The Scarcity of EVs in Rental Fleets and Its Impact on the U.S. Used Car Market

Introduction

The electric vehicle (EV) revolution is rapidly gaining momentum in the United States, driven by increasing consumer demand, environmental concerns, and government incentives. However, one key sector lagging behind in this transition is the rental car industry. The scarcity of EVs in rental fleets has far-reaching implications, not only for the rental market but also for the broader used car market in the U.S. This article explores the reasons behind the lack of EVs as rental cars and examines how this shortfall affects the availability and pricing of used EVs.

The Current State of EVs in Rental Fleets

Despite the growing popularity of EVs, they remain a rarity in the rental car market. According to recent industry reports, EVs make up less than 1% of the total rental car fleet in the United States. Traditional internal combustion engine (ICE) vehicles continue to dominate, primarily due to the perceived convenience, lower upfront costs, and the widespread availability of refueling infrastructure.

Major rental companies have been slow to adopt EVs, often citing concerns about range anxiety, charging infrastructure, and the higher initial purchase costs of electric vehicles. However, this reluctance is beginning to shift as companies like Hertz and Enterprise have announced plans to incorporate more EVs into their fleets. Despite these efforts, the current availability of EVs in rental fleets remains limited, hindering widespread consumer exposure to electric vehicles.

Impact on the Used Car Market

The rental car industry plays a significant role in the U.S. used car market. On average, approximately 25% of used cars in the U.S. come from rental fleets. These vehicles are typically sold after one to three years of service, providing a steady supply of relatively new and well-maintained used cars to the market. This flow of ex-rental cars helps to keep used car prices stable and accessible to a wide range of consumers.

However, the scarcity of EVs in rental fleets has resulted in a corresponding lack of used EVs entering the market. This shortage has several important consequences:

1. Limited Supply of Used EVs:
   • With so few EVs in rental fleets, the number of used EVs available for resale is significantly lower compared to ICE vehicles. This limited supply can lead to higher prices for used EVs, making them less accessible to budget-conscious consumers who might otherwise consider transitioning to an electric vehicle.
2. Higher Prices for Used EVs:
   • The combination of limited supply and increasing demand for EVs in the used car market has contributed to higher prices for pre-owned electric vehicles. According to recent data, used EV prices have risen by as much as 30% year-over-year, with popular models like the Tesla Model 3 and Nissan Leaf commanding premium prices.
3. Reduced Exposure and Adoption:
   • The absence of EVs in rental fleets also means that fewer consumers have the opportunity to experience driving an electric vehicle. Rental cars often serve as a first introduction to new vehicle technologies, and the lack of EVs in this sector may slow down overall EV adoption rates as fewer people are exposed to the benefits of electric driving.
4. Impact on Fleet Electrification Goals:
   • Many corporations and governments have set ambitious goals to electrify their vehicle fleets in the coming years. The limited availability of used EVs can make it more challenging and costly for these entities to meet their electrification targets, as they may need to rely more heavily on purchasing new EVs at higher costs.

The Future Outlook

While the current situation presents challenges, there are signs of change on the horizon. As rental companies begin to invest more in EVs and as charging infrastructure continues to expand, the availability of EVs in rental fleets is expected to increase. This, in turn, will gradually boost the supply of used EVs entering the market.

Several factors could accelerate this transition:

1. Incentives and Mandates:
   • Government incentives and mandates, such as the proposed EV tax credits and zero-emission vehicle requirements in certain states, could encourage rental companies to adopt EVs more rapidly. These measures could also make it more financially viable for rental companies to purchase EVs, despite their higher upfront costs.
2. Corporate Partnerships:
   • Partnerships between rental companies and EV manufacturers could help increase the availability of EVs in rental fleets. For example, Hertz's recent agreement to purchase 100,000 Teslas is a significant step toward expanding the presence of EVs in the rental market.
3. Consumer Demand:
   • As consumer awareness and demand for EVs grow, rental companies may feel more pressure to offer EV options to meet customer preferences. This shift in demand could lead to a more balanced mix of vehicles in rental fleets, including a higher proportion of EVs.

Conclusion

The scarcity of EVs in rental fleets has a ripple effect on the U.S. used car market, limiting the supply of affordable, pre-owned electric vehicles and slowing the pace of EV adoption. As rental companies begin to embrace the transition to electric vehicles, the market dynamics will likely shift, leading to greater availability and potentially more competitive pricing for used EVs. In the meantime, stakeholders across the automotive industry must continue to push for greater electrification in rental fleets to support the broader goal of reducing emissions and promoting sustainable transportation options.