In a bold move to transform a century-old car rental business for the modern era, a pair of finance veterans made a daring bet on electric vehicles (EVs). However, what seemed like a visionary strategy ultimately led to financial turmoil and a strategic U-turn. Bloomberg’s Erik Schatzker sheds light on the rise and fall of Hertz’s electrification plan.

The genesis of this saga dates back to 2021 when Hertz, under new ownership, embarked on an ambitious electrification plan. The goal was to revolutionize the rental car industry by phasing out gas guzzlers and replacing them with Tesla’s sleek electric vehicles. The plan appeared promising at the time, representing a forward-thinking approach to sustainability and innovation.

Schatzker reveals that his involvement began three years ago when the electrification plan was conceived. “It seemed like a great idea to them and me,” Schatzker admits. The allure of modernizing an age-old business model with cutting-edge technology was undeniable.

However, as Schatzker explains, what began as a promising venture soon encountered insurmountable challenges. The demand for EVs from rental and purchasing perspectives proved lackluster. “Some of it for sure is early EV demand from a rental standpoint; it just isn’t there yet,” Schatzker notes. Additionally, inexperienced EV drivers behind the wheel of Teslas led to a surge in accidents, exacerbating Hertz’s financial woes.

Moreover, Elon Musk’s unexpected price cuts in 2023 further destabilized Hertz’s financial footing. The resultant depreciation costs damaged the company’s balance sheet, prompting a strategic reassessment. Hertz’s decision to offload thousands of Teslas and revert to gas-powered vehicles signifies a significant retreat from its electrification ambitions.

With Stephen Scherr, the former CEO and CFO of Goldman Sachs, departing, Hertz is navigating a leadership transition. Gil West, a seasoned executive with extensive experience in the transportation sector, now assumes the helm. His appointment signals a concerted effort to steer Hertz through turbulent waters and execute a strategic turnaround.

As Hertz embarks on this new chapter, the electrification debacle serves as a poignant reminder of the perils of premature innovation and the importance of prudent business decision-making. While the allure of groundbreaking initiatives may be enticing, navigating uncharted territory requires careful consideration and foresight. For Hertz, the electrification gamble is a cautionary tale, highlighting the inherent risks of disrupting traditional business models without a clear path to success.