It only took a hint toward an electric vehicle transition to send share prices of Avis Budget Group soaring to their highest level ever yesterday (Nov. 2) after executives at the rental car company said they have plans to add more EVs to their fleet.
“You’ll see us going forward be much more active in the electric scenarios as the situation develops over time,” Avis CEO Joe Ferraro said on an earnings call in response to a question on the company’s electric vehicle strategy. While chief financial officer Brian Choi said Avis has kept the plans mum for competitive reasons, he added the company was working with its partners on a plan to adopt EVs at scale.
The company’s stock was up 108% on the news, which comes after one of Avis’s main competitors, Hertz, unveiled a plan Oct. 25 to offer Tesla vehicles to its customers.
Avis announcement comes a week after Hertz, Tesla agreement
Hertz’s stock rose shortly after it announced it would buy 100,000 electric vehicles from Tesla, news which boosted the car maker’s valuation to $1 trillion that same day. Tesla CEO Elon Musk rattled the market again when he tweeted on Nov. 2 that he hadn’t actually signed a deal with Hertz yet, but the rental car company insisted it’s already started receiving orders of Tesla’s Model 3 car.
Regardless of the stability of the deal between Tesla and Hertz, Avis acknowledged that the plan put the industry on alert to where it’s headed in terms of EV transition. “It pushes pace and draws attention to what needs to be done to absorb electric vehicles at scale,” Choi said on the earnings call.
Absorbing EVs at scale may be a tricky task for rental car companies given the manufacturing challenges many other car manufacturers are currently facing. Tesla has been more resilient to supply chain issues than some of its competitors during the pandemic, and it may be a while before other companies producing EVs (such as General Motors or Ford) are in a place where they can fill an order like the one Hertz recently placed.
“It’s probably a wait-and-see approach,” Edmunds analyst Ivan Drury told Quartz on Oct. 25 when asked about whether the Hertz deal would push other rental car companies to pursue similar purchases. “There’s not enough volume being manufactured in the new car industry to allow this to be something that’s easily conjured up.”
For its part, Avis said it spent the last year working with its partners to “optimize a product line” for EVs while considering how to tackle the logistical hurdles associated with bringing on more electric cars. While the rental car industry already seems to be embracing moves to transition to electric vehicles, Avis’s stock market rally shows they may be seen as a sound investment by the wider public as well.