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Not grasping the business model

Last week US rental giant Hertz announced it would replace 20,000 EVs with petrol cars, taking a $245m (£193m) hit as it sold the plug-in vehicles because of a rapid depreciation in their value.

Three years ago, Hertz announced plans to buy 100,000 Teslas to electrify its fleet.

But the company said renting out electric cars had proved to be less popular and profitable than traditional vehicles and the cars had also come with higher repair costs.

Europe’s biggest car rental company, Sixt, announced in December that it would be phasing out Teslas altogether, however a spokesman said this was part of its “regular de-fleeting process”.

It is understood Teslas made up a small proportion of Sixt’s fleet to begin with, but the company had concerns over how quickly they lost their value.

OK. And:

Part of the Government’s strategy for decarbonising motoring was to flood the used car market with EVs via fleet operators and company car schemes.

Traditionally, the rental companies have made a profit on their used cars. As mass buyers – really, mass, mass – they get a huge discount from the manufacturer. After x k miles, or y months being rented out, they are sold. The original discount was larger than the depreciation. Used car values are, traditionally, a profit centre for rental companies.

So, govt tries to flood the used EV market, that means depreciation is going to be high – possibly higher than the original discount. The govts plan “works” by destroying the economics of car hire.

What a great plan, eh?

26 thoughts on “Not grasping the business model”

  1. Just goes to show how the people at the top of business are suckered into the Net Zero hype. Easy to vitue signal at your metropoliyan elite dinner parties.
    Why is the clown CEO of Addison Lee still in post after spunking over £30M on electric vehicles that are no use for the taxi business?
    What level of fuck up is required for his mates to bin him off?

  2. «What a great plan, eh? »

    Indeed, but considered against all the other moronic EV state dirigisme and net zero nonsense, a mere bagatelle.

  3. When we all have everything we need (ie, everything we are permitted) in our 15 minute gulags, we won’t need hire cars anyway.

  4. Perhaps this is not really the Government not understanding the business model as hire operators ending their subsidy farming. The Government offers a subsidy on the purchase of new EV by early adopters to offset the rapid depreciation of vehicles which will become outdated rapidly.
    However the writing is now on the wall. As the experience curve starts to kick in we have seen EV get better and cheaper very quickly and subsidies will disappear. Why buy a second hand Leaf from Hertz when you can buy a new MG?
    In a subsidy free world hire companies will only buy EV when like petrol cars they stop getting better and cheaper every year.

  5. Tim – it gets worse:

    The Government is forcing car manufacturers to ensure EVs make up an increasing proportion of their sales until 2035, when the sale of new petrol cars will be banned. A downturn in fleet buyers means car makers face the threat of fines unless they can boost demand elsewhere.

    It’s not a “threat” of fines, massive fines for car makers are baked into law:

    the share of internal combustion engine (ICE) cars must not exceed 78% of new registrations in 2024. Manufacturers above this threshold will be fined £15,000 per additional car.

    Same goes for manufacturers of boilers. Thanks, ‘Conservatives!’

    Griffin, meanwhile, is left to rue his decision to go all electric at Addison Lee on the promise that the world would change around him.

    See also: Britain and Western Europe. The Child Catchers who sold the Net Zero dream are no longer offering lollipops. It’s all cages and tears now.

  6. Joe Smith said:
    “What level of fuck up is required for his mates to bin him off?”

    Problem is the non-execs, who are the main ones who should step in and tell him to stop or leave, are even more likely to be the status-signalling types who like to brag about how they “greened” “their” companies.

  7. EVs are being registered by dealers to sit on forecourts. There is no way to force customers to buy them. What can’t continue will not continue. My petrol cars will last me out if I keep them. If we all keep them will the government take them away, or ban petrol? Let’s put them under pressure and find out.

  8. I know of a large operator hiring out Polestars, of which it bought 65,000 worldwide, at half the cost of a petrol Fiat 500. Not hard to see why: who, hiring a car and therefore out of their usual territory (metaphorical, literal or both), wants the hassle of finding charging facilities? And the T &Cs require the car to be returned fully charged so that you have to spend the last part of the hire period finding a working charger and waiting while it does its job. It seems that big business is utterly in thrall to the Gaia madness.

  9. “….I know of a large operator hiring out Polestars, of which it bought 65,000 worldwide, at half the cost of a petrol Fiat 500. ”

    . . . and with Polestar teetering on the brink of bankruptcy (the fleeing of the CFO is always a strong indicator), the second-hand value of those 65,000 cars is declining as we speak – who would buy a used BEV when the chance of being able to get a replacement battery falls to zero? Their value will decline to the equivalent of the lease cost for however many months of reliable operation a buyer thinks they might have left in them, and then they will be no more than scrap. Yes, that certainly sounds like the green and sustainable outcome to me.

    llater,

    llamas

  10. I do wonder if there’s a business opportunity here.

    Build aftermarket batteries, and sell them to owners at xx% of the cost of new.

    Or, build the batteries, buy up the cars, fix them up and sell them on.

  11. @ CJ Nerd

    In the same way HP blocks the printer you paid for from using a cheaper 3rd party cartridge, the EV makers will ensure they only work with “safe” OEM batteries with the relevant security chip embedded.

  12. @ Joe Smith – considering that some repair shops in the US have successfully “hacked” Tesla’s supposedly closed Ecosystem, there’s hope such a move would only be temporary. The bigger stumbling block would be getting insurance for a “Non-Standard” EV – rates are already going through the roof as it is…

  13. In the same way HP blocks the printer you paid for from using a cheaper 3rd party cartridge, the EV makers will ensure they only work with “safe” OEM batteries with the relevant security chip embedded.

    Except that you can buy 3rd party HP printer cartridges. And they work.

    I suspect there might be a slight legal problem here. A product is sold on the basis that the buyer has full rights of use. That means you have the right to do whatever you want with. If you’re going to build in a restriction like that, then what are you legally selling? The product or the service the product performs? In the latter case, they could find themselves with what could be in effect an open ended warranty commitment.
    No doubt they could make it difficult to produce an after market replacement that functions. What the printer companies do. (Why some don’t work) But not intentionally impossible.
    If they could get away with that, they’d already be producing cars that had no alternative to a dealer service. Entirely technically possible. And desirable by the franchises. It’s the servicing where their money’s made.

  14. You solve the problem of people working around your lock-in by the usual mechanism – incompetent government intervention.

    Remember my use of the phrase “safe”? Well, dangerous lithium batteries can’t be allowed on the road if they burst into flames. So, the usual approach of banning things will be used by the politicians to ensure you don’t get to use the car you paid good money for.

  15. @Joe Smith
    Yeah, I did actually think about that.
    But they do actually have to sell these cars. And the lack of a second hand market won’t help that. That doesn’t of course imply government won’t do something stupid.
    Otherwise. Manufacturers would have to show they’re capable of doing something that aftermarket suppliers are incapable of. They going to unconditionally guarantee their batteries never catch light?

    @DW
    And they did end up with a slight legal prob.

  16. Canon’s inkjets have for years been made with built in obsolescence. After a set number if pages they simply stop working. I had a number of Canons bought around the same time that all died in the same circumstances.

    My Fiat refused to let its Service Clock be reset unless performed by a main dealer. Eventually the clock just switched off and the car works fine.

  17. Canon’s inkjets have for years been made with built in obsolescence. After a set number if pages they simply stop working.
    If a manufacturer actually did package that in the ware & didn’t disclose in the specs they’d be setting themselves up for one helluva class action suit. But I know what you mean. It does feel like it.

  18. Incidentally, I did find with my Brother that the power button doesn’t actually turn it off. It will periodically run through a head cleaning cycle of its own accord. As a very infrequent user, that seems to be where most of my ink cartridges are going. I reckon I print at about 2€ a page. So the question is, is it better to unplug it? Or will not doing the cleaning cycle end up with permanently blocked jets? Choices….

  19. @ BiS – they’re not jets, inkjet is a term of art.

    The head should be parked in a cup or receptacle that seals it from the outside air. Make sure this is clean and not boogered up with dried ink from too many head cleaning cycles. Q-tip and water. If not planning to use it for a week or two, just unplug it. I never had an inkjet cartridge that still had ink in it that wouldn’t restart with no more than a damp Kleenex.

    llater,

    llamas

  20. Thanks for the tip llamas. You’ve probably saved me 50€ a year. And to be able to print without a trip to the print shop. Since this thing won’t do anything unless all colours are available.

  21. “If they could get away with that, they’d already be producing cars that had no alternative to a dealer service”

    But BiS… They are..

    Can’t get the software to monitor/reset/tune the software actually running the car officially, unless you’re an Authorised Dealer.
    Can’t get parts officially, unless you’re an Authorised Dealer.

    Pretty much won’t pass M.O.T. ( or local equivalent ) if they figure out there have been Unauthorised Modifications/Repairs.
    And if your insurance finds out, they’ll be gloating…

    The lock-in is accomplished through post-market and legal requirements…

  22. “Pretty much won’t pass M.O.T. ( or local equivalent ) if they figure out there have been Unauthorised Modifications/Repairs”

    For several years my local garage/MOT station has displayed a note in the waiting room informing customers that – thanks to some new EU legislation – manufacturers can no longer insist they have to do repairs & servicing. So long as the official servicing schedule is followed, and genuine or equivalent parts used, the manufacturer has to stand by their warranty. I don’t know if Brexit has changed anything for us in this regard?

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