Can Rental EVs Survive After Hertz’s Shift Back to Conventional Vehicles?

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When Hertz announced in 2021 that it would build out its electric vehicle rental fleet, the move was received as a clear signal that the transition to EVs was moving full speed ahead. The company bought 100,000 Teslas and hired Tom Brady to headline its related ad campaign.

But the winds have shifted. Last week, Hertz said it would pull back on that decision and sell a third of its EV fleet. The cost of repairing damage to EVs remains stubbornly high, and, more generally, the company said that it needed to match its supply of EVs with lower consumer demand than anticipated.

There’s another related factor that has received less attention: customer education. Hertz’s 2021 announcement touted data showing widespread consumer interest in EV.

Indeed, survey after survey has shown that a significant share of Americans are interested in going electric. But those same surveys have shown persistent consumer concerns about issues like charging. Electric vehicles are a new technology and most renters are unlikely to know how to operate them yet. From the beginning, a significant part of Hertz’s challenge was not only getting customers interested in EVs but also getting them up to speed on all the ins and outs of operating the technology.

"There are millions of Americans, in fact millions of consumers around the world, who are knowledgeable and experienced in EVs, and they ride them well," CEO Stephen Scherr said on CNBC last week. "There are those that experiment and their knowledge of how to drive this car... may be part of the issue."

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Hertz has tried to address the steep customer education barrier. In its second-quarter earnings call last year, Scherr touted the company’s “robust digital and other educational content” and said it had deployed “EV ambassadors” to inform customers.

And yet anecdotal reports about how well those programs have been executed are mixed. Some renters have reported great experiences with eager associates who explained everything. Others, myself included, have felt left in the lurch. Last November, I rented an “intermediate” car from Hertz only to discover when I arrived to the assigned stall in the parking garage that the company had assigned me an electric vehicle. This was not what I had reserved, and no human had mentioned it to me. I did receive an email from Hertz with resources about my EV rental—but it landed in my inbox when I was already on the road.

Looking through the materials now, they actually seem quite helpful. Short videos explain how to operate each specific EV model that the company rents, and a custom-built website allows the user to chart a journey between charging stations. If only someone from Hertz had told me about it before I got behind the wheel.

The company declined to share any data about the success or challenges of its customer education program citing a quiet period before the company’s coming earnings announcement. But it’s clear that the issue has been a focus. In an earnings call last year, Scherr cited Hertz's customer education programs as a key strategic move to position the company as an EV leader. “What you are seeing at Hertz is an evolution of readiness and smart investments that are not easy to replicate quickly,” he said. The following quarter he cited new “educational tools on EV functionality” to help reduce the frequency and cost of damage to the cars.

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The stakes of customer education are significant. Hertz has positioned its electric vehicle move as a gateway for consumers to experience and eventually adopt EVs and now the pullback has contributed yet another headwind to that bigger objective.

There’s a lesson in here, too, for any company operating a consumer-facing business that’s changing in response to the energy transition. Customers are going to need some hand holding. In some ways, this is an obvious insight. Customer education is a basic component of any business school marketing course. Still, it’s a topic that can often get lost in the midst of seemingly more important concerns about pricing, costs, and other fundamentals. And, as Hertz shows, it’s a task that can be harder than it seems.