Hertz sees EVs as 10% of its fleet in China one day. Right now, it just wants more than two.

I chatted with Edward Hu, China country manager for global car rental company Hertz, in Shanghai last month to learn more about Hertz’s promotion of electric vehicles in the China market.  I was pleased to hear what sounds like a reasoned approach based on a realistic assessment of the problems and potential for electric vehicles in China.

First, a bit of background.  Hertz www.hertz.com first set up shop in China in 2002.  It was only promoting the brand to China’s international traveler set, however, as an option in foreign countries. In late 2009 Hertz decided to start renting to corporate customers in China, first in Beijing then in Shanghai. Its China business is still very small, says Hu, and the focus is on short-term rental and leasing to other businesses.  Some 80% of Hertz’s business in China is business to business.

There isn’t a huge demand for electric vehicles from business in China. So why is Hertz jumping into the EV sea there?  The global strategy at Hertz is to try to capture trends, says Hu.  “And we do believe EVs will be the future,” he says.

Edward Hu, Country Manager for Hertz China, figures 10% of the Hertz fleet in China could be electric one day.

There is also a nice marketing benefit, of course. It allows Hertz to be a good corporate citizen, helping keep the air clean an all.  Also, Hertz can’t win a price war with local car rental firms, who mainly compete on price, says Hu. Instead, “we try to differentiate ourselves by providing good quality service, a higher standard, and also we get into new trends like EVs,” he says.

It doesn’t hurt that the Chinese government is heavily promoting electric vehicles.  Any foreign company in China that can help out a government goal is bound to earn some Brownie points. And though the Chinese government has dialed back its heavy emphasis on pure electric vehicles, at least in the near term, it does still aim to have a bunch of EVs on the road in the future.  But, it has been having a hard time convincing consumers to buy electric vehicles, even with a hefty subsidy attached. Hertz figures it can help with that.   “EV rental is a big help to the consumer acceptance for the EV (because) they can experience the car first hand,” says Hu.

The government welcomed the suggestion that Hertz could introduce consumers to electric vehicles by including EVs in its rental fleet in China, says Hu.  “We approached the government.  They didn’t have any idea about the car rental industry, “  he says.  “They said, ‘wow, this is a good idea.’  They really like to cooperate with us.”

Not many consumers are being introduced to EVs by Hertz just yet.  So far Hertz only has two BYD e6 crossover electric vehicles for rent in Shenzhen.  http://www.nytimes.com/2011/08/24/business/global/hertz-to-begin-renting-electric-cars-in-china.html

They are in big demand, says Hu.  “Within two hour of release, we had a customer,” he says.  “Two days ago customer wanted to rent an e6 for ten days.”  The EVs rent for less than 400 RMB a day if you drive it yourself; more if you chose the chauffer-driven option.

Hertz has two BYD e6 EVs available for rent in Shenzhen with or without a chaffeur.

Hertz plans to add EVs to its fleets in Shanghai, Beijing, and Chengdu for starters, says Hu. But BYD hasn’t been able to supply the vehicles yet, he says.   Lack of charging infrastructure is also a problem, even in Shenzhen, where the government is building one out.  Hertz is also finding it tricky to set up the meter to calculate how to pay at the charging stations, says Hu.

Hertz is working with General Electric to grow demand for the Hertz EV fleet in China.  In August Hertz and GE Industrial Solutions announced they would bundle EVs provided by Hertz with GE’s recharging stations and offer the package to multinational companies and governments in China.  http://tinyurl.com/ylj2ccx

Now, Hertz is talking with the government in the Shanghai suburb of Jiading (which includes the “Shanghai International Auto City”)  http://english.jiading.gov.cn/ about leasing some EVs for use by city employees, and about ways to promote individual use of EVs.  Not coincidentally, Jiading is a “pilot city” in China for development of an EV infrastructure.  It is trying to create a platform so all the players in the EV supply chain can test their technology, says Hu.

Hertz has ambitious plans to grow its presence in China. It now has only 1,000 vehicles in its fleet in China, and all but two have internal combustion engines.  They are spread out over five cities Beijing, Shanghai, Shenzhen, Tianjin, and Chengdu.  But that will expand dramatically over the next five years, says Hu, to many more cities and up to 40,000 vehicles.

In December of 2010, Hertz launched its Global Electric Vehicle Program.  Among its elements:  Mitsubishi I-Miev EVs are part of the Hertz London fleet,  Hertz plans to add 500 Renault electric vehicles to its European fleet beginning in 2012, and different types of EVs are already available at a number of cities in the U.S.

In China, EVs could be up to 10% of the Hertz fleet five years down the road, says Hu. That could include some hybrid electric vehicles, he says.   “If there is some mature hybrid vehicle available in Chinese market we definitely consider buying them.”

Of course, that will depend on how quickly Chinese consumers warm to electric vehicles.  Hertz doesn’t believe that will happen too quickly because the technology isn’t mature, the cost is high, and the infrastructure is not built out.  But that is changing, and Hertz is doing its part to nudge EV adoption in China along.

“There will be no big change in the short term,” says Hu. “But this is the future.”