Okay, great. Once again, I'm Ryan Brinkman, the US Autos Analyst, at JP Morgan, ready to get going with our next session. Very excited to have here, Hertz and their relatively new Chief Executive Officer, Stephen Scherr. Stephen, thanks so much for making it to the conference.
Thanks for having us. Appreciate it.
Absolutely. You know, I thought, a good place to start might be with, you know, what, what is the very latest that you're seeing out there, in terms of the traditional summer travel season? I think that, your business has a, a lot of insight, into the consumer, the health of the consumer, the confidence of the consumer, and their plans, in advance relative to, travel. What do you see?
Great. Well, I would say that, at a headline, demand remains very strong. We don't see, through the lens of our business, weakness in the consumer. In fact, quite the contrary. The consumer continues to spend considerably on leisure, and we're seeing that across a range of different geographies. In the U.S., leisure travel remains strong. Not all demand is as attractive as other, but we're seeing quite considerable demand at very attractive rate. Seeing it across all parts of the U.S. In other words, the Northeast in the summer, as you would expect, is quite busy. Same with the Midwest. What we're seeing in the U.S. business, particularly on the West Coast, is beyond just domestic travel.
We're we're seeing growth in inbound travel, particularly among Japanese and Korean tourists. By contrast, and interestingly, and maybe by virtue of the fact that visas are tough to come by for Chinese tourists who want to make their way to the United States, we've seen considerable traffic among Chinese tourists for demand in the summer in our European business. Which takes me to the European business, where the summer has been very, very strong on the demand side, amidst a very stable, if not slightly up, rate environment to even that which we anticipated. We're seeing Chinese tourists come in to Europe. We're seeing considerable leisure travel. Our business at the airports in Europe is strong, largely on the back of U.S. travelers who are making their way to, you know, a variety of European destinations.
The last thing I would say on the European business is that I think summer extends into September and potentially beyond. Meaning the, the forward, if you look at bookings, which are on a forward more reliable than ours, particularly around airlines, the airlines are continuing to show fairly elevated traffic into Europe from the U.S. Obviously, these flights are coming back to the United States quite full, not just with European tourists or, or U.S. returning tourists, but European tourists who are coming. The inbound travel, both from Asia, which is growing, and the U.S. business is really strong.
Well, that's interesting and encouraging color. Maybe just to follow up on that, relative to... I always hear you talk about the international inbound. You just mentioned U.S. tourists in Europe. I don't hear the rental companies talk about that as much. Maybe it's less important because you're more likely to rent a car, maybe in the U.S., use public transit in Europe, I'm not sure. I, I did see those headlines about the European Union potentially requiring a visa for Americans to visit. It's gonna be an easy to obtain visa, I think. Nevertheless, I feel a little bit miffed. You know, can't go to Paris without a visa. Could that deter some people from going? What do you think?
I mean, Listen, theoretically, it could deter people, but, you know, I've read it the same way you did, which is, the process is meant to be a bit of a perfunctory one.
Mm-hmm.
Easy to obtain. You can be assured that the airlines that are transporting those travelers will make it easy and convenient to obtain the visa to come across. You know, for our European business, you know, based on the traffic that is coming from the United States to Europe, you know, we're seeing, as I said in response to your first question, very elevated utilization in Europe, which is really quite encouraging. You know, I would say just to the broader question of the consumer, you know, we have all been reading, probably now for the better part of three or four quarters, of the potential risk to consumer falloff, and it simply hasn't materialized.
You know, the cliff, if you will, that everybody had assumed the consumer was going to fall off, and we would see demand sort of fall away, has simply not happened. You know, you could debate whether that's a reflection of the broader health of the consumer, which I suspect it is. I do think that we're well past revenge travel as a pattern, and what this is illustrating, at least to us, is perhaps a more permanent or long-lived sort of shift to experiential spending on the part of the consumer as opposed to spending on hard goods. You know, in all, the demand remains quite strong, and the health of the consumer through the lens of our businesses is healthy.
Great, thanks. you know, maybe moving from the, the consumer, the, the leisure traveler, the, the individual to the commercial customer.
Mm-hmm.
Because I think when we did have that revenge travel after Omicron, we were basically all the way back with the consumer. There's a sense that I think that the corporate travel still has a way to go. Where, where do you think we are in terms of the normalization of corporate travel? Is there potentially, you know, a new norm? I saw the Zoom is requiring their workers to come back to the office, right? Is there potentially a new normal with work from home, et cetera?
It's always hard to make a spot judgment when we're talking about corporate, you know, as we enter the middle part of August. I wouldn't, I wouldn't render a judgment on where corporate business is going based on August itself. Having said that, you know, we are about 80% back to where corporate business was. Bear in mind that in the bankruptcy and the reorganization, we pulled away by design from about 20%-25% of the corporate business that we had, in part because we didn't see it as profitable business or business worth pursuing. The notion that we're back as far as we are relative to the 2019 levels, speaks to an elevated level of engagement on our part on the corporate side.
I read an interesting Deloitte study that said that while corporate business was generally back in the 70%-80% range, their view was that over the next two years, it would revert back to close to 95% of where it had been. If, in fact, that happens, and I have no reason to believe it won't, you know, then this will be of benefit to us in the context of the presence we have, you know, in the corporate space. What we have been trying to do since I arrived, having shed ourselves of some of the unprofitable corporate business, is look at that business in a very different light, with the rigor of ensuring that we're not simply grabbing days and volume and running youth high, but we're doing it at a profitable engagement.
The other thing I would say about our corporate business, perhaps uniquely, is that we're seeing a continued growth in the utilization of electric vehicles in the corporate space. This is where companies are looking to satisfy not just the base need for an employee to be in a rental car, but, satisfying certain sustainability objectives that they have and putting their, their employee in an electric vehicle. I'll just tell you anecdotally, you know, we engaged-- I engaged in a series of letters and emails with the CEOs of most of our major corporate clients.
In that, I engaged them in the proposition that, in fact, EV did present an interesting opportunity for them to sort of satisfy sustainability objectives, which have been always elusive, and the SEC has obviously been on everyone on the veracity of those claims. This was a very real way to satisfy that. I think, without exception, we have seen in companies with whom we've engaged, a pickup, literally just in the last month or two around the take-up of EVs and the component of business. I think that's an edge that we will continue to sort of pursue, in the growth in our corporate business.
Yeah, that's very interesting. I mean, of course, when they release these corporations, their sustainability reports, it, it could, you know, help them with their metrics and what not. It's also a very visible, right? When the employees, all JP Morgan employees, traveling around in electric vehicles, visiting clients in electric vehicles, right? That's interesting opportunity.
Well, JP Morgan was certainly one-
Oh, yeah.
of the, of the, of the companies that we engaged in, and I think it is visible. I think, you know, to, to those that run these sustainability objectives inside an organization, having done that in my, in my prior life, you know, you are looking for real and tangible ways to do this because you're otherwise subject to criticism on those that are less measurable and less tangible. It becomes very obvious if we are renting EVs to you instead of combustion engine cars, what that means, like tangibly what that means in terms of numbers for the corporate customer.
Goldman Sachs, I hope, too, is, is renting vehicles from Hertz these days?
I believe they are.
Okay. You know, let me ask on. Follow-up.
At elevated rates, I meant.
Good. Elevated rates. On the commercial, you know, demand, but also yeah, your unique kind of commercial exposure, because there's also that American Express Global Business Travel contract or relationship. Maybe you could delve into that a little bit there, how that, you know, so small and medium businesses kind of complement your more larger corporate- relationships. You know, I think around the time of the, the IPO, there was discussion that, it could be a pretty material driver of earnings when corporate travel came back, even $100 million. There was some floating, even, even more contribution of, of, of EBITDA. What have you experienced so far, and, and what do you think, the ultimate potential is of that relationship?
Well, I would say perhaps the most interesting part of that relationship is on the back of their acquisition of Egencia, which played to small and mid-sized businesses. Bear in mind, we have a sales force that is engaged and that benefits from Amex GBT more broadly around large corporate clients that sign large corporate contracts with prescribed rate and days and the like. What Egencia brought to Amex GBT, and we've taken quite a large market share in it, is an entrée into small and mid-sized businesses that use Amex GBT through that, that we would have more of a challenge in its absence to gain access to. This is now putting us in square into that small and mid-sized business at rates that we're obviously setting and prescribing. We see the take-up as being large. Customer acquisition through that channel is an attractive one.
You're not deploying, you know, a more expensive sales force to do it. I think what we're seeing around that is, is really quite positive.
Great, thanks. I thought to ask on electric vehicles, you touched on it already. I mean, Hertz has been a clear leader there, including really ever since that first announcement in, I'll never forget, I guess it was probably November 2021, that you would buy 100,000 vehicles from Tesla. I won't forget because, I was about to reinitiate on Hertz. Your cap went from, you rose 10%, cap went from $10 billion-$11 billion that day. I, I also cover Tesla, and I have an underweight rating on them, and they rose 10%, taking their cap from a trillion to $1.1 trillion, an increase of $100 billion on the announcement that you'd buy $4.2 billion of vehicles from them.
That's etched in, in my memory. May I just update us on.
I can assure your intent was not to frustrate your call on Tesla.
Thank you. May you just update us on how many Tesla do you own now? You also discussed on the last call, you know, diversifying the EV portfolio, getting more of the Polestar in GM vehicles. Maybe you can update us on those relationships too. Then what, what has been the early economics on EVs? I know that they're contributing really quite nicely to the revenue per day.
Mm-hmm.
There was some talk, too, on the last call about I know the maintenance is lower, right, but some of the repair costs.
Mm-hmm.
could, could be elevated. I just want to kind of net it all together.
Yeah.
What, what's the economic contribution from EVs?
Just by the numbers, we are now at about 40,000 Tesla, obviously with room to grow and buy in the context of 100,000. We're probably halfway through in the commitment around Polestars, which was about 65,000. I think the, the piece that is really most interesting to me is the prospect now of beginning to take delivery on the first cars in a 175,000 electric vehicle purchase that we will make over five years with General Motors. I'm, I'm, I'm focused on the GM component of it for a couple of reasons, which tie into elements of your question. First of all, I think just as a general matter, to offer our customers more choice and to give us diversification against over-indexing to any one particular manufacturer is inherently a good risk objective for us to pursue.
Secondly, I think the GM cars will come across a wide range of makes and models and cost points, which will also give us considerable diversity and choice for the customer. On the cost side, I would say that, you know, the challenge that we have had with Tesla is that, you know, they are obviously a younger company. They don't have what GM has. What GM has is a very broad, well-worn parts supply. We don't need one bumper for a model car, we need 1,000 of them.
Mm-hmm.
The ability to sort of ascertain parts at affordable prices, but perhaps even more importantly, with speed, around a company like GM that has, you know, a broad auto parts distribution, will be of benefit to us. In terms of the overall sort of cost profile, you know, to running the EV fleet, I would say that maintenance is undeniably lower, as had been forecast, just in terms of day-to-day maintenance. I also think that length of keep around the electric vehicles will be much longer than what combustion engine cars are. You know, we will, over time, begin to experience a flatter depreciation curve, a lower cost input to how we use these vehicles.
The idea is you could keep them for several years, and rekit the interior and not have sort of maintenance challenges, and do that in a way that will suit us, particularly in the context of the rental of those electric vehicles to Uber riders and rideshare drivers and the like. The cost element will be attractive. The reference I made on the call, and this runs a little bit to sort of the cost analysis at the company generally, is that what we did experience, particularly in the rideshare and that we are addressing, is elevated damage around certain of the electric vehicles and in particular, Tesla. You know, this ran to the fact that parts are more expensive, repairs are more expensive, and we've taken action to reduce that damage level down.
We've done it in the way in which we underwrite to the drivers that we are renting these cars to, particularly in rideshare. Requiring a higher number of minimum rides before they're eligible to rent a Tesla, or requiring that they have a certain point score above some threshold, because these are better and more seasoned drivers. We've even gone so far as to take certain action with respect to the torque and the speed limitation on these cars, because what happens is, for an inexperienced driver, you know, we experience front-end damage because the torque is fast. These are some of the learnings that come with this. It's an elevated cost that we had carried in Q2. I suspect we'll see it in Q3, but we have it in focus and we know how to address it.
So that's, that's an element to the cost sort of feature of those cars. Again, that will be less of a concern as we move to GM automobiles, and I think less of a concern as we address this, you know, jointly with Tesla as well.
Very interesting. I didn't realize you, you, you could modify the torque like that. That's interesting. You mentioned Lyft and Uber. Let's talk a little bit about transportation network companies.
Yes.
the TNC opportunity with regard to Lyft and Uber. You know, a number of years ago, maybe back in 15, 16, et cetera, it was seen by investors as almost an existential threat. To the rental car companies, which was probably always an erroneous take. Nowadays, I think it's obvious that you do a good business, right, with those longer term rentals to the TNC drivers. What are the benefits to the drivers versus providing their own vehicle? What are the benefits for Hertz, you know, in terms of, you know, the revenue or the length of hold impacting depreciation? Is it also, like, maybe a less cyclical business?
You know, what, what numbers can you maybe put around this for us? We say that Hertz is a, a leader in the TNC rental market.
I think there's no question we're a leader, just given the relationship that we have with Uber and the relationship we have with Lyft. It is a strategic irony in that, as you said at the start, some years ago when Uber got started, you know, the view was that it would be a replacement for the rental car in places like Orlando and otherwise, and it's proving not to be that. People still enjoy the flexibility of a rental car and the mobility, whether on business or leisure. It is a really good and really strong growth area for Hertz. It doesn't run at a correlation of one to the rack business, meaning we look at the rack business as a business that will throw off, you know, really good returns.
We can manage that business on a cash basis. We can improve upon that business as we are with respect to what we're doing around Dollar and what we're doing in Europe. I think the interesting aspect about the rideshare business is that it is a differentiated growth area for the organization. It, it is that by virtue of the cost elements that I described, particularly around electric vehicles. Obviously, you know, we have an entry point for a driver at Uber, for example, of anywhere from $299 to $349 a week. That driver stands to take in or benefit almost $200 per week more in terms of incentives that are paid to them by Uber, in addition to gratuities and in addition to a differential in charging relative to gas.
The customer, in this case, the Uber driver, is benefiting by about $200 a week, in the context of those two categories. That's a very strong incentive. Now, what we're gonna introduce, as early as later this month or the beginning of September, is we're gonna introduce kind of rewards, if you will, for the drivers. To the extent that they keep the car for five or 10 consecutive weeks, there will be a benefit to that driver in terms of a free week or a partial week. This is not just to sort of gain attractive entry to the driver to get into a Tesla and drive that as part of what they do, but equally to extend out the length of keep.
Because we're able to charge an implied lower RPD on that vehicle because the length of keep is measured in weeks and months, and therefore, the number of touch points around that car is lower. I would say, however, that, you know, the one or two other growth areas for us around this are what's going on in terms of regulation and New York City. Around regulation, by 2030, Uber and Lyft, and frankly, all rideshare in cities like New York, L.A., San Francisco, and others, will be required to be all electric, okay? That's not a decade from now. That's six-ish years from now. The new car price, even though it has dropped, is still out of reach of most drivers. There's unlikely to be a deep used car market around EVs by virtue of the longevity of those cars.
So we become the most affordable means by which drivers can enter the EV space and satisfy what Uber and Lyft are gonna be subject to. I think that the first mover edge, the unique relationship that we have, and the impending regulatory requirements set up for continued and fairly consistent growth in that business. The second being New York City. This is the only city in the country that... and it's a bit of a donut hole, in that it requires TLC plates and the equivalent of a taxi medallion, which is a diamond, to be affixed to our car. We do not have, no one has, a significant presence in rental to rideshare in New York City. This is the largest market for those. The city is looking to go all electric by 2030.
I suspect there, there will be quite a bit of, of engagement in and around that. Again, to the extent that we stand as a viable and affordable means by which they can become electric, I'm quite optimistic about what that growth sort of value or growth proposition is for us. Again, different than the rack business and all of this, you know, on the back of a flattening, i.e., lower depreciating curve, the longer we keep these electric vehicles. The, the proposition becomes even more interesting over time, both on a revenue and, and cost base.
Very interesting. Maybe looking down the road at the, the next generation, TNC opportunity or what some are calling, you know, Transportation as a Service 2.0, or Mobility as a Service, 2.0, TaaS. You know, see, investors see that TaaS 1.0, you know, is, is an opportunity. What about, when the cars drive themselves, right, and there's no, drivers to, to rent the cars, to? You know, what do you see as Hertz's, potential role in an autonomous robotaxi world, with your, maybe your expertise in buying and selling vehicles, managing, maintaining, repairing, financing fleets, et cetera?
Mm-hmm.
You know, what early experiments or partnerships have you maybe explored so far in this area, and do you expect to be able to leverage your existing relationships with those TNC leaders as their business evolves?
Well, I must say, I mean, I, you know, I always listen to anything as a service, as, as a bit of an, an empty moniker that sort of suggests that it's ephemeral and that it's out there in the distance, and it's ways in which you can leverage a network and the like. This topic is not kind of out there as a theoretical, you know, in the distance. I mean, we are engaged and in discussions with autonomous vehicle companies. We are in discussions with small and mid-sized businesses around the prospect of fleet management. This is what we do. This is what we are very, very good at. We have a real estate footprint just in the United States that touches or is in proximity to 90% of the U.S. population.
As small and mid-sized businesses will either need to or want to go electric, they will not want to engage in the sort of task of ensuring that they are all charged and ready to go, and they can own it, we can own it, they can rent it. This is an area that we are quite good at and are growing in our competency around electric vehicles by virtue of what we're doing with BP and others, and understanding at a, at a software and then at a physical level, how you do this. So I think that when you look at the autonomous side of the house, you know, I would say that there are companies like Waymo and others, obviously owned or influenced by Google, who have no particular interest in owning this fleet.
There are other things they want from the fleet. I think that there's quite a bit of motivation for them to see this fleet owned and managed by others, and that other can be us, and in fact, will be us. I think part of what we're learning in managing a growing and sizable electric fleet, giving us a competitive edge as a first mover in it, is the knowledge and the idea and the cadence from how you in-fleet these cars, to how you manage them, to how you charge them, to how you make decisions and choices around maintenance and the like, that I think sets us up. Again, this is not tomorrow's business necessarily, but for a real play in the context of fleet management around electric vehicles.
Very interesting. You've spoken, including on the last call, about the, the underutilized potential of the Dollar in Thrifty brands, about their ability to track a, attract a younger buyer, a younger, customer, you know, maybe more interested in, in value than in renting the, the latest and greatest, models, like, like maybe a, a Hertz customer, might expect. You know, on the last call, you talked about the, the revitalization-
Mm-hmm.
of the Dollar brand. You know, what are your plans exactly for Dollar and Thrifty? In what ways and, and to what extent do you think you could use those brands to increase the earnings power of the company? You know, how big of an opportunity would you say that, this could be?
Well, I think it has the potential to be a big opportunity. I mean, you know, credit to our competitor in terms of what they've done with their value brand, which on any given day, can often be larger than their mainstay. For us, I think that there's an offensive play in Dollar Thrifty and a corresponding defensive play, particularly around the price integrity of what we charge around Hertz. The plan around Dollar and Thrifty is already in motion. First, we have redone the digital property, the dot com for Dollar. Again, as I said on the call, the early days are proving positive in terms of conversion, in terms of revenue per transaction, and in terms of our ability to sell digital value-added product on that. From that, we aim to sort of operationalize this. That is, create a much better consumer journey.
Think about it as version 2.0, which will be, you know, past the counter. It will be e-delivery of a rental agreement, it will be assignment of a vehicle, it will be QR code to pass through and the like. All of that's table stakes, but it's not irrelevant, because right now, if you go on Expedia or you go on an OTA, level of satisfaction around Budget is higher than it is for Dollar Thrifty. Not surprisingly, 'cause we didn't put a lot of energy into it. As we improve that journey from the digital engagement all the way through to the return of the vehicle, our ability to charge a higher rate and not compensate for poor experience with a lower rate will be there.
All the while, this will enable us to maintain strength in our value, in our, in our prestige brand, which is Hertz. In fact, just with the early introduction of, of, of Dollar and the new digital asset, and against the demand that we are seeing in the market right now, this week, we've taken rates up on Hertz by about $5 a day or $25 a week. Again, having price meet what we are seeing and realizing in the demand component for our rental product, and with a defensive proposition that we can now use Dollar Thrifty to be the, you know, rate, if you will, against the value brand and not bring Hertz back into it. You know, we'll see, we'll see what happens with that rate.
You know, I know, Avis was here yesterday and talking about stability in the rate environment. I would agree with them. In fact, not only don't I see reason for rate to fall, as they said, but, you know, we're taking an opportunity against a very strong demand backdrop in the summer to take our rates up, and, you know, look to capture our fair share of business. The distinguishing or the decoupling, if you will, of Dollar Thrifty, which will become more pronounced relative to Hertz, will afford us that opportunity to again, hold hard on the brand that people are looking for, for service and loyalty and points and so forth, and are willing to pay a premium product for a better car, as against a more organized approach toward Dollar Thrifty, which can, which can...
be profitable and carry attractive margin at a lower RPD because we're running lower cost, older automobiles, because there is no choice, because, you know, we're able to sort of fulfill that obligation to that customer over time on a more digital and less human-intensive basis.
It does seem like a very promising opportunity. I wanted to check in on your approach to optimizing operations through automation. I read in an interview that you gave at a business conference, I, I think in Saudi Arabia, you described the rental car industry as being a sort of amalgamation of very complex math problems, and saw the opportunity for more use of automation or even AI, to better inform you as to the optimal approach to how much you should be pricing vehicles and where those vehicles should be, and, you know, how long you should hold them, et cetera.
It, it actually sounded, you know, somewhat reminiscent of what Avis has termed their demand fleet pricing model, which their managers in the field, they say, have come to trust, sometimes even over their own intuition, and which they have, at times, attributed to their strong profitability and even higher than Hertz margin. You know, my understanding was that Hertz was actually working on a similar system from the same vendor, pre-bankruptcy, but that it was also very complex in terms of its implementation and, and maybe the firm moved away from it. So, where do you stand currently on, you, you know, your regard for, for automating these different processes and other decisions? You know, how much of an opportunity could there be? Does it require, you know, a, a full, you know, IT system rework or not?
You know, what kind of, you know, risks and opportunities are there involved with it, this?
Sure. Well, there's a lot, there's a lot there. Maybe I start with cost relative to the competition, because it plays to an element of what we're investing in IT, which runs to revenue management and runs to fleet control. So when I look at a, a comparison of us, and Avis, you know, we ran at roughly a 10-point delta in EBITDA margin. I would say that about 50% of that would be attributable to scale, meaning they are running just a larger fleet through, through where we are. And, you know, we run on our cost base roughly 30% fixed and 70% variable. So the mission we're on, obviously, is to tighten down on the fixed cost and reduce down kind of that delta such that we can run more efficiently.
The time horizon of doing that is going to be influenced by, quite a meaningful spend that we are undertaking around IT that feeds the very nature of what you described. What played out pre-bankruptcy, I don't know if it was the same vendor as they used or not, but it didn't yield the type of technology and opportunity that I think this really presents, you know, to us. The two sort of variable, if you will, cost elements that we need to drive, one is the one I was talking about, which is damage, and bring that down.
I think there are issues around operational integrity relating to subrogation and the like, all of which are achievable, are in focus, and we understand how to tighten that gap, which is, again, 50%, you know, related to scale and 50% IT damage and other operational elements. That brings me back to IT and the core of your question, which is, if you go to any, any of our managers that runs an airport, so go out to JFK, that person, knowingly or unknowingly, is running a multivariable calculation every single day. They start off with a certain number of cars, they know how many are reserved and therefore will go out, and they know how many are scheduled to come in.
They don't quite know what the cadence of that is, and they rely too much on intuition and experience. We are building with Palantir and other vendors, sort of two tools. One is a revenue management tool, and the other is what we're describing as a fleet control tower. That is, being knowledgeable about where your cars are, how they're moving, how that person in the field is better equipped to think about the allocation of those cars over the course of the day, and obviously, how we optimize to the rate equation in the context of demand that is there. We're going to continue to invest in that. It's obviously a long-term investment. It comes alongside the migration of our entire sort of technology base from a data center to the cloud.
That, we're probably 60% of the way through that journey, and I think some of the elevated IT expense that we're incurring will bleed off over time, but will start to bleed off in the back part of next year and continue down. It will be a meaningful and consequential number when we get to where we are, not just by virtue of what the revenue will be on the back of these tools that you describe, but equally on the cost base, both of running in the cloud, but equally of then not supporting multiple platforms, but only one that's cloud-based, API-driven, and has the ability or enables us to be in a better position to run these two, these two types of systems.
Very helpful. Thanks. I think there's a broad sense amongst investors that rental car companies are overearning, given the degree of pricing and depreciation tailwinds, recently. Yet you've also outlined there are a number of company-specific opportunities. So to sort of, you know, combine the factors that we've talked about, you know, the, the various opportunities around American Express, global business travelers, the continued recovery in corporate travel, the TNC opportunity, the revitalization of the Dollar and Thrifty brands, the cost-cutting initiatives, maybe some of the opportunity around AI or automated pricing you just referenced. You know, you also combined that with some of the headwinds around, you know, potentially normalizing, pricing. I think you see normalizing depreciation.
You know, how does it kind of all shake out at the end of the day, in terms of, you know, do you think normalized earnings power or EBITDA for the company?
Listen, it shakes out at the EBITDA line. You know, it, it, this is an industry of two public companies that define RPD and utilization differently. The comparative basis requires probably more mechanics than is, than ought to be necessary, but it all falls out at the EBITDA line. This is a business that ought to run, you know, in the high teens EBITDA margin on a sustainable basis. There are variables that will play on revenue intake and the like, but I think targeting that as a sustainable EBITDA margin is one that we ought to aspire and deliver against. I think on the revenue side, we are in a period, I think, of rate stability.
I, I, I don't disagree with what I understand our competitors said yesterday. Obviously, as I mentioned here, we're using the opportunity of strong demand to take rate up. I think we're in a period of stability around rate. We continue to see strong demand to sort of feed it. We are running our fleet at an elevated level of utilization against historical standards, yet we're running fleet at a very tight tolerance, as is the industry, to where a sellout situation exists. It's not as acute as it was in 2022. You know, the industry is not running at a fleet size that's 30%, 20%. It's low single digits above that which the industry would otherwise be in a sold-out position. You've heard me on cost.
I think that we're going to run the gamut on the reduction of our fixed costs. That will be helped on the back of lower IT spend over time. We know what we're focused on as it relates to the variable expenditure, and so I feel good about having the cost issue in scope and knowing exactly where we can drive it. I think on the back of the stability on the revenue or on the rate side, continued demand, a focus on cost, the achievability of that EBITDA margin is one that, again, we ought to aspire to and deliver against, you know, for our investors.
Thank you. Let me check to see if there's a question in the audience. There is one. This will have to be the last question. Wait one second for the mic. Thanks.
With the rideshare drivers taking out EVs and taking them home, where are they going to charge them?
Well, part of what we're doing with BP is building out a broader charging network. It's their financial capital against our fleet, knowledge of fleet movement, where they dwell, where they move, and it's also using our real estate to locate and build charging stations. As you may also know, we are engaged in a series of projects called Hertz Electrifies with cities around the country. We've done Denver, Atlanta, Houston, Orlando. You should assume New York to be in focus. This is all in the context of taking up our EV fleet, working with technical schools around the development of a mechanic class around this. It is equally working with cities to build chargers.
Cities are minded as a matter of public policy, and we're minded as a matter of just good business, that we see these charging stations located in neighborhoods where our customers live, and those are Uber and Lyft drivers. It means that it may not be in a city like New York, in Manhattan, which is where the owners may be of Tesla and the like, but it may be in the outer boroughs, where these drivers live. There's a confluence of both public policy and good business. BP is proving to be a really good partner, and they're building GigaHubs and sets of charging stations at places. You know, we work with differentiated pricing schemes for our rideshare drivers so that, you know, they occupy these chargers at off hours, where they get lower rates.
This is a process that we're working through and showing some early signs of success.
Okay, we are out of time. Please join me in thanking Stephen for all the great color and insight he shared today.
Great. Thank you. Thank you, everyone. Appreciate it.