Because of electric cars: car rental company Sixt is making losses

Although sales and the number of customers reached a record high in 2023, profits at car rental company Sixt have collapsed. The family business even expects a loss for the first quarter of this year. The electric vehicles in the fleet are responsible for this, explained managing director Alexander Sixt, who runs the stock corporation with his brother Konstantin.

Specifically, significantly lower residual values for electric cars and their lower demand among customers compared to combustion engines were the main reason for the decline. Sixt had invested many millions of euros in advertising for its electric cars and charging stations.

Nevertheless, the 42 and 45 year old brothers are sticking to their goal of converting up to 90 percent of the fleet in Europe to fully electric cars by 2030. “We are doing everything in our power to achieve this,” said Alexander Sixt. “We don’t lack commitment.”

Customers reject electric cars

However, he qualified: “It depends on what the customers want.” CFO Kai Andrejewski added: “Our increase in profits last year would have been significantly greater if we had had more combustion vehicles instead of electric cars. Because combustion engines are used more intensively and achieve higher prices.”

Another problem is the sharp fall in prices for used electric cars. This contributed to a loss of 40 million euros last year. The profit before taxes in 2023 was still 464 million euros – supported by the business with combustion engines. The bottom line is that profits fell by 18 percent compared to the previous year.

Used electric car prices are plummeting

On average, vehicles are kept in stock for less than a year. But even during this period, the electric vehicles lose much more value than Sixt had assumed. The used car market for electric cars has collapsed. In contrast, the prices for used combustion engines are rising.

This is mainly due to the uncertainty of how long the batteries will last. Because they are extremely expensive to procure. In addition, the repair costs for electric cars are higher than the landlord originally assumed. The competitor Hertz had already discovered this.

The rise of electric cars poses major challenges for traditional car rental companies, and Sixt is no exception. As more consumers choose electric vehicles for their environmental friendliness and cost savings, car rental companies like Sixt are grappling with a changing market landscape that requires adaptation and innovation.

One of the main reasons for Sixt’s recent losses is increasing consumer demand for electric cars. With increasing concerns about climate change and environmental sustainability, more people are choosing electric vehicles over traditional gasoline-powered cars. This shift in consumer preferences has led to a decline in demand for conventional rental cars, impacting the revenue streams of companies like Sixt that rely heavily on gasoline-powered fleets.

Additionally, the infrastructure required to support electric vehicles, such as charging stations, is still relatively meager compared to the widespread availability of gas stations. This infrastructure gap poses logistical challenges for car rental companies like Sixt and makes it more difficult to offer electric vehicles as viable rental options to customers. Without adequate infrastructure, rental companies could struggle to meet the growing demand for electric vehicles, further exacerbating their financial losses.

Additionally, the upfront costs for rental companies associated with transitioning to electric vehicle fleets can be significant. Electric cars typically have higher purchase prices than their gasoline-powered counterparts, making it costly for companies like Sixt to expand their electric vehicle offerings. Additionally, ongoing maintenance and repair costs for electric vehicles can differ from those of conventional cars, requiring additional investment in training and infrastructure to effectively support electric vehicle fleets.

Opportunities for Rental Companies

Despite these challenges, there are opportunities for rental companies like Sixt to benefit from the growing popularity of electric cars. By strategically investing in electric vehicle fleets and expanding charging infrastructure, rental companies can position themselves as leaders in the emerging electric vehicle rental market. Additionally, partnerships with electric vehicle manufacturers and charging network providers can help rental companies overcome logistical hurdles and accelerate customer adoption of electric vehicles.

In addition to introducing electric cars, Sixt can also explore other revenue streams and business models to offset its losses. For example, offering additional services such as car sharing, ride-hailing and subscription-based mobility solutions can diversify revenue streams and appeal to a wider range of customers. By adapting to changing consumer preferences and market trends, Sixt can overcome the challenges of electric cars and become a stronger and more resilient player in the car rental industry.

In summary, the rise of electric cars brings both challenges and opportunities for car rental companies like Sixt. While switching to electric vehicle fleets can involve initial costs and logistical hurdles, the introduction of electric cars can help rental companies remain competitive in a rapidly evolving market. By investing in electric vehicle infrastructure, developing new revenue streams and adapting their business models, companies like Sixt can overcome the challenges of electric vehicles and position themselves for long-term success in the transportation industry.

 

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