Hertz Q1 2025: Unpacking Key Contradictions in Fleet Strategy and DPU Targets

Fleet optimization and DPU targets, impact of tariffs on fleet strategy, fleet size and utilization strategy, fleet management strategy and demand generation, depreciation per unit targets and fleet management are the key contradictions discussed in Hertz Global's latest 2025Q1 earnings call.



Fleet Management and Cost Control:
- Hertz's fleet rotation led to over 70% of their core U.S. RAC fleet being 12 months old or newer, with DPU under $300 and DOE per day in the low 30s.
- The company's disciplined fleet management strategy, focusing on reducing vehicle depreciation and leveraging rising residual values, significantly improved financial metrics.

Revenue Management and Customer Strategy:
- Hertz's revenue per day (RPD) was down 5% year-over-year, influenced by a deliberate strategy to orient the fleet mix towards lower depreciating vehicles.
- The company's focus on optimizing revenue management systems, improving demand selection, and enhancing off-airport and mobility business units is aimed at driving long-term margin improvements.

Cost Reduction and Operational Efficiency:
- Hertz achieved a 9% year-over-year improvement in total direct operating expenses, with DOE decreasing by 4% quarter-over-quarter.
- The company's efforts in productivity improvements, structural cost removals, and streamlining operations are evident in these cost savings.

Liquidity and Financial Strategy:
- Hertz maintained a strong liquidity position with $1.2 billion at the end of Q1, extending their revolving credit facility to $1.7 billion until March 2028.
- The company's focus on derisking the balance sheet and pursuing strategic transactions, like the potential ATM equity offering, supports its long-term financial flexibility.