Why one rental company just bought a Tesla fleet (and another just got rid of them)

Friday, 30 April 2021

Car rental company Go Rentals received a government subsidy to purchase a fleet of electric vehicles. It now has 10 Tesla Model 3 for hire. (First published in May 2021).

The Government’s energy efficiency agency has helped a car rental company buy 10 new Tesla as part of a drive to increase motorists’ exposure to electric vehicles.

On Tuesday Go Rentals started renting out its Tesla Model 3 cars, the first fully electric vehicles (EV) in its fleet of about 1100.

Go Rentals owner John Osborne said it bought the cars new for about $75,000 each making for a total investment of $750,000 in cars and about $80,000 on eight chargers. On a single charge the Tesla has a range of up to 508 kilometres.

The Teslas would have an average hire rate of about $150 a day, compared to an entry level petrol vehicle which cost about $75 a day, Osborne said.

Insurance for the Tesla works out about a third more expensive as well.

Go Rentals owner John Osborne says the addition of Tesla EVs for hire is part of a wider sustainability strategy for the company.

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Osborne said the target market for its Tesla was not just travellers and holidaymakers but also people considering owning an EV and wanting to rent one for a weekend, so they could try before they buy.

The Energy Efficiency and Conservation Authority contributed $180,000 to the initiative as part of a low emission vehicle contestable fund designed to encourage uptake of electric vehicles and alternative transport modes.

Go Rentals is not the first rental car company to offer Teslas or receive funding from the government authority.

Snap Rentals chief executive Jamie Bennett said it introduced four of the sportier Model S Tesla to its fleet about four years ago when they first became available in New Zealand.

The Covid-19 downturn meant Snap Rentals got rid of them last year but it had big plans to continue down the EV path.

Snap’s fleet was 30 per cent hybrid, and it had ambitions for its entire fleet to be plug-in hybrid, battery hybrid or electric by 2025, he said.

Go Rentals has added 10 Model 3 Tesla EVs to its fleet.

The main barrier to operating electric vehicles as rentals, especially Tesla, was the high purchase price, he said.

Being a luxury vehicle with a longer charge range, the Teslas could be hired out at a higher rate and were more suitable for self-drive tourists, he said.

“But obviously the cost to hire that is remarkably more expensive than to hire just a normal ICE (internal combustion engine) vehicle.”

The road infrastructure to support EVs, such as charging stations, was not quite developed enough to fully support EVs for self-drive tourism, particularly for more affordable EVs with a smaller range, he said.

“It's a bit of a difficult one.”

Pre-Covid Snap was able to turn a profit on the Teslas, he said.

Snap had fully electric shuttle vehicles taking customers to and from the airport in another initiative supported by Energy Efficiency and Conservation Authority.

He said it was good to see competitors like Go Rentals introduce Teslas.

“It's all for the greater good.”

Osborne said Go Rentals was on a mission to become more sustainable. Its offices had been carbon-neutral for three years, not including the emissions created by its fleet, and it planned to instal solar panels at its Auckland base.

“We're trying to be as green as we can within a sustainable business model.”

He said it would be OK if the Teslas broke even in the first year or two.

“If we can keep them sustainable, and they can pay their way that's fantastic.”

The company aimed to expand its EV fleet over time, he said.

“As the economics justifies it, we will accelerate that as fast as possible. Economics do have an impact on what we can sustain.”

Adrian Duque says companies introducing EVs to their fleet are being market leaders.

One of the conditions of the government grant was that Go Rentals must supply the lower South Island, so it would base two Tesla in Dunedin and two in Queenstown. It was also providing a charger for public use in Queenstown.

The authority’s investment and engagement group manager, Nicki Sutherland, said since the launch of the low emission contestable fund it had committed $29.4 million in government funding to 180 projects, matched by $62m from applicants.

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“Support for rental car operators provides an accessible way for people to experience EVs, and supply through to the second hand car market given the rapid turnover of rental vehicles.

“We know that getting people behind the wheel and experiencing an EV is one of the most effective ways to build familiarity and favourability,” Sutherland said.

Research showed that after driving an EV, 76 per cent of people said it improved how favourably they felt about EVs, 63 per cent said it made them more confident that EVs could meet their needs, and 69 per cent said it made them more likely to consider buying an EV.

Co-funding projects such as Go Rentals Tesla purchase helped limit the risks for early adopters, and should encourage others across the market, especially as demand for EVs continued growing, and businesses continued to grow their electric fleets, she said.

“That’s especially important in the business and government sectors, as fleet managers will have increased access to a low-risk way to try out new technology.”

Successful applicants to the latest round of the fund (round 10) will be announced by Energy and Resources Minister Megan Woods in July.

“Beyond that, we’re working to refocus the scope of the Fund, as its original purpose is less relevant with far higher EV uptake now.”

Adrian Duque of sustainability and e-charging company Schneider Electric, said not a lot of people would have experienced driving an EV and, until they had, they would not understand the benefits of driving one.

“The majority of people would consider buying an EV after having a test run in it,” Duque said.

People who already owned EVs would be highly likely to rent an EV from car rental companies, he said.

But for a non-EV owner it would be a step into the unknown, and a lack of education about how to operate an EV, such as where to charge, may be intimidating, he said.

“But with a Tesla, you’re basically fine. Nobody travels 400km a day unless you are travelling out of town.”

The Climate Change Commission, created by the Government to give independent advice on meeting climate change targets, made a draft recommendation for a ban on internal combustion light vehicles entering or being built in Aotearoa no later than 2035.

The Government has promised all public sector new cars will be electric by 2025.

Of the more than 4 million vehicles in New Zealand just over 26,000 were EVs.