Recently, due to the high cost of electric vehicle maintenance and weak rental market demand, Hertz, a well-known car rental company in the United States, has decided to stop using electric vehicles and plans to sell the existing 20,000 electric vehicles. Hertz is one of the world's largest car rental companies, with more than 8,100 locations in 148 countries. The company has been actively working on the transformation of new energy vehicles, ordering up to 100,000 electric vehicles from Tesla in 2021 and 65,000 vehicles from Swedish electric vehicle company Polestar in 2022. The ambitious goal is to electrify a quarter of the company's vehicles by the end of 2024. Hertz's massive purchase of 100,000 electric vehicles was sold for about $4.2 billion, a move that was once hailed as the largest single deal ever made in the electric vehicle space and sent Tesla's stock soaring at one point. However, it is regrettable that Hertz has now completely abandoned the electric car rental business. Is the rental market for electric vehicles really so tough?
The American giants withdrew with a broken heart
Hertz, a century-old car rental giant, had ambitions to build the largest fleet of electric car rentals in North America. At the time, Hertz had high hopes for Tesla, believing it would appeal to EV users and environmental advocates looking for a fresh experience. In addition, they generally believe that electric vehicles are less expensive to maintain than gasoline vehicles and have a higher retention rate in the used car market.
However, the transition to electrification proved to be an operational nightmare for Hertz. First, the price of Tesla's models has been reduced by 30% from the time of purchase until early 2024, resulting in a significant reduction in the value of Hertz's EVs. To make matters worse, U.S. car rental users have less trust in electric vehicles. They are more inclined to choose gasoline vehicles, and once Tesla is the only option, users will turn to other car rental companies. This is due to the lack of charging facilities in the vicinity of most Hertz outlets, which requires users to spend a lot of time and effort looking for Superchargers.
In addition, the cost of repairs is also a major pain point. It was revealed that Hertz's Tesla vehicles were four times more likely to be involved in accidents than other vehicles, causing repair costs to skyrocket. Hertz reported that its vehicle operating costs reached $5.5 billion in 2023, up 13% from the previous year and 39% from 2021.
The crisis sparked a heated discussion in Hertz's Board of Directors. After a long debate, the board finally concluded that abandoning electric vehicles was the only way forward. Although the order was originally intended to push the car rental industry towards green and sustainable development, it turned out to be a classic business failure for a variety of reasons.
Fan Yongyue, executive deputy general manager of Hengyu New Energy Vehicle Rental Co., Ltd., pointed out that the fundamental reason for the lack of adaptation of electric vehicles in the US rental market is the imperfection of charging infrastructure. The vehicle-to-pile ratio directly affects the experience of using an electric vehicle. According to the data, the vehicle-to-pile ratio of public charging piles in Europe and the United States is more than 15:1, far worse than China's 7.5:1. At the same time, the development of the charging pile market in European countries is uneven, and the construction density is extremely low.
In contrast, China excels in this regard. According to the "2023 National Electric Vehicle Charging and Swapping Infrastructure Operation" report released by the China Charging Alliance, as of December 2023, the cumulative number of charging infrastructure in the country has reached 8.596 million units, a year-on-year increase of 65%. Among them, the number of new charging piles in 2023 accounts for 40% of the cumulative number. Fan Yongyue said bluntly: "There is no other country in the world that has such a ubiquitous ultra-high voltage grid and such a large number of charging piles as China. In China, whether it is a bustling city or a remote village, charging piles can be easily found. The improvement of infrastructure is the cornerstone of electric vehicle leasing, which is the advantage of the Chinese market and the weakness of the US market. ”
Chinese companies are already profitable
Unlike U.S. car rental companies, which have taken a heel, Chinese car rental companies have tasted the sweetness of electric vehicles.
Qiao Wenqian, Vice President of Marketing of eHi Car Rental, said that eHi Car Rental is the first brand in China to test the water of electric vehicle leasing business. As early as 2010, eHi Car Rental cooperated with BYD to launch the first electric vehicle leasing pilot service in Shenzhen with F3DM models, in 2013, eHi Car Rental cooperated with SAIC Motor to launch a large-scale electric vehicle leasing business in Shanghai, focusing on the Roewe E50 model, and opened the first electric vehicle rental franchise store in China, and in 2014, eHi Car Rental became Tesla's first corporate customer in China.
At present, eHi has more than 10,000 new energy vehicles, mainly the most popular brands among C-end consumers, such as Xpeng, Tesla, ARCFOX, Volkswagen ID., etc. Qiao Wenqian further introduced that the acceptance of electric vehicle leasing has obvious regional characteristics, and it is more popular in areas with high market penetration of new energy vehicles and mild climate throughout the year.
Therefore, in mature markets with a penetration rate of more than 40% of electric vehicles, such as Shanghai, Sanya, Haikou, etc., there are natural user acceptance advantages and a more complete energy supplement support system, which is more suitable for promoting electric vehicle leasing.
At present, in the market suitable for the promotion of electric vehicle leasing, electric vehicles, especially popular models, are very popular, and many electric cars have a high degree of topicality, and "renting" as an immersive test drive has become a very popular way to experience. "The competition in China's new energy track is very fierce, but the competitive landscape has begun to highlight, and the top 10 brand models in monthly sales are more favored by leasing users. Qiao Wenqian said.
Fan Yongyue, who is also optimistic about electric car leasing, said: "You can tell from the name of our company that all our vehicles are electric vehicles. Fan Yongyue introduced that Beijing Hengyu New Energy Automobile Leasing Co., Ltd. was jointly established by BAIC Group and Foxconn Group, and currently has about 2,000 electric vehicles, all of which are BAIC's models, and the business is mainly distributed in Beijing and Changzhou.
Unlike Hertz, which declared bankruptcy in 2020 due to the epidemic, Fan Yongyue revealed that Hengyu New Energy Car Rental Co., Ltd. happened to start making a profit during the epidemic. On the one hand, the integration of car sharing, time-sharing rental, and taxi has greatly increased the rental rate of vehicles, and on the other hand, new energy vehicles have cultivated consumers after years of development, making users begin to accept electric vehicles. More importantly, the update and iteration of technology has significantly improved the driving range of electric vehicles, and the use experience of electric vehicles has gradually surpassed that of fuel vehicles.
Consumers determine market trends
"Your honey, your arsenic" is a saying that reveals the unique phenomenon of electric vehicle leasing in the Chinese market. In fact, it's not the leasing companies that choose electric vehicles, it's the choices of consumers that are driving the trend.
Fan Yongyue has experienced all the company's models, and he deeply feels that the driving experience of electric vehicles is far better than that of gasoline vehicles. What's more, electric vehicles are cheaper to use, and this market demand is driving consumer choice. "A liter of oil is about 7 yuan, and a kilowatt-hour of electricity is only a few cents, and the cost of charging an electric car is almost negligible. He explained that, especially for ride-hailing drivers, the lower the cost of ownership, the higher the profit.
He revealed that at present, the rental rate of Hengyu new energy vehicles has reached 98%, the failure rate is the same as that of fuel vehicles, and the maintenance cost is lower than that of fuel vehicles, but the residual value of second-hand cars is lower than that of fuel vehicles. As the penetration rate of electric vehicles continues to increase, so does consumer acceptance of electric vehicles. The environmental and economic advantages of electric vehicles are becoming increasingly prominent, and Fan Yongyue is optimistic about the prospects of electric vehicle leasing. However, he also stressed that leasing companies need to be more refined in their operations, because car rental involves vehicle management and user operations, and is an industry that requires refined operations, and profits come from efficient operations.
Qiao Wenqian believes that for consumers, the biggest advantage of electric vehicles is that they reduce the cost of travel, and users can directly enjoy the energy supplement discount of driving electric vehicles compared with fuel vehicles. However, for operators, the collapse of used car prices for new energy vehicles is a huge pain point, especially in the context of the intensifying price war of car companies, and the problem of residual value is more prominent.
Despite the challenges, so do the opportunities. With the strong support of the government, China's new energy vehicle market has become the world's largest market, and the penetration rate of new energy vehicle sales has already exceeded 30%, ranking first in the world. "In this era of rapid development of the new energy industry, we have the most convenient energy replenishment system, as well as a richer and more comprehensive product matrix than our counterparts in any country in the world, which can meet the diverse needs of consumers. Qiao Wenqian said. She believes that the rental business of electric vehicles will have a better future.
Qiao Wenqian also revealed that eHi Car Rental provides more than 200 models for consumers to choose from, of which new energy vehicles are an important component, which can meet the differentiated car needs of different consumers. In the future, eHi will optimize and supplement its new energy vehicle products according to market conditions, provide users with high-quality services, and make more beneficial explorations for the development of China's new energy vehicle industry.
Text: Hao Wenli Editor: Guo Chen Layout: Zhao Fangting
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