Hertz to order up to 175K EVs from GM to meet EV fleet goals

Kalea Hall
The Detroit News

Hertz Corp. is planning to order up to 175,000 electric vehicles from General Motors Co. over the next five years for its rental fleet, the companies said Tuesday. 

Hertz will offer GM EVs across all brands: Chevrolet, Buick, GMC, Cadillac and also BrightDrop commercial electric vans, with first deliveries of the Chevrolet Bolt EV and Bolt EUV expected in the first quarter of 2023. 

The companies believe the multi-year, multibillion-dollar deal "is the largest expansion of EVs among fleet customers and the broadest" since it will include vehicles from multiple segments at varying price points. 

The partnership with Hertz isn't surprising and could be one of several involving GM. In May, The Detroit News reported GM was in talks with multiple rental car companies, including Hertz. 

"What we've learned is when a customer experiences an EV, they're twice as likely to purchase," Mary Barra said during a CNBC broadcast interview Tuesday afternoon. "This is going to be a wonderful opportunity to showcase General Motors' EVs from Chevrolet all through all of our brands, even including BrightDrop."

During Barra's keynote speech at the Consumer Electronics Show earlier this year in Las Vegas, Enterprise Holdings, a major rental car company with the brands Enterprise, Alamo and National, expressed interest in the Chevrolet Silverado EV, which will be available next year.

Selling to rental car companies has been viewed negatively in the past since automakers make more money from transactions with retail customers. 

Steve Carlisle, GM executive vice president and president of GM North America, told media on a Tuesday call: "Things have a changed a lot," with automakers demonstrating "discipline in terms of finding the right balance point here in terms of how much of our total business rentals should represent."

He added the intention is to sell EVs to rental fleets at "retail margin."

The partnership "is definitely a great opportunity to get consumers exposed to the vehicles in a different environment and in a way that they might not otherwise," said Stephanie Brinley, principal automotive analyst for S&P Global Mobility.

"For Hertz, it's meeting their sustainability goals over time," she said. "And for GM, it's more exposure ... it's meeting their sales and sustainability targets as well."

In the past, some automakers were selling to rental fleets to keep production figures up, but that gave consumers a negative impression of the vehicles. 

"I do think that for the most part there's been a lot of learning and I don't expect it to be handled in the same way going forward," Brinley said.

And just because rental business was handled poorly before, that doesn't mean "this can't be a good opportunity," she added.

 Hertz made a splash last fall when it announced it would offer "the largest EV rental fleet in North America and one of the largest in the world" with an initial order of 100,000 Tesla electric vehicles. The company hired former Michigan quarterback and NFL star Tom Brady to market the $4.2 billion deal. Hertz also has Polestar electric vehicles for customers to rent. 

Hertz CEO Stephen Scherr told CNBC the rental car company's customers "are making an affirmative statement up front that they want to ride in an electric vehicle and I think this deal really gives us the opportunity to expand the choice that they have."

Hertz already has tens of thousands of EVs available to rent at 500 locations in 38 states. Its goal is for 25% of the fleet to be electric by the end of 2024.

GM intends to increase deliveries to Hertz as it rapidly scales EV production between 2023 and 2025. The Detroit automaker plans to have annual production capacity of 1 million EVs in North America by 2025. 

GM produced 3.17 million vehicles in 2018 for North America and 2.87 million in 2019, when the United Auto Workers went on a 40-day strike, halting production across the U.S., according to data from S&P Global Mobility. 

David Whiston, U.S. autos equity analyst for investment services firm Morningstar Inc., said in a statement the GM partnership with Hertz is "good as long as they don’t allocate too much of the production to Hertz over retail customers. Hertz is a good way to get some people who otherwise would not try GM into GM vehicles but you don’t want to over allocate and hurt residual values."

Also on Tuesday, GM in partnership with the Environmental Defense Fund released a set of recommendations to accelerate an all-electric future for passenger vehicles starting in model year 2027.

The recommendations were developed to support the next tier of Environmental Protection Agency clean car standards. The company and the defense fund are encouraging the EPA to create standards to ensure at least 50% of new vehicles sold by 2030 are zero emitting, that there's a 60% reduction in greenhouse gas emissions in model year 2030, and that tailpipe pollution is removed from new passenger vehicles by 2035.

khall@detroitnews.com

Twitter: @bykaleahall