➡ Hertz is now selling up to 20,000 Teslas from their fleet, a decision which had generated interest in the company while also propelling Tesla to become a trillion dollar company in 2021; however, Hertz ended up buying fewer Teslas than initially planned.
➡ The decision to buy Teslas at full price, without a fleet purchase agreement with Tesla, has been seen as a major misstep for Hertz who essentially helped market Tesla’s vehicles without any benefit to themselves.
➡ Furthermore, Elon Musk’s decision to continuously cut Tesla’s prices has also negatively influenced Hertz’s investment, as it has depreciated the value of their fleet.
➡ Rental companies, especially those like Hertz, rely heavily on discounted rates offered for buying vehicles in bulk, a privilege not extended to them with their Tesla purchase.
➡ Hertz’s strategy of buying and promoting Teslas has been characterized as a desperate attempt to generate interest in a recently bankrupt company, with the negative fallout prompting some to question the value of investing in such enterprises.
➡ Hertz’s stock has dropped 45% year over year and they are planning to cut one third of their electric vehicle fleet due to the demand-supply mismatch and cost issues related to EVs.
➡ People are unwilling to pay premium prices for something inconvenient. Thus, making large investments without scaling up gradually is perceived as unwise, leading to low stock prices.

➡ Over the next two years, the company aims to match its operating charge with its EBITDA and increase cash flow by $250-$300 million.
➡ The company plans to sell 20,000 electric vehicles by 2024, which will contribute to a net depreciation expense of $245,000,000. This amount can then be written off as an expected loss from this investment.
➡ The commentator has a personal investment in meta, a company that made a record high recently.
➡ The company’s financial performance and operational integrity are critical, along with reflecting the trend that Tesla is the largest fleet in the country.
➡ There is recognition that the value of electric vehicles like Tesla declines after purchase, a fact that needs adjusting to.
➡ The demand for the company’s product is consistent and satisfying, with quarterly income meeting seasonal expectations. Unfortunately, the cost base is influenced by factors beyond control, which require adjustment.
➡ The initial assumption was that electric vehicles would offer a new experience for customers. While this was proven true, the demand was insufficient to maintain a large fleet.
➡ Eventually, the best-selling electric vehicles and Teslas will become the most rented vehicles, however, that time has not yet arrived.
➡ Despite lower demand than anticipated, there remains a significant customer group that is willing to pay premium prices.
➡ The commentator personally would not invest in Hertz or similar companies, but bases investment decisions on long-term prospects, not on current market conditions.
➡ An example given was Meta, which despite initial negative trends, took off later on. Thus, investors should focus on the fundamentals of companies before investing and should hold onto investments despite short-term difficulties.
➡ In conclusion, the commentator does not recommend investing in Hertz, emphasizing that such an investment could lead to about a 45% loss year over year.

Hertz is now selling up to 20,000 Teslas, up to 20,000 of their fleet of teslas. Take a look of what’s being reported. And they had them as an interviewee on CNBC. I mean, it’s just fascinating to me because I think back to when Hertz announced that they were going to buy a ton of teslas. This was 2021. We were still in kind of the meme stock era. It was very clearly, to me, it seemed like a play on the part of just bankrupt Hertz to really generate interest in the company and interest in their strategy going forward.

And it made Tesla a trillion dollar company. And it was soon thereafter that. It was about a year ago now that we saw in the regulatory filings that Hertz was actually buying a whole lot fewer teslas than they initially announced and even falling well short of their plans for the number of teslas that they were going to purchase. They’ve really sort of taken a bath on those purchases.

It can’t help that Elon Musk has cut price so much, and that’s got to be a big factor here. Craig, unfair to you, but let’s try to go there. What’s a new Tesla cost? What’s a used Tesla cost now? And what’s it going to cost in 90 days? Yeah, I think if we think about the cheapest Tesla you can get your hands on, right? A model three. I mean, this is a car that was supposed to out of the gate, cost $35,000.

The company is now fairly close to that in terms of how much you can pay for a new one. And that moved down dramatically last year. This is a company that just repeatedly was cutting price to try and keep growth going. It was effective in helping the company to continue to increase volume, but they really took it on the chin in terms of margin, and it really burned Hertz.

And over here in Europe as well, you’ve heard rental companies gripe about what the price cuts have done from a depreciation standpoint for their fleet. And that’s because, and I’m going to get the video that he did on the CNBC with the CEO. That’s because, first of all, Hertz had no fleet purchase agreement with Tesla. When y’all getting y’all Chevy Malibu’s and Toyota Camrys and Kias and Optimas and all of that stuff, when y’all go over into national and Hertz and Avis rental car and enterprise and Alamo and all of these same companies that’s all owned by the same people, when y’all go into these companies, they are getting a severely discounted rate for how much they are paying for these vehicles.

The first mistake that Hertz made is they paid full price in order to try to market themselves when they were really just doing Tesla’s job for them. By marketing Tesla’s vehicles, Tesla was getting free promotion that was charging them full price. And then Hertz ordered a whole bunch of them at retail instead of getting them at fleet sales and wholesale. That’s number one. Number two, they can’t control Elon Musk, because Elon Musk is going to do what’s in the best interest of Tesla, not necessarily what’s in the best interest of Hertz.

So one of the things that if you study historically, automotive companies, they don’t really make a lot of money off of rental car companies and fleet sales. They charge them a different rate because they agree to buy more of them. They swap out their cars, and they wind up selling them on the market in order to keep their fleet fresh. They don’t get all of the bells and whistles.

They just get enough in order to make sure that you’re going to be satisfied as a customer when you rent out these vehicles, as far as being able to charge the premium prices for it. And the auto manufacturers, even back when things start getting a little bit tighter for the auto manufacturers, a lot of shareholders were okay with auto manufacturers not selling as many cars over into the rental car companies because it wasn’t necessarily a profitable venture for them, especially with car sales.

Now, truck sales is a little bit differently, but especially with car sales, it wasn’t really a profitable thing to do. So when you seen Hertz make this move, this is why I don’t like investing in these companies. I don’t like investing in the enterprises. I don’t like investing in airline stocks, because first of all, they’re the first people, or the first companies that people walk away from. As far as leisure travel activity, when there’s a crunch, whenever there’s layoffs, whenever the economy is messed up, if there’s a pandemic, the first thing that people are going to cut out is leisure vacations, traveling cars, hotel rooms, all of that stuff.

I remember my dream. Even being a young man, one of my biggest dreams was, this is bad for Hertz. Not Tesla. This is bad for Hertz. Jessica. One of my biggest things was I wanted to own a boutique hotel. Not anymore. Because as I grew older and I became a man, I understood the inherent risks and the true costs of what it take in order to own a hotel.

And then also the repercussions that come along with that. Once you’re in a situation when the economy crash and the worst thing that you could do is be the first person on the chopping block, whenever there is a crash or an issue or a war or inflation issues or people trying to cut back, you don’t want to be the one that’s at the forefront of the movement as far as the first thing that people cut out when they having issues with their budget.

This is Hertz CEO answering questions from CNBC as far as his announcement to cut fleet sales or cut fleet investments. Pretty big news from the major rental car company that all of us know. $9. 15 a share this year or year over year. One. Year over year. Now listen, 2023, you could miss most companies, especially technology companies, brick and mortar, Amazon, Walmart, all the way across the board.

You could barely miss year over year. Tesla is, I mean, I’m sorry, Hertz Global ticker symbol HTZ is down 45% year over year. Now, I made a 40% return on Rivian stock from November over to December alone. On Rivian stock from November to December alone, Hertz is down 45% year over year. And their stock price is at $9. 15 a share. They’re announcing this morning it will cut one third of its electric vehicle fleet over the year.

CEO Steven Schurz joins us right now to discuss the company’s decision. Steve? Well, first of all, welcome. Just welcome, street. Thank you, Jim. Good to be here. Thanks. Good to see you. All right. The one damage I know you is one thing and one thing only. The man who just knows to tell the truth and nothing but the truth about financials from the days when you were at Goldman.

This seems like a very positive for Hertz, the numbers, but definitely an asterisk for the adoption of evs in this country. Well, I think, look, we took a bold move and are making a strategic adjustment to our fleet to take 20,000 electric vehicles out of the fleet. It’s really to respond to the reality, which is we’re trying to bring supply in line with demand, and we’re addressing a cost issue that happens to be related to the evs in the context of damage and damage costs.

That’s what it is. But in the end, this is about the numbers. It’s about the financial performance and the operation. Let me translate this for you all from a C student’s perspective. Bold move means I made a bad investment. Bold move means I made a bad investment. And glow. Hardy, you are absolutely right. Before new presidency, for you to be losing in the middle of an election year when it’s incentivized for the incumbent to make sure that they’re doing very well in the stock market because people’s money and how they affect it financially is going to influence how they vote is wild.

Bold move means that you made a bad investment and you made a bad decision. Never scale too fast. Never ever try to scale too fast. When you try to have too much growth too fast, either two things is going to happen. Either you’re going to crash out or you’re trying to get your company sold and you’re about to IPO. Obviously, Hertz is not in a position of IPO because they’re a traditional company that’s been around for a long time and they so focused on growth.

And right after the pandemic, you do not want to try to scale too fast. And so ordering too many vehicles, and we don’t even truly have the infrastructure because again, remember, people that rent vehicles or coming from out of town in order to do so, unless you’re going over into a supercharger or a charging station, it doesn’t even make sense, right? Unless you get in the Airbnb or something like that.

And I will say that Tesla is the best in the game when it comes to these charging and infrastructure network, but you got to build out the infrastructure to support the investment that then people can capitalize off of as far as the premium price that they’re willing to pay for it, but they’re not going to pay a premium for something that’s inconvenienced in them. And for you to make that big of a bet instead of scaling it up and seeing what it is that it’s going to do is wild.

It’s stupid. And that’s why your stock price is so low. Appreciation and appreciation, but equally the operational integrity of the business. And so we’ll put EBITDA on in the next two years that will equal what the charge was, and we’ll increase cash flow by about $250 to $300 million. All right, so let’s look at this. They selling 20,000 of their electric vehicles over 2024, which means that you guys are going to get it for cheap sales, will account towards $245,000,000 of a net depreciation of expense related to.

So now they get to write off $245,000,000 because that’s how much they expect to lose as a result of making this investment. $245,000,000 of net depreciation and expense. Net depreciation expense related to the sale. So basically, you get in the cars at a bargain if you’re buying it from Hertz. It’s not about the broader issue of meta. Made a record high today. Yes, I am invested in meta.

That’s one of the people that. One of the companies that’s on my stock list, we’re going to go over it in stock chasers, stock club, whatever it is that you all want to do on this Sunday. For the company, it’s about financial performance and operational integrity and adjusting ourselves. I think that one of the things that you were spot on was that, look, Tesla is the largest in the country, and you wanted your fleet to reflect Tesla at the same time.

Unlike what Kathy Wood said earlier, you were explaining that there is depreciation. These do not go up in value after you buy them. No, I mean, look, the reality here is that we’re experiencing the consequence of decline in teslas, but in evs more generally. So at the beginning of this year, when Tesla took down the price of their cars, residual price falls, depreciation goes up. That’s obviously a cost to the I’m up 16% reality.

Tesla did what they did for reasons that are presumably good for their company. But we just need to adjust to the reality of what the cost input is of this car. And so we’ve made this move to really put ourselves back on track. It’s interesting to note, Jim, that demand for our product is real and is sustaining what we put in our ak. As an indication of what happened in the fourth quarter, demand was there, revenue was in line with what expectations were on a seasonal basis.

The issue I’m addressing is one of our cost base. That’s one of the influence evs have had on that cost. And there are certain circumstances like price decline, like residual decline and depreciation. That’s out of our control, but you need to react to it and we’reacting, so that’s interesting. That’s different from demand or behavioral friction when someone comes to the counter. Because originally the thinking was, this will be a nice way for people to experiment.

Did that happen or did it happen? It did happen, and it is happening. It’s just not happening at a level of demand that justifies us maintaining a fleet of this size at this moment. In know Carl, the one thing I would say is that at some point, the reality of evs and Teslas being the best selling car will at some point render them the best rental car. It’s not yet.

So we may have been ahead of ourselves in the context of how quickly that will happen, but that will happen. And I think in the end, we’re in the business of giving consumers choice. We’re including in that choice electric vehicles. And there is a significant component of our customer set that are still paying us a premium for these. It’s not at the level of demand that we anticipated.

And I think a smart company is one that’s agile, makes an adjustment, takes away the distraction financial, and loses $250,000,000 so that you can write it off because you made a bad decision and a bad bet. I wouldn’t invest in Hertz personally. I don’t even like rental car companies. I don’t like airlines, I don’t like hotel chains. I don’t like any of that. I don’t like any of it at all.

Real estate Jones says Tesla is taking a hit on the market. I don’t look at what’s currently going on in the market to determine whether or not I’m going to invest in a company. I look at the long term prospects and what’s going to happen ten years from now. I don’t buy and sell based off of what’s currently happening in the market today. I’m not a day trader.

I’m a long term investor. And if I believe in the company and the fundamentals of the company is great, then I’m going to invest in it. I’ll give you an example. Meta everybody was down on Meta. Everybody was down on meta. In 2022, stock was down. The whole stock market was pretty much down, but the stock was down and all of that. It took off and killed it in 2023.

It’s still taking off in 2024. But if you would have sold in 2022 because, oh my God, the stock is down. No, you ride the wave. And if you actually believe in the fundamentals of the company and what the CEO is doing as far as its leadership and the eight ways in which I believe that you fundamentally evaluate whether you should invest in a company, then you stick with it for a long time and then you let it pay off for you.

You don’t get rid of it. When things start to get difficult, you start have to buy in more if the fundamentals of the company is great. So I think that Hertz is crazy. And if you invest in Hertz, in my personal opinion, I think that you’re doing yourself a disservice. You would be down at least 45% year over year. .