhood centers, small airports, hotels, etc).
This is problematic because a renter that decides last minute to one-way their car from a prime location to a non-prime location without charging first essentially took that car out of rev service for the day. An ICE car would never have that problem.
This, of course, was fine when used EVs barely lost their value, but now that they depreciated like a rock since 2023, these cars are a cumulative black hole in forward revenue.
> I like trying out a different vehicle as often as I can.
Interesting. I rent just about that often, but I try to get a car that I'm already familiar with. If I'm renting a car, I'm probably somewhere that I'm not familiar with and have my hands and brain full of other stuff that needs attention. The last thing I want to do is add "get used to a different car" to that list.
Most EVs, and Teslas particularly, have very different controls than the cars I am used to. I actively avoid them all mostly for that reason.
I'll rent something that is similar to the vehicles I own but maybe somewhat different to try out. However, absent special needs, I wouldn't be inclined to rent something radically different unless it was a utilitarian sedan or something like that. But I wouldn't rent an electric car except as a novelty.
Which is even worse: Hertz has no idea who their customer is!
I make 2-3 long trips per year, and I rent a car for each. Why?
- I buy cheap, reliable transportation with a focus on commuting. You don't want to be in my car for several hours on a long trip.
- If I break down, the rental company takes care of it. I don't have to find a shop and wait for a part.
- I save a fortune. I know people who base their car-buying decision based off the couple of long trips they make per year. They end up paying 2x - 3x more for their car than I've paid for mine. They also typically have higher fueling costs and higher repair costs.
- When I do get an EV, I don't have one yet, I won't worry about range anxiety
That last point is what I never understood about Hertz - you should be pitching your rentals to EV owners as a solution for range anxiety on long distance trips. Easy peasy! You get sales. Not here's unfamiliar technology you're using in an unfamiliar place, figure it out! How did they ever think that was a smart idea?
I don't really consider several hours a long trip. I routinely do 2-5 hours on a weekend and can't believe that's so unusual or that a family or a group wouldn't want a vehicle set up for the purpose. Of course, others have different needs.
I'm sure they did get consultants opinions and do due diligence. But the funny thing about leadership is, they can be prone to going against the grain of armchair quarterbacks with no skin in the game who always say no. Given who the interim CEO team was they probably ignored (or, not ignored but considered and went against) the reports in favor of a risky bet.
It didn't happen to work out. However if it did, they would be hailed as visionary heroes.
Hertz's big purchase seems to have happened in 2021, by then it was pretty well established that Musk constantly promises FSD will be ready and operating either 'next year' or 'in a few months' in a pattern stretching back to the late 2010s.
Oh yeah he's never stopped claiming it's just around the corner because it helps prop up sales and gets people to spring for the FSD extra package at great profit for Tesla. I think it's nearing a decade since he started the cycle at this point?
The only record he had was ambition. Otherwise, his companies' record is filled with delays. And his personal record is filled with hostilities.
If you mean to say his ambitious and callous track record gave you hope that you will see rogue bullish auto driving, I understand you. I am still waiting for this to happen. I am expecting him to launch a self drive that is both bullish and dangerous and a mess on the roads.
Otherwise, his other claim that CURRENT vehicles (at the time) will be upgraded to self driving, was entirely a let-down and an opener for lawsuit and false advertising.
Hertz bought a ton of Teslas because their used value was extremely high at the time (excellent for the rental car business) and they wanted to be seen as a leader in rental car innovation. Nothing to do with FSD (which was never enabled in any of their cars)
I don’t get it, what changed in between 2021 and now? Back then we were told that electric cars were faster, cheaper to operate, quieter, and better for the environment. Isn’t all that still true today? Why are they losing value then?
Mostly true but for fleet vehicles it might not be a great decision.
1) Charging complexity at Hertz, turnaround time for vehicles that are not fully charged.
2) Body Repairs. Tesla is still notorious for bad repair lead times and costs.
3) 2021 was near peak Tesla pricing.
#2 was definitely a problem for them; Teslas are out of action longer because of the wait times, AND they are more expensive to repair (which means they're more expensive to insure, and some carriers won't cover them at all). Being out longer costs Hertz a lot of money, and having to eat higher maintenance costs on top of that is a brutal double-dip.
edit just to add: This is much less of a problem for individual owners; I know people who are still happy with their Teslas, and a single person needing a single replacement car while theirs is awaiting repair is not a big deal. But a car company needing a thousand replacements while a thousand cars are sitting in storage is pretty bad for them.
The cost of new electric cars has fallen. This impacts the resale value of older cars.
Further, these were relatively early model 3 with not great initial quantity, and Hertz had a bad operational experience for various reasons that are causing them to unload a bunch all at once.
Finally, Musk’s antics are arguably causing brand damage.
> The cost of new electric cars has fallen. This impacts the resale value of older cars.
It's really amazing to see.
I bought my Model 3 Performance in 2019 for ~$57K. If I were to buy today, it'd be $56K. Now, a $1K drop doesn't seem like a lot, but there's been a lot of inflation in the last 5 years, and the M3P today has a couple newer features that mine doesn't have, like a power lift trunk, heated steering wheel, adaptive suspension, a screen for the rear seats, and faster acceleration.
Accounting for inflation alone, the M3P today should be costing ~$70K. With all the added features, it really should be $75K. But it's only $56K.
I don't think it should be a $70K car today because of the power lift gate, I think it should be $70K because of inflation, and the fact that it does 0-60 mph in 2.9 seconds.
Tax credits too. In 2019 you probably got a partial credit, in 2020-2022 you didn't get any federal credit. Today's M3P is now $49k with an instant credit.
Rental cars, since they're driven more heavily than personal vehicles, require more maintenance. My guess it that Hertz did not make the investment in the repair infrastructure (batteries, brakes, electrical) that was needed to support 100,000 vehicles
I am almost certainly renting something because I need to go to a few places. I don't want unfamiliarity and I'm probably not especially cost-sensitive. I wouldn't rent a Tesla unless I wanted the novelty in a predictable situation like within Silicon Valley.
Musk is utterly repellant to many, BYD is eating up market share, need Tesla’s have got cheaper, compelling electric vehicles are available from multiple manufacturers and charger networks are more accessible to non Tesla EVs.
This is very specifically about Tesla, not electric cars in general. The biggest issues that Hertz is seeing are particular to the models they bought, early Tesla Model 3's, not the fact that they're electric in itself.
The depreciation we’re seeing may genuinely be wealth gap related. The people on one side of the gap want a new Tesla rather than a used one, and on the other side you may not have stable charging infrastructure i.e. in an apartment, don’t want to pay an electrician to upfit their house, or are just straight up hanging back on older cars.
I, for one, bought a used electric car recently for over half off the MSRP and it’s been an excellent car. It’s quiet, it’s fast, if I sit in my garage for 5 minutes when I arrive and answer a text message blowing the air conditioning that’s fine. I even just charge with the 120V outlet. But if you don’t have the ability to charge at home or work, it’s going to be more annoying than visiting a gas station, so likely better to stick with ICE for now.
>> I don’t get it, what changed in between 2021 and now?
It is more about what didn't change. Tesla hasn't changed, at least it has not kept up with the times. For those who want them, there are better/cheaper/more reliable electric cars on the market. Tesla's answer to the new market is largely just more of the same. Except the Tesla pickup, which was new but also just plain horrible. That fiasco has seriously tarnished the brand.
The article mentions that Tesla cut prices on new vehicles. So if you can buy a new Model Y for cheaper there’s no reason to pay what Hertz thought they could resell for.
Hertz net worth is partially in the vehicles they own. If they need cash, they can sell the cars to make it back. They know that the cars are depreciating assets but they also know that they're still assets. Tesla decided to decrease the amount of profit it made on each car in order to keep a higher sales volume and by doing so caused Hertz cars to instantly depreciate as people could buy a new tesla for cheaper than a used one. Tesla's profit margin was and probably still is higher than most manufacturers so they can afford to drop prices while hertz could not. This kind of reminds me of First Republic bank crashing because 10 year TBills became cheaper than 1 year TBills thanks to the anti-inflation measures the fed used to combat inflation. An unusual set of circumstances.
The challenge of repairs especially from gigacasting is almost certainly a problem at that scale, even without Tesla's slow parts chain.
After finding damage in a car I was going over for a friend, I would avoid them personally even if it made sense for utility needs.
I know repairability isn't a huge deal for most people, but it is for fleets and me, I was surprised Herz made such a commitment as the concerns were well known.
Obviously this is just one aspect of the value crash.
It's not just TSLAs either. A recent episode of ATP talked about getting a dinged bumper fixed on a Rivian that cost ~$20k. That's almost as much as I paid for my last car that still runs great.
I doubt a big company like Hertz carries insurance that’s similar to individual car owners. Presumably they have their own maintenance and repair shops.
Fleets don't go to jiffy lube, when a car isn't being rented (e.g. at the shop) it is costing the company money, and Tesla's price drops cause issues, as covered in Hertz's earnings call.
> For context, collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle.
> Second, where a car is salvaged, we must crystallize at once any difference between our carrying value and the market value of that car. The MSRP
declines in EVs over the course of 2023, driven primarily by Tesla have driven the fair market value of our EVs lower as compared to last year, such
that a salvage creates a larger loss and, therefore, greater burden.
> Taking account of the impact on depreciation, collision and damage and RPU relating to our EV fleet, we estimate that had our fleet in Q3 been similarly sized but comprised solely of ICE vehicles our EBITDA margin would have been several margin points higher.
Not really: A big part of the "MO" of the rental car company is knowing when to buy and when to sell. Cars have very predictable depreciation.
The reason why rental cars are always "generally new" is because they make the most profit selling their cars when they are 1-2 years old.
Before 2020, Teslas kept their value and even appreciated. This was an unsustainable fluke due to high demand and low supply of EVs. (I know someone who sold their 1-year-old Tesla for a profit.) Given how car rental companies work, a fleet made of cars that hold their value or appreciate is ideal.
In 2021 this changed overnight, and clearly Hertz bet more than they should. I own two Teslas and, if I ran a car rental company, I would have had customer demand drive my transition over to EVs. (I've never rented an EV when traveling.)
The value of the cars almost always goes down, and rental car companies churn through cars while making money on rentals. The problem with Teslas is not so much the depreciation, but more so that people don't want to rent them. They were marketed as some sort of upgrade but given the maturity of public chargers, I do not want an EV if I travel somewhere and rent a car, let alone pay a premium.
With a gas car I know I can get gas wherever cars go and that will take a few minutes. With an EV I would have to work out whether my hotel has EV charging/plan travels around chargers in an area not known to me.
I had this issue recently somewhere in the Midwest, and had to specifically say I wanted a gas car because almost everything they offered me was an EV and I really didn’t want to mess around with chargers.
> With a gas car I know I can get gas wherever cars go and that will take a few minutes. With an EV I would have to work out whether my hotel has EV charging/plan travels around chargers in an area not known to me.
Exactly. Most people rent a car when they're traveling, so they're likely to be in an unfamiliar place. Having to figure out and plan around charging the EV is added annoyance at that point. Sure, if you're familiar with the area and know where the chargers are and have some sort of regular schedule that allows you to use them, EVs work well. When I'm driving through rural Idaho with kids in the back who are getting a bit tired and bored, I don't want to have to find an EV charger. The kids aren't going to be happy about having to hang out for 30-40 minutes in some random charging station parking lot. And I'm not going to be terribly happy about extending my drive by that much when a 10 minute break would have done the job.
Until EV charging spots are as ubiquitous and fast as gas stations, you will not solve the problem of range anxiety. It's somewhat parallel to the situation when cars first came about -- there weren't a lot of gas stations. But cars at the time offered significant benefits over other methods of transportation, which made the tradeoff palatable. What do EV's bring to the table -- better acceleration (useless for most people), quietness (most noise while driving is not from the engine)? Most every 'feature' they have over ICE cars is something that ICE cars can have too, or don't matter for the vast vast majority of drivers. They're just another car, but with the added annoyance of using a fuel source that's not as commonly available.
The depreciation on EVs is actually quite ludicrous. I have a 2018 Leaf that has 30k miles on it. I took it in for warranty repairs to a local dealership and while I was waiting looked at some of the 2024 Leafs and the starting price was 35k. The trade in value of my leaf? 6k.
The dealer told me that the price of all EVs is much lower in resale due to the incentives offered on new EVs.
I found it entirely preposterous that the difference between the 2018 leaf and 2024 leaf was really 29k for 60 additional miles of range. Materially that was really the only difference between the two models (and 30k miles, but still).
Leafs are about the worst on resale value though. EV buyers have largely realized the battery life on Leafs aren't as good as liquid cooled EV batteries, and the fact they don't support CCS or NACS means they're incredibly limited compared to pretty much every other EV on the market.
Other than comparing the major price changes in OEM prices of Teslas no other EV has had nearly as bad of a time as Leafs.
I mean, sure. The charging network is actually why I've been telling people to avoid them, since CHAdeMO is very hard to find. But then why is the new sale price so high compared to the resale?
Let’s say your goal was to improve the electric vehicle charging network. Is there a reasonable way to create a government incentive for gas stations to add charging spots in their parking areas?
I greatly appreciated Hertz' push into renting EVs. The first EV I drove was a Hertz Polestar and I liked it so much I ended up buying a similar car (Volvo C40).
The depreciation of Teslas is a big problem for Hertz. But also they had a hard time with customer service. There's lots of stories of people having bad experiences with Hertz EV rentals. Personally I had a great experience.
I'm sure after the 5th Tesla battery to be punctured underneath to instantly cause a repair of 2/3rd the entire new car value, they realized there was a problem. After the 50th they threw in the towel and realized this was a bad idea and threw out whoever suggested it in the first place.
Damn the planet, internal combustion for the profit.
I looked and there were some in the $22k-$26k USD range. Locations were mostly Orlando, Portland, and somewhere in Maryland I didn't bother to remember. If that's your idea of "cheap" then have at it. The last time there were articles about their selloff, I recall some around $14k-18k USD.
Since the OEM surely do not sell cars loosing money, it's clear that current western prices are not competitive at all, to the point our automotive industry is DOOMED. Or our OEMs can make a Telsa for 10.000 or they are out of the game.
Certainly, the typical contribution that your comments make to the Hacker News & the world around are much larger than mine.
If you had an email / IRC other reachable address in your profile, I would probably contact you to inquire about matters of direction (IE "approaches of things") and few exact questions, though I realize now that many exact questions that one tries to think on spot on abstract matters are easily doxa (least based on doxa) and writing questions specifically to know to ask them when one (not personally—in general) finds the right person to ask them, seems like a right approach... for question asking!
What’s truly notable is that this isn’t a statement of Hertz’s belief in EVs in general. They are expanding their fleet of EVs. But Teslas in particular were problematic, mainly for maintenance reasons. Not a surprise if you’ve been following the category.
I love EVs and Teslas. I love renting them during my business trips and put in extra effort to explicitly seek them out.
Hertz going all-in on Teslas like they did was extremely dumb and short-sighted. I have many reasons why:
- Teslas are far from normal cars. Nothing about operating a Tesla is like any other car out there. Great if you're shopping for a car; terrible if you've just landed into ORD on a Monday morning after getting up at 4am and are sprinting to a 10am meeting. Hertz didn't do even the most basic ground work at understanding how their customers will rent these cars before spending an absolutely ludicrous amount of money on what was, essentially, a stupid flex.
- Hertz ordered the Teslas well ahead of building out a comprehensive charging solution to assuage range anxiety. They, then, did things like charge renters a "full tank" for returning the cars below 25% capacity despite their hotels, their customer sites or any of the areas they frequent having easily-accessible charging options. They should have allowed drivers to return them at whatever % they had left and handled charging logistics transparently.
- Teslas have a non-existent parts network, and becoming proficient enough to repair Teslas on-site required significant labor investments that, given the state of many of the Teslas I've rented, didn't seem to be made.
Hertz had the right idea. EVs are 100% the future. They should have slowed their execution of that idea way the hell down. $300M+ investment in charging solutions throughout the worldwide Hertz network, with a focus on 90%+ coverage in the US. Purchase used Bolts and A FEW partner EVs as upmarket vehicles (which few people rent because businesses won't expense cars at those classes) and design incentives to drive rentals, collect feedback and understand pain points. Shit, I don't know, maybe spending a few dollars on creating an actual dedicated rental type for EV tiers instead of lumping them in with the same tired rate codes from the 80s so that renters who expected an ICE don't get an EV and vice versa! Or, maybe, spending a few dollars tracking inventory levels so that those who DO rent Tesla EVs don't come to learn upon arrival that all of them are INOP (see point above).
But, no. Instead, Hertz is going to Hertz and sell these vehicles off to stop the bleeding and go back to the ICE-only strategy that already wasn't working for them.
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[ 2.8 ms ] story [ 134 ms ] threadAt the time, I found his claims hard to believe but I didn't have much conviction given his extremely strong track record up to that point.
I'm sorry, I can't tell if this is sarcasm or not.
If they truly believed these cars would soon drive themselves, that’s entirely the fault of executives who didn’t do the minimum due diligence. Spending $100k to get a few consultants’ opinions would have been enough to pop that bubble.
Entirely? Like 100%?
It's only a problem if you are poor.
But more than one part can be guilty.
The latter can still be fraud, but the bar is much higher. Hertz would have to show that Tesla actually promised self-driving in a contract.
[0] https://news.ycombinator.com/item?id=39928913
EDIT: Not understanding the downvotes.
Board members and executives have a fiduciary duty to shareholders. They let their hubris get the best of them and that left the company with a fleet of assets that are depreciating rapidly, even by automotive standards. Thus the company is not returning as much value as it could if it had purchased more traditional vehicles.
"I have a fiduciary duty to shareholders" can't just be used by executives and board members to explain away budget cuts and massively upending peoples' lives with layoffs. It should cut both ways.
Or are we going to just finally admit that this excuse only serves to protect management and capital?
It seems to me that sometimes somebody has to try a thing for us all to find out that it doesn’t work. If people with money in the company were sure it was a dumb idea all along, couldn’t they have sold their shares? Or even done fancy options trades to profit from their contrarian certitude?
Why would a court be involved in something like this, where management very clearly said what they were going to do, they did it, and it just didn’t work out the way they’d hoped?
If Tesla's lack of parts is the problem - and the article asserts that as a possible problem - then it's nothing to do with hindsight. Tesla either had the demonstrable ability to provide repair/replacement parts on time, or they didn't. You get that in writing and you have people actually dig to see if the supply chain was there. That's something you check before you ink the deal.
The article also mentions that there are other EVs in the fleet that haven't caused the financial problems. In other words, there's something about how Hertz structured the Tesla deal that was less-than-brilliant.
> Why would a court be involved in something like this, where management very clearly said what they were going to do, they did it, and it just didn’t work out the way they’d hoped?
Because they may not have done their due diligence in signing the deal with Tesla, and it's costing shareholders money. Making bets is one thing; making one that deals with something outside of your ken is another. Your job as a board or c-suite is to find the people to give you the straight dope on things you don't know about, not be distracted by new shiny from Silicon Valley.
That resale value retention was harmed by two things that would not have been evident when they purchased the EVs:
1.) Tesla started cutting prices on new EVs.
2.) Incentives to purchase new EVs stayed high.
If we interpret fiduciary duty that broadly, I think I better start cutting grass instead.
Who's saying that engineers should be thrown in jail for making a mistake?
I'm saying that there's reason to believe that maybe Hertz's leadership didn't do their jobs. Lawsuits for that kind of thing are filed all. The. Time. in this country. If we're here to create value for shareholders by any legal means, and they don't do that, well... the monetary loss and resulting lawsuit is the risk that justifies the insane amount of money people in that level of the company make. Who knows, maybe the suit would be tossed.
If they don't want to deal with that, maybe a nice six-figure and full benefits compensation package would be more their speed.
Sounds like the executives who did the deal should have come to an understanding with Tesla about not doing things to massively dilute the value of the fleet.
Either they forgot to, or they bought the bullsh*t. Either way they're incompetent and don't deserve more money than most people will make in their entire lives within the span of a few years of work. Drag them in for a deposition to find out which one it was and recover some of the money.
That explains quite a lot, right there.
Mark Fields, who had spent ~30 years at Ford and was fired for not moving them fast enough into EVs, was the interim CEO while they searched for and found the Goldman guy for their permanent CEO. It was Fields that announced the deal with Tesla, although you have to wonder how much of it was already in place - he had been CEO for like 3 weeks at that point. Or, you know, maybe his thought process was "I'm not making this mistake twice" and the finance bros loved it and that's why they hired him.
I find it easier to believe that Hertz thought electric vehicles would be a big consumer draw but, as a sometimes renter, I have trouble seeing the appeal of dealing with something unfamiliar as a renter aside from maybe a one-time novelty.
I can see why car rental companies expect fossil fuel cars to be returned with a full tank, but for an electric car, they can charge it themselves. Being able to return the car without having to worry about recharging would make the electric cars more attractive.
The challenge here is that they didn't invest in building charging infrastructure at ALL of their locations (neighborhood centers, small airports, hotels, etc).
This is problematic because a renter that decides last minute to one-way their car from a prime location to a non-prime location without charging first essentially took that car out of rev service for the day. An ICE car would never have that problem.
This, of course, was fine when used EVs barely lost their value, but now that they depreciated like a rock since 2023, these cars are a cumulative black hole in forward revenue.
Interesting. I rent just about that often, but I try to get a car that I'm already familiar with. If I'm renting a car, I'm probably somewhere that I'm not familiar with and have my hands and brain full of other stuff that needs attention. The last thing I want to do is add "get used to a different car" to that list.
Most EVs, and Teslas particularly, have very different controls than the cars I am used to. I actively avoid them all mostly for that reason.
I make 2-3 long trips per year, and I rent a car for each. Why?
- I buy cheap, reliable transportation with a focus on commuting. You don't want to be in my car for several hours on a long trip.
- If I break down, the rental company takes care of it. I don't have to find a shop and wait for a part.
- I save a fortune. I know people who base their car-buying decision based off the couple of long trips they make per year. They end up paying 2x - 3x more for their car than I've paid for mine. They also typically have higher fueling costs and higher repair costs.
- When I do get an EV, I don't have one yet, I won't worry about range anxiety
That last point is what I never understood about Hertz - you should be pitching your rentals to EV owners as a solution for range anxiety on long distance trips. Easy peasy! You get sales. Not here's unfamiliar technology you're using in an unfamiliar place, figure it out! How did they ever think that was a smart idea?
It didn't happen to work out. However if it did, they would be hailed as visionary heroes.
Big companies seem to be worse than you'd think at filtering out obvious nonsense vendor claims.
(Notably, people at Walgreens were going, "er, yeah, not sure about this, seems like bullshit", but they were overruled by the decision-makers).
https://insideevs.com/news/727657/tesla-fsd-unsupervised-202...
The only record he had was ambition. Otherwise, his companies' record is filled with delays. And his personal record is filled with hostilities.
If you mean to say his ambitious and callous track record gave you hope that you will see rogue bullish auto driving, I understand you. I am still waiting for this to happen. I am expecting him to launch a self drive that is both bullish and dangerous and a mess on the roads.
Otherwise, his other claim that CURRENT vehicles (at the time) will be upgraded to self driving, was entirely a let-down and an opener for lawsuit and false advertising.
1) Charging complexity at Hertz, turnaround time for vehicles that are not fully charged. 2) Body Repairs. Tesla is still notorious for bad repair lead times and costs. 3) 2021 was near peak Tesla pricing.
edit just to add: This is much less of a problem for individual owners; I know people who are still happy with their Teslas, and a single person needing a single replacement car while theirs is awaiting repair is not a big deal. But a car company needing a thousand replacements while a thousand cars are sitting in storage is pretty bad for them.
Further, these were relatively early model 3 with not great initial quantity, and Hertz had a bad operational experience for various reasons that are causing them to unload a bunch all at once.
Finally, Musk’s antics are arguably causing brand damage.
All of these impact resale value.
It's really amazing to see.
I bought my Model 3 Performance in 2019 for ~$57K. If I were to buy today, it'd be $56K. Now, a $1K drop doesn't seem like a lot, but there's been a lot of inflation in the last 5 years, and the M3P today has a couple newer features that mine doesn't have, like a power lift trunk, heated steering wheel, adaptive suspension, a screen for the rear seats, and faster acceleration.
Accounting for inflation alone, the M3P today should be costing ~$70K. With all the added features, it really should be $75K. But it's only $56K.
https://www.tesla.com/blog/what-you-need-know-about-federal-...
In America? I thought Uncle Sam put a stop to that.
I, for one, bought a used electric car recently for over half off the MSRP and it’s been an excellent car. It’s quiet, it’s fast, if I sit in my garage for 5 minutes when I arrive and answer a text message blowing the air conditioning that’s fine. I even just charge with the 120V outlet. But if you don’t have the ability to charge at home or work, it’s going to be more annoying than visiting a gas station, so likely better to stick with ICE for now.
It is more about what didn't change. Tesla hasn't changed, at least it has not kept up with the times. For those who want them, there are better/cheaper/more reliable electric cars on the market. Tesla's answer to the new market is largely just more of the same. Except the Tesla pickup, which was new but also just plain horrible. That fiasco has seriously tarnished the brand.
After finding damage in a car I was going over for a friend, I would avoid them personally even if it made sense for utility needs.
I know repairability isn't a huge deal for most people, but it is for fleets and me, I was surprised Herz made such a commitment as the concerns were well known.
Obviously this is just one aspect of the value crash.
They expected to save on maintenance but the higher repair costs seem to have destroyed that benefit.
who pays for repairs when you crash into Hertz Tesla?
https://ir.hertz.com/static-files/75a583c0-90e0-496a-8b45-9f...
> For context, collision and damage repairs on an EV can often run about twice that associated with a comparable combustion engine vehicle.
> Second, where a car is salvaged, we must crystallize at once any difference between our carrying value and the market value of that car. The MSRP declines in EVs over the course of 2023, driven primarily by Tesla have driven the fair market value of our EVs lower as compared to last year, such that a salvage creates a larger loss and, therefore, greater burden.
> Taking account of the impact on depreciation, collision and damage and RPU relating to our EV fleet, we estimate that had our fleet in Q3 been similarly sized but comprised solely of ICE vehicles our EBITDA margin would have been several margin points higher.
The reason why rental cars are always "generally new" is because they make the most profit selling their cars when they are 1-2 years old.
Before 2020, Teslas kept their value and even appreciated. This was an unsustainable fluke due to high demand and low supply of EVs. (I know someone who sold their 1-year-old Tesla for a profit.) Given how car rental companies work, a fleet made of cars that hold their value or appreciate is ideal.
In 2021 this changed overnight, and clearly Hertz bet more than they should. I own two Teslas and, if I ran a car rental company, I would have had customer demand drive my transition over to EVs. (I've never rented an EV when traveling.)
With a gas car I know I can get gas wherever cars go and that will take a few minutes. With an EV I would have to work out whether my hotel has EV charging/plan travels around chargers in an area not known to me.
Exactly. Most people rent a car when they're traveling, so they're likely to be in an unfamiliar place. Having to figure out and plan around charging the EV is added annoyance at that point. Sure, if you're familiar with the area and know where the chargers are and have some sort of regular schedule that allows you to use them, EVs work well. When I'm driving through rural Idaho with kids in the back who are getting a bit tired and bored, I don't want to have to find an EV charger. The kids aren't going to be happy about having to hang out for 30-40 minutes in some random charging station parking lot. And I'm not going to be terribly happy about extending my drive by that much when a 10 minute break would have done the job.
Until EV charging spots are as ubiquitous and fast as gas stations, you will not solve the problem of range anxiety. It's somewhat parallel to the situation when cars first came about -- there weren't a lot of gas stations. But cars at the time offered significant benefits over other methods of transportation, which made the tradeoff palatable. What do EV's bring to the table -- better acceleration (useless for most people), quietness (most noise while driving is not from the engine)? Most every 'feature' they have over ICE cars is something that ICE cars can have too, or don't matter for the vast vast majority of drivers. They're just another car, but with the added annoyance of using a fuel source that's not as commonly available.
The dealer told me that the price of all EVs is much lower in resale due to the incentives offered on new EVs.
I found it entirely preposterous that the difference between the 2018 leaf and 2024 leaf was really 29k for 60 additional miles of range. Materially that was really the only difference between the two models (and 30k miles, but still).
Other than comparing the major price changes in OEM prices of Teslas no other EV has had nearly as bad of a time as Leafs.
The depreciation of Teslas is a big problem for Hertz. But also they had a hard time with customer service. There's lots of stories of people having bad experiences with Hertz EV rentals. Personally I had a great experience.
Damn the planet, internal combustion for the profit.
Since the OEM surely do not sell cars loosing money, it's clear that current western prices are not competitive at all, to the point our automotive industry is DOOMED. Or our OEMs can make a Telsa for 10.000 or they are out of the game.
I might be wrong, but that's what I see.
Certainly, the typical contribution that your comments make to the Hacker News & the world around are much larger than mine.
If you had an email / IRC other reachable address in your profile, I would probably contact you to inquire about matters of direction (IE "approaches of things") and few exact questions, though I realize now that many exact questions that one tries to think on spot on abstract matters are easily doxa (least based on doxa) and writing questions specifically to know to ask them when one (not personally—in general) finds the right person to ask them, seems like a right approach... for question asking!
Hertz going all-in on Teslas like they did was extremely dumb and short-sighted. I have many reasons why:
- Teslas are far from normal cars. Nothing about operating a Tesla is like any other car out there. Great if you're shopping for a car; terrible if you've just landed into ORD on a Monday morning after getting up at 4am and are sprinting to a 10am meeting. Hertz didn't do even the most basic ground work at understanding how their customers will rent these cars before spending an absolutely ludicrous amount of money on what was, essentially, a stupid flex.
- Hertz ordered the Teslas well ahead of building out a comprehensive charging solution to assuage range anxiety. They, then, did things like charge renters a "full tank" for returning the cars below 25% capacity despite their hotels, their customer sites or any of the areas they frequent having easily-accessible charging options. They should have allowed drivers to return them at whatever % they had left and handled charging logistics transparently.
- Teslas have a non-existent parts network, and becoming proficient enough to repair Teslas on-site required significant labor investments that, given the state of many of the Teslas I've rented, didn't seem to be made.
Hertz had the right idea. EVs are 100% the future. They should have slowed their execution of that idea way the hell down. $300M+ investment in charging solutions throughout the worldwide Hertz network, with a focus on 90%+ coverage in the US. Purchase used Bolts and A FEW partner EVs as upmarket vehicles (which few people rent because businesses won't expense cars at those classes) and design incentives to drive rentals, collect feedback and understand pain points. Shit, I don't know, maybe spending a few dollars on creating an actual dedicated rental type for EV tiers instead of lumping them in with the same tired rate codes from the 80s so that renters who expected an ICE don't get an EV and vice versa! Or, maybe, spending a few dollars tracking inventory levels so that those who DO rent Tesla EVs don't come to learn upon arrival that all of them are INOP (see point above).
But, no. Instead, Hertz is going to Hertz and sell these vehicles off to stop the bleeding and go back to the ICE-only strategy that already wasn't working for them.