Hertz Reports Unexpected Q3 Loss as High Depreciation Takes Its Toll

Hertz Global Holdings Inc. experienced a significant third-quarter loss that exceeded analysts' expectations, largely attributed to high depreciation expenses from its fleet vehicles. Following the release of these financial results, the rental company’s shares fell by over 4%.

The company faced a $1 billion asset impairment during the quarter, attributed to a decline in the value of its fleet over the past year. This decrease is associated with a general decline in vehicle prices, linked to ongoing consumer hesitancy regarding major purchases amid economic uncertainties.

Previously, Hertz announced its intent to reduce its vehicle inventory and revealed plans to sell around 30,000 electric vehicles (EVs), including cars from Tesla Inc. (NASDAQ:TSLA). This decision was partly a response to the high repair costs associated with these vehicles. However, the declining demand for used cars presents a potential challenge for Hertz, particularly after the company made significant investments in EVs, including an order for approximately 100,000 Tesla vehicles in 2021.

Market research from Cox Automotive indicated that affordability remains a barrier for consumers, especially due to a lack of models in the popular $15,000 price range targeted at used car buyers.

Hertz's depreciation per unit rose by 89% compared to the same period last year, reaching $537 million for the quarter ending September 30.

On an adjusted basis, Hertz reported a loss of 68 cents per share, which was worse than analysts' expectations of a 50 cent loss, as compiled by LSEG. The company's overall quarterly revenue also decreased by 5% year-over-year to $2.58 billion, falling short of the anticipated $2.7 billion.