Polestar (PSNY) shares are falling Monday after car rental giant Hertz (HTZ) announced plans to delay buying its EVs this year.
Scaling back electric vehicle plans
The news comes after the car rental giant said it would sell some of its Tesla models earlier this month.
In 2021, Hertz announced a massive 100,000 Tesla Model 3 order to bolster its EV rental offerings. Hertz followed it up by adding Tesla’s Model Y to its fleet the following year.
A month later, Hertz stuck its first deal with Polestar to add up to 65,000 Polestar EVs. It was a considerable order for the Swedish EV maker at the time after delivering just 29,000 vehicles in 2021. The agreement included purchasing up to 65K Polestar EVs through 2027.
It was also part of Hertz’s goal of EVs accounting for a quarter of its fleet by the end of 2024. However, those plans have since fallen through.
In early January, Hertz revealed it was selling about 20,000 Tesla vehicles. Hertz said it would use some of the proceeds to buy new gas-powered cars after Tesla’s prices fell from their peak. It also announced it would not hit its 25% EV fleet goal by the end of the year.
Hertz delays plans to buy Polestar EVs this year
Now, Hertz is delaying plans to buy Polestar EVs this year. Polestar CEO Thomas Ingenlath told the Financial Times that Hertz CEO Stephen Sherr inquired about pausing the purchase of EVs in 2024 last fall.
Polestar has already sold about 20,000 EVs to the car rental giant over the past two years. According to FT, the Swedish EV maker agreed to waive the required 2024 order.
In return, Hertz agreed not to sell Polestar’s vehicles too early or cheaply, Ingelath said. He explained that the two companies agreed to “keep the cars longer than a year.” If Hertz wants to take Polestar EVs out of its fleet, “we have the right to first refusal.”
Hertz and Polestar have “clear intentions” to reboot large-scale sales, but whether that will happen in 2025 remains unclear. Ingenlath said the companies would “have to review at the time.”
The news comes after Volvo announced plans to sell its nearly 50% stake in Polestar to parent company Geely. Volvo also said it would not be investing in the brand going forward.
Polestar stock was down another 6% in pre-market trading. PSNY shares are now down over 70% over the past 12 months.
City Dwellers’s Take
Hertz’s business model puts the company at high risk while car prices are volatile because it owns its vehicles outright.
The car rental company bought Tesla’s vehicles close to their peak prices. Tesla’s price cuts last year led to lower resale values, putting further strain on Hertz’s margins.
Hertz emerged from bankruptcy after the pandemic halted travel, hitting rental and vacation companies especially hard. The rental giant is set to report earnings on Tuesday. We’ll learn more about Hertz’s financial situation following the release.
FTC: We use income earning auto affiliate links. More.
