Hertz Global Holdings, Inc HTZ has taken a bold step by choosing to sell roughly 20,000 electric vehicles (EVs) from its U.S. fleet, constituting about one-third of the global EV fleet.
The divestiture, which commenced in December 2023 and is scheduled throughout 2024, encompasses a variety of makes and models.
Hertz anticipates that this move will provide a better equilibrium between supply and the anticipated demand for EVs, while also reducing the disproportionate number of lower-margin rentals and mitigating damage expenses associated with EVs.
The electric vehicles intended for sale will, however, remain eligible for rental within its fleet during the sales process.
A portion of the proceeds from the EVs sale will be reinvested in purchasing internal combustion engine (ICE) vehicles to meet customer demand.
The company foresees an additional $245 million in depreciation expenses from this planned sale in the fourth quarter of 2023.
This non-cash charge signifies the write-down of the EVs’ carrying values as of December 31, 2023, to their fair values, minus related expenses associated with the vehicle disposition.
Hertz does not anticipate the reduction in the EV fleet and the subsequent addition of ICE vehicles to have a significant impact on its asset-backed securitization facilities.
The company expects the downgrade in fleet and reinvestment to enhance Adjusted Corporate EBITDA throughout 2024 and 2025, with an incremental free cash flow generation of approximately $250 million – $300 million combined over 2024 and 2025.
Hertz projects its revenue for Q4 of 2023 to range between $2.10 billion-$2.20 billion, with a consensus of $2.20 billion.
Financial results for the fourth quarter ended December 31, 2023, are due to be reported on February 6, 2024.
Price Action: HTZ shares are currently trading lower by 5.19% at $8.86 as of the last check on Thursday.
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