Another screeching U-turn on EVs! Now Hertz halts deal to buy 50,000 electric Polestars but agrees not to sell the 13,000 it has bought (to avoid a fire sale tanking secondhand values)

Hertz has backtracked on its plans to buy 50,000 electric cars from Polestar, saying the rapidly falling price of electric cars makes it too risky.

Following the lead of other companies – and increasingly consumers – the rental giant is worried it will buy electric cars only to find their prices drop shortly afterwards.

Companies with large fleets need to be sure that tens of thousands of cars won’t suddenly drop in value, as this could cost them millions of dollars.

Another factor for Hertz’s turnaround is simply that customers don’t want to rent electric cars for long trips – deterred by range fears and a lack of charging stations.

In December, Hertz said it was selling tens of thousands of Teslas for the same reasons.

In April 2022, Hertz agreed to buy 65,000 cars from Polestar over five years. So far it has bought 13,000, but it doesn’t want the rest.

Polestar CEO Thomas Ingenlath (pictured) told the Financial Times that Hertz could withdraw from the deal last fall

The move was part of Hertz’s strategy to ensure that a quarter of its rental fleet would be electric by the end of 2024 – a target the company has since abandoned.

CEO of Polestar told the Financial Times it allowed Hertz to withdraw from the deal in the fall of last year, provided it agreed to hold on to the 13,000 cars it had already purchased for at least a year before selling them.

The EV maker is concerned about a ‘fire sale’ that could drastically reduce the value of used Polestar cars by flooding the market with significant supply.

Those fears seem justified. Tesla suffered exactly that when, in January, Hertz announced it would sell 20,000 of its cars, some of which were listed on the used vehicle website for just $17,000.

The average value of a used Tesla fell by more than $1,000 in the first half of January, DailyMail.com announced last month.

Hertz also offered Polestar the right of first refusal to buy back the cars if the company wanted to remove them from its fleet, Polestar CEO Thomas Ingenlath said.

He told the Financial Times that Polestar had a “clear intention” to revive the deal with Hertz and continue selling cars to the rental company in the future.

While it appears the deal was officially dropped last year, news of the U-turn is only being reported this week.

Hertz announced its fourth-quarter results today and blamed the poor results on “headwinds” with electric cars.

Hertz CEO Stephen Scherr previously alluded to the issue during the company’s third-quarter earnings call in October.

‘Declines in the manufacturer’s recommended retail price for electric cars over the course of 2023, mainly caused by Tesla, have reduced the fair market value of our electric cars compared to last year, so that a salvage will lead to a greater loss and therefore a greater burden,” he said during the company’s third-quarter earnings call in October.

Over the past year, Polestar shares have fallen 87 percent

Meanwhile, shares in Hertz have fallen by 50 percent. During Hertz’s Q4 earnings call on Tuesday, the CEO blamed the poor results on ‘headwinds’ caused by EVs

Volvo bought Swedish company Polestar in 2015 and established it as a specialist EV brand shortly afterwards. Volvo has been producing Polestar models ever since.

News of the deal’s cancellation comes days after it was announced that Volvo would stop financing Polestar, instead handing responsibility to its parent company – Chinese car group Geely.

Geely has several other brands under its umbrella, including Lotus, Smart and Zeekr.

It also comes after Polestar announced plans to cut about 15 percent of its workforce and months after struggling automakers started production of the Polestar 4.

Over the past year, Polestar shares have fallen 87 percent. Hertz shares are down 50 percent.