Hertz Global Holdings, Inc HTZ has announced plans to sell roughly 20,000 electric vehicles (EVs) from its U.S. fleet, constituting about one-third of its global EV fleet.

The divestiture, set in motion in December 2023 and slated to unfold throughout 2024, encompasses various makes and models.

Hertz anticipates that this move will help align EV supply with anticipated demand, eliminate a disproportionate number of lower-margin rentals, and reduce damage expenses associated with EVs.

It’s worth noting that the EVs marked for sale will continue to be available for rental within its fleet during the sales process.

A portion of the proceeds from the EV sale will be reinvested into acquiring internal combustion engine (ICE) vehicles to meet customer demand.

The company foresees an additional $245 million in depreciation expenses from this proposed sale in the fourth quarter of 2023.

This non-cash charge represents the write-down of the EVs’ carrying values as of December 31, 2023, to their fair values, minus related expenses linked to the disposition of the vehicles.

Hertz does not expect the reduction in its EV fleet and the subsequent addition of ICE vehicles to significantly impact its asset-backed securitization facilities.

The company projects that the fleet reduction and reinvestment will enhance Adjusted Corporate EBITDA throughout 2024 and in 2025, and expects to generate incremental free cash flow totaling approximately $250 million to $300 million over the aggregate period of 2024 and 2025.

Hertz anticipates reporting revenue for Q4 of 2023 in the range of $2.10 billion to $2.20 billion (consensus $2.20 billion).

The financial results for the fourth quarter ended December 31, 2023, will be disclosed on February 6, 2024.

Price Action: HTZ shares are currently trading lower by 5.19% at $8.86 as of the latest check on Thursday.

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