Avis Budget Group Confronts Miss With Aggressive Reset

Avis Budget Group ((CAR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Avis Budget Group’s latest earnings call balanced unusually weak financial results with an equally aggressive response plan. Management acknowledged a sizable earnings miss, a sharp year-end demand shock in the Americas, and heavy non-cash write-downs, yet emphasized record fleet actions, cost cuts, and a tighter, utilization-first strategy to stabilize profitability.

International Business Turnaround

Avis Budget stressed that its international segment delivered a meaningful turnaround in 2025 and met expectations in the fourth quarter. The company framed this as proof that its core model remains intact outside the Americas, effectively isolating the operational shortfall to the U.S.-centric business.

Record Vehicle Dispositions in January

After aggressive defleeting in the fourth quarter, the company sold a record number of vehicles in January, with strong momentum continuing into February. Management expects disposition activity to remain elevated through the tax refund season in March and April, supporting fleet rightsizing and balance-sheet repair.

EV Tax Credit Monetization and Liquidity

Management highlighted a key win from monetizing EV-related tax credits, generating roughly $180 million of cash so far. This inflow is being used to strengthen liquidity and support a broader balance-sheet reset, partially offsetting the financial impact of EV-related write-downs.

Shortening EV Life to Cut Residual Risk

The company sharply reduced the assumed economic life of its EV fleet from 36 months to about 18 months to limit residual value and technology obsolescence risk. Previously depreciating these vehicles at about $600 per month, Avis Budget expects the shorter life to materially lower future exposure and accelerate capital recycling.

Fleet Age and Utilization Gains

Avis Budget expects the average age of its U.S. rental fleet to be under one year by the end of the first quarter of 2026, positioning it with a younger, more efficient asset base. Utilization in the Americas improved by roughly 0.5 percentage points in 2025, a notable achievement given recall headwinds that left thousands of cars grounded.

Cost Discipline and Portfolio Reshaping

To rebuild profitability, the company launched a global reduction in force in January and strengthened performance management across operations. It is prioritizing utilization over pure fleet growth and conducting a portfolio review, including potential exits or restructurings at Zipcar, to redeploy capital into higher-return opportunities.

Waymo Partnership Moves Toward Launch

The autonomous-vehicle partnership with Waymo remains a strategic bright spot, with a Dallas launch tracking to plan. Real estate, hiring, training, and compliance are in place, and Waymo is already offering fully autonomous rides to employees in Dallas as a step toward a wider public rollout.

Strategic Response and Governance Framework

Management outlined a three-horizon plan that starts with diagnosing the fourth-quarter miss, moves through near-term corrective actions, and extends to longer-term strategy. The company committed to tighter fleet discipline, sharper OEM partner selection, and expanded customer initiatives such as the Avis First program to improve loyalty and mix.

Full-Year EBITDA Shortfall vs. Guidance

Avis Budget reported full-year adjusted EBITDA of $748 million versus prior guidance of $900 million, a shortfall of about $152 million. Management noted that roughly $150 million of that miss was concentrated in the fourth quarter versus October expectations, underscoring how rapidly conditions deteriorated late in the year.

Americas Demand Shock and Rental Days

The most visible operational hit came from a sudden demand shock in the Americas, where rental days for the quarter ended flat instead of growing about 3 percent as guided in October. Commercial rental days in November fell about 11 percent, with management citing FAA and TSA disruptions as key drivers of that drop.

Pricing Pressure and RPD Decline

Pricing weakened more than anticipated, with Americas revenue per day falling 3.7 percent in the fourth quarter versus internal expectations of roughly a 2 percent decline. This added to the earnings pressure from softer demand, as the company had to compete harder on price in a choppy market.

Used-Vehicle Volatility and Manheim Drop

The used-car market turned against Avis Budget late in the year, with the Manheim rental index price per vehicle falling nearly $1,000, or about 4.3 percent, from October to November. That swing cut into gains on sale and pushed valuation marks lower, compounding the fourth-quarter profit shortfall.

Higher Depreciation Per Unit

Monthly net depreciation per unit in the Americas reached $338 in the fourth quarter, versus an October estimate just under $300. Management guided to an even higher depreciation reset in the first quarter, near $400 per unit, with an expected normalization to a low-$300s run rate across 2026.

EV Fleet Write-Down and Balance-Sheet Reset

The company recorded an approximately $500 million write-down on its EV fleet at year-end, characterizing it as a deliberate move to reset the balance sheet. While painful for near-term earnings, management argued the action reduces future volatility and better aligns book values with current market realities.

Insurance Reserve Strengthening

In December, Avis Budget increased its personal liability and property damage reserves, which management estimated accounted for about $50 million of the adjusted EBITDA miss. This conservative reset is intended to strengthen the company’s risk position heading into 2026, even as it weighs on recent results.

Recall Disruption and Grounded Vehicles

Vehicle recalls created additional operational drag, with roughly 14,000 cars still grounded at the end of the fourth quarter due to parts shortages. The recall issues carried an estimated $40 million impact in the quarter from added depreciation, interest, and parking costs, on top of lost rental profits and lower gains on sale.

Guidance and Near-Term Earnings Pressure

Management acknowledged that adjusted EBITDA will be under pressure in the first quarter of 2026 due to the depreciation reset and normal seasonality. The company issued a deliberately wide full-year EBITDA range, built on a tighter, utilization-led fleet plan and modest Americas revenue growth, and said it intends to narrow that range as visibility improves through the year.

Avis Budget’s call painted a picture of a business hit hard by a late-year demand shock, pricing pressure, and EV-related volatility, but also one moving quickly to repair the damage. Investors are left weighing a weaker near-term earnings profile against tangible operational fixes, a younger fleet, and a more disciplined capital strategy that could set the stage for a steadier 2026 and beyond.