Hertz's EV Partnership and Turnaround Potential: Is This the Inflection Point for Value Investors?

In the annals of corporate reinvention, few stories are as instructive-and as cautionary-as Hertz Global Holdings' recent journey. Once a symbol of the EV revolution's overreach, the rental car giant now stands at a crossroads where strategic recalibration and valuation mispricing may converge to create an inflection point for patient investors.

The EV Gamble: A Lesson in Mispricing

Hertz's foray into electric vehicles (EVs) began with a bold bet: in October 2021, it committed $4.2 billion to purchase 100,000 Tesla vehicles, aiming to lead the transition to sustainable mobility. The logic was sound-EV adoption was accelerating, and Hertz saw an opportunity to corner a market. But the execution was flawed. Tesla's aggressive price cuts, designed to boost consumer adoption, rendered Hertz's fleet obsolete almost overnight. By early 2024, the company was forced to liquidate 30,000 EVs at fire-sale prices, a move that slashed its valuation and eroded investor confidence.

The financial toll was severe. Hertz's Q3 2024 earnings revealed a loss of $0.68 per share, far exceeding expectations, as depreciation and operational inefficiencies compounded losses. This mispricing-both of the EVs' residual value and of Hertz's strategic agility-highlighted a critical disconnect between corporate ambition and market realities.

Strategic Reset: Back to Basics

The writing was on the wall: Hertz needed a reset. Enter the "Back-to-Basics" strategy, a disciplined approach focused on fleet optimization, cost control, and revenue management. The results, as outlined in the company's Q3 2025 earnings presentation, are promising.

Key metrics tell a story of recovery:
- Vehicle utilization climbed to 84%, a sign of efficient asset deployment.
- Depreciation per unit (DPU) fell by 49% to $273, a critical lever for profitability.
- Revenue per unit (RPU) rose to $1,530, up 9% sequentially while sequential revenue growth hit 13% from Q2 to Q3 2025.

These improvements have translated into tangible outcomes: Hertz reported its first positive earnings per share in two years, sparking a 40% surge in its stock price. The company is now on track to meet 2026 EBITDA margin targets of 3-6% and aims for $1 billion in EBITDA by 2027.

Is This the Inflection Point?

For value investors, the question is whether Hertz's turnaround represents a durable inflection point or a temporary rebound. The company's strategic reset addresses core operational weaknesses, but risks remain. The EV experiment exposed Hertz's vulnerability to supplier pricing power and technological obsolescence. However, the lessons learned-namely, the importance of aligning fleet composition with demand-suggest a more disciplined approach moving forward.

The valuation itself offers intrigue. With a market capitalization that has yet to fully reflect its 2027 EBITDA aspirations, Hertz trades at a discount to its historical averages. Yet, the path to sustained profitability hinges on maintaining operational rigor and avoiding another overreach.

Conclusion

Hertz's story is a microcosm of the broader challenges facing companies navigating disruptive transitions. Its EV gamble was a costly misstep, but the subsequent strategic reset has laid the groundwork for a more sustainable model. For value investors, the key is to assess whether the company's current trajectory reflects a genuine transformation or a temporary reprieve. Given the progress in metrics like DPU and RPU, and the alignment of management with long-term goals, this may indeed be the inflection point that justifies a cautious bet.