Hertz's near-collapse in 2020 exposed a fundamental misunderstanding among traditional car rental operators: electric vehicles operate under entirely different economic and operational rules than gasoline-powered cars. The rental giant's leadership failed to account for these differences when aggressively expanding its EV fleet, nearly destroying the company in the process.
The core problem centered on charging infrastructure and customer expectations. Hertz customers renting EVs faced unpredictable charging times, limited range, and sparse charging networks outside major metros. Rental agreements didn't account for the need to charge vehicles between customer uses. Gas cars refuel in five minutes anywhere. EVs require 20 minutes to several hours depending on charger type. This mismatch cascaded through Hertz's operations, stranding vehicles and frustrating renters who discovered they couldn't complete planned trips.
Insurance costs compounded the problem. EV battery replacement costs tens of thousands of dollars. A single collision could total an otherwise serviceable vehicle. Hertz faced exploding insurance premiums and liability exposure that traditional car rental economics never anticipated. The company estimated damage claims on EVs ran substantially higher than conventional vehicles, eating into already-thin rental margins.
Customer acquisition costs spiked. Hertz marketed EVs aggressively but underestimated how few customers understood EV limitations or wanted to navigate charging logistics during a vacation. Marketing spend ballooned while conversion rates fell. Contrast this with gas cars, where customers feel comfortable renting sight unseen because the product is familiar.
Maintenance patterns differed radically. While EVs require less oil-based servicing, battery thermal management and electrical systems demand specialized technician expertise that traditional rental facilities lacked. Parts availability remained limited. Downtime stretched longer when vehicles needed repairs, reducing the percentage of fleet available for rent at any given time.
The pricing problem cut deepest. Hertz charged rental rates similar to gas vehicles despite higher acquisition costs and operational expenses. The company couldn't scale volume fast enough to achieve the cost efficiencies that would have supported competitive pricing. Customers with range anxiety also demanded daily rental rates below what economics supported, creating a squeeze Hertz couldn't escape.
Fleet depreciation rates proved unpredictable. Used EV values fluctuated wildly as battery technology improved and consumer sentiment shifted. Hertz couldn't accurately project residual values when it came time to sell off used rentals, making it impossible to plan capital expenditures rationally.
By contrast, companies that succeeded with EV fleets built operations around EV realities rather than forcing EVs into gasoline-era playbooks. They invested in dedicated charging infrastructure, trained technicians in battery systems, adjusted insurance strategies, and priced rentals to reflect true operating costs. They targeted customers comfortable with EVs rather than forcing EVs onto reluctant renters.
The lesson applies beyond rental cars to any sector deploying EVs at scale. Adoption requires operational redesign, not just vehicle substitution. Supply chains, maintenance networks, insurance products, customer training, and pricing models all need reconstruction. Companies treating EVs as interchangeable with conventional vehicles overlook the systems thinking required to operate them profitably. Hertz's near-death experience stands as a cautionary tale for any business assuming new technology fits into old structures.