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How the large EV transition is starting within the automobile rental industry

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Tesla Model 3 electric vehicles at a Hertz airport location.

Photo by E.R. Davidson

Not long after Hertz Global Holdings emerged from bankruptcy last summer, reorganized after the Covid-19 pandemic stalled your entire automobile rental industry, the Estero, Florida-based company boldly announced a $4.2 billion deal to buy 100,000 Tesla fully electric vehicles (EVs) by the top of 2022. Similar to that, the race was on inside the industry to transition to EVs from internal combustion engine (ICE) models.

While Hertz was first off the starting blocks, its two biggest rivals, Enterprise Holdings and Avis Budget Group, have since joined in. But similar to the full-scale adoption of EVs amongst American drivers goes to take years, the rental automobile shift also shall be a marathon, not a sprint. “Corporations that operate fleets at our size cannot just activate a dime and next 12 months go all EV,” said Sharky Laguana, president of the American Automobile Rental Association. “Our industry desires to move as fast as it may possibly, but there are some serious and difficult constraints.”

The initial one, Laguana said, “is just getting your hands on the rattling things.”

The $56-billion U.S. rental industry typically buys about one-tenth of auto manufacturers’ recent cars every 12 months, but with persistent supply-chain disruptions, especially the shortage of essential computer chips, the numbers are way down. The industry bought 2.1 million vehicles from OEMs in 2019, Laguana said, compared with only about 750,000 in 2021. U.S. sales of EVs doubled in 2021, but still only comprise about 4% of the nation’s total marketplace for cars and trucks.

One other major speed bump for rental automobile corporations is the paucity of EV charging stations, at airports and other rental locations, hotels, resorts and office buildings, in addition to along local roads and interstate highways. After which there’s the challenge of training and training corporations’ agents and mechanics on EVs, not to say familiarizing drivers on the differences from operating ICE vehicles.

Hertz doesn’t state the general variety of vehicles in its fleet, said Jeff Nieman, senior vice chairman, operations initiatives, so it’s unknown what number of Teslas can be found within the greater than 30 markets currently offering EVs, which now also include the primary of the 65,000 Polestar 2s — an EV brand jointly owned by Volvo and its Chinese parent Gheely which has planned to go public through a SPAC deal — Hertz began purchasing in a five-year deal announced in April. Nieman did say, nevertheless, he’s confident that EVs will represent “greater than 30% of our fleet by the top of 2024.”

Within the meantime, Hertz has several hundred thousand ICE models within the U.S. that shall be rented for years to return, said Chris Woronka, an analyst at Deutsche Bank. Even so, “they’ve decided they are going to carry the EV torch for the industry and be very outspoken about their plans and goals,” he said.

Look no further than the spate of Hertz TV spots, starring NFL superstar Tom Brady touting Tesla rentals, that aired during this 12 months’s Super Bowl. Hertz also has created a dedicated area on its website to assist educate drivers about EVs.

Renting EVs to corporates focused on ESG, carbon neutrality

A primary goal for Hertz, in accordance with Woronka, is the company market. “The leisure customer might think it’s cool to drive an electrical automobile, however the longer game is on the company side,” he said.

Beyond comparing costs of employees driving EVs versus ICE cars — currently skewed by the national average of around $5 for a gallon of standard gas — corporations view EVs as a quantifiable solution to reduce their greenhouse gas (GHG) emissions, meet net-zero goals and burnish their environmental, social and governance (ESG) bona fides amongst sustainability investors and advocacy groups.

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

Not surprisingly, rental corporations themselves are embracing this idea, said Sara Forni, director of fresh vehicles for the nonprofit Corporate Electric Vehicle Alliance (CEVA). While they definitely “wish to get more butts in EV seats,” she said, “in addition they want to satisfy their sustainability goals and greenhouse gas emissions reduction targets.”

Siemens US, an affiliate of the German-based conglomerate, is a flagship member of CEVA and was a part of the Hertz EV program launch last fall. “We fully support our global decarbonization and ESG goals,” said Randall Achterberg, North America travel commodity manager, “and our fleet makes the most important Scope 1 emissions footprint and we’re already making progress with an aggressive EV transition strategy,” referring to GHGs produced by Siemens’ U.S. fleet of nearly 10,000 vehicles. “On the company travel side, we wish to expand our employees’ usage of EVs.”

To this point, Siemens has booked greater than 100 EV rentals with Hertz. “We’re not pushing as heavily as we might prefer to, because they are not ready,” Achterberg said, acknowledging the inherent obstacles in its EV rollout. Siemens is alleviating one stumbling block: it builds EV charging stations and has committed to fabricate one million of them within the U.S. over the following three years.

Enterprise’s early Orlando EV rental automobile experiment

Enterprise might not be as out-front as Hertz with its EV rental program, however the privately held company, headquartered in St. Louis, has been within the exploratory stage since 2014. That is the 12 months it began participating within the Drive Electric Orlando Rental Pilot, a multi-year study sponsored by the Electrification Coalition, a Washington, D.C.-based nonprofit advocating for EV adoption, particularly amongst fleet owners.

The pilot, partly funded by the U.S. Department of Energy, was centered at Orlando International Airport and as well comprised resorts and theme parks in the realm. “We also had close partnerships with local regulators and policymakers, which was critical in ensuring we did this the correct way,” said Chris Haffenreffer, vice chairman of strategy development at Enterprise. The corporate rented all-electric cars, including Chevy Volts and Nissan Leafs to travelers, who were incentivized with perks akin to free charging, parking and valet service.

“Although EVs were [then] an afterthought in our business, the teachings learned are consistent with what we see today,” Haffenreffer said. Namely, getting employees behind the wheel of EVs is crucial, “so that they can communicate actively with customers,” as is partnering with other entities to speculate within the charging infrastructure.

Although the rental corporations have said they’re constructing their very own charging stations, one other critical partner is the U.S. government, which in last 12 months’s bipartisan infrastructure bill earmarked $7.5 billion to states to create a network of EV charging stations. Earlier this month, the Biden administration proposed regulations that might require stations built on interstates with federal dollars to be not more than 50 miles apart.

Enterprise, like Hertz, is specializing in 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 easy methods to operate an EV and the advantages,” Haffenreffer said. But as with leisure travel renters, determining easy methods to get from point A to Point B and easy methods to charge the automobile is increasingly difficult, Haffenreffer said.

Parsippany, Latest Jersey-based Avis saw its stock rocket in early November after it said it was moving into the EV rental business per week after the Hertz-Tesla deal broke, and though its come back down together with your entire market, CEO Joe Ferraro told analysts during a conference call on the time, “You will see us going forward be way more energetic in electric scenarios because the situation develops.”

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

U.S. automakers are spending billions to ramp up their EV production. General Motors goals to deliver 400,000 EVs in North America by the top of 2023, and Ford has committed to 600,000 by that very same time. Considering that renting an EV is basically an prolonged test drive, the rental market is seen as a very important driver in President Joe Biden’s plan for half of all recent cars and trucks sold in 2030 to be zero-emissions vehicles.

“From our standpoint, the rental automobile market makes a ton of sense, especially as OEMs get into longer-range electric vehicles,” said Electrification Coalition executive director Ben Prochazka. “What an important solution to get consumers exposure to recent technology in a low-risk setting.”

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