Travel managers are under pressure to help their employers reduce their carbon footprint. One seemingly obvious route would be to shift car hire from internal combustion engine (ICE) to electric vehicles (EVs). According to the clean transport campaign group Transport & Environment, petrol cars emit 241 grammes of carbon-dioxide equivalent per kilometre whereas EVs emit 75 grammes, even after battery production is taken into account.
As recently as summer 2023, when Hertz CEO Stephen Scherr led his company’s second-quarter earnings call, the direction seemed clear for car rental suppliers and their corporate customers alike. Hertz was earning a premium of US$30-$35 per booking for EVs compared with ICE cars, while customers, said Scherr, “want to satisfy their own carbon footprint objectives, so they are compelling employees to get into EVs.”
A few months later, however, and the EV revolution is on hold. In January, Hertz, which had led the rental sector for EV purchases in the US and development of partnerships for charging stations, announced it will sell 20,000 EVs, one-third of its total EV fleet, and use some of those funds to buy ICE cars instead.
Last week, another rental major, Sixt, also applied the brakes. It stated that Sixt was profitable in 2023 in spite rather than because of its EV fleet, observing a “significant deterioration in market conditions for e-mobility.” Electric vehicles “will continue to make up part of the Sixt fleet in the future” but only “with a high degree of flexibility.” Sixt added it is bringing “forward significantly” its phasing out of electric risk vehicles – EVs with no buyback or leasing arrangements.
On the demand side, says Stuart Donnelly, president of mobility for ground transportation mileage analyst The Miles Consultancy, there is a conflict between stakeholders over engine choice. “Corporate clients want EVs to be available because it is more sustainable but the challenge remains for the user to want that option,” he says.
A survey by BCD Travel of 900 business travellers who have used car rental, published in January, bears out this assertion. It found 81 per cent of those surveyed were not using EVs and another 13 per cent used them only rarely.
This contrasts sharply with adoption of long-term car rental and company fleet vehicles, where “there is a high appetite for EVs, mainly driven by taxation,” says Donnelly. France has a law mandating a minimum proportion of EVs in company fleets.
So what is the problem? “Short-term rental and EVs are not a marriage made in heaven today,” says Donnelly.
Richard Thompson III, mobility manager for the DACH region retail chemist dm-drogerie markt, explains why. His company is aiming to take its own vehicle fleet 100 per cent electric but Thompson foresees no such mandate for car rental any time soon.
“If you have a short journey, from Karlsruhe [the company’s base] to Frankfurt, for example, an electric car will do the trick, but if it’s a longer ride, people do tend to pick up a gasoline car instead because charging times are still a hassle,” he explains. “It’s a question of how much more time our co-workers will need to get from A to B. If they were only recharging once, you could still argue it was worthwhile using an EV, because you would have to take a break anyway, but we have had people driving from Karlsruhe to Salzburg having to stop three times to charge their car.”
The frequency of charging, Thompson adds, depends on several variables, including the car make and model, and driving conditions – whether the car heater is used, for example.
Business travellers are time-poor. Unlike private EV owners, business car renters are rarely able to charge their vehicles at home and therefore rely almost entirely on the publicly available charging network. But they lack time to plan stops for recharging points, let alone wait for charging to complete.
According to BP, its BP Pulse150 rechargers, typically found on BP petrol station forecourts, take around 15 minutes to provide electricity for 100 miles of driving. A BP Pulse50 charger, typically found at motorway stop forecourts, takes 15 minutes to provide only 40 miles of driving.
Furthermore, adds Donnelly, “when you get there, is the charging point available and is it working?” He also points to the cost of public chargers, which he estimates at £1 per kilowatt hour compared with £0.15 for home charging. “If you’re relying on a public charger, the cost outweighs the cost of using petrol or diesel,” he says.
Rental companies have other reasons for being wary of electric, even if they can command premium rates. Sixt reported that the falling value of used EVs is leading to increased depreciation and resale losses, while Hertz stated that repairing an EV is twice as expensive as repairing an ICE vehicle.
Putting all these challenges together, Donnelly concludes that when it comes to EVs, “car rental is a follower, not an early adopter. At the moment the marketplace is not mature enough.”
When the charging infrastructure on Europe’s highways improves, that analysis may change, but even allowing for existing limitations, observers believe more can be done right now to encourage corporate EV rentals.
On the supply side, says Sabah Kahoul, France-based managing director of the consultancy Business Travel Purchase, rental companies do nothing to encourage EV use. She contrasts the sector with another form of ground transportation, Uber. Its all-electric Uber Green service is no more expensive for passengers than ICE cars even though drivers earn a ten per cent higher trip payment.
Donnelly adds that rental providers also need to change their rule that, typically, EVs are returned at least 80 per cent charged, which creates a major stress for business travellers rushing for a flight, for example.
But Kahoul says employers need to act too, for example starting to specify in their travel policies that travellers should use EVs for journeys up to a given distance.
Thompson, meanwhile, believes education is key. “We’ve had the idea of staging an EV day where we invite colleagues to test the vehicles and have rental car or fleet providers there, just to get more people familiar with electric,” he says.
And while the EV business rental revolution goes on hold, there are other ways to make corporate car hire more sustainable. Kahoul has two recommendations. The first is to make use of the emissions data that rental providers now include in their reporting. “Instead of saying in your policy you are entitled to rent up to a Compact car [the third-smallest rental size after Mini and Economy], why not say you are entitled to rent up to a specified amount of CO2 emissions?” she asks.
Kahoul also urges buyers to promote car sharing services in cities: renting by the hour or day, which at least utilises vehicles more efficiently. “I see very limited mention of car sharing in travel policies,” she says.
Developing the point further, Donnelly recommends companies create a hierarchy of transport modes for urban journeys with public transport at the top, followed by ride hailing and car sharing, with car rental near the bottom.
According to Donnelly, there are still too many incidences of business travellers renting a car reflexively and unnecessarily. “We are creatures of habit,” he says. “It’s not that people do things to be naughty. The majority of locations are reachable by ride or by rail. If you can transfer even 30 per cent of your employees in terms of modal shift from rent to either ride or rail, the cost potential is unbelievable and the carbon impact is also exceptional.”