Ongoing Vehicle Sourcing Constraints Aggravated by Higher Fleet Costs

As part of an ongoing series, Automotive Fleet magazine will interview subject-matter experts around the industry to get a pulse on the state of the commercial fleet market. In conversations with fleet managers, the top challenges still continue to be the constraints in sourcing of replacement fleet vehicles and the across the board increases in fleet costs.

To learn more about these market dynamics and their impact on the fleet industry, AF Associate Publisher Mike Antich reached out to Ted Davis, senior vice president & chief operating officer at Holman Manufacturing & Distribution, to solicit his insights on these topics.

AF: To what degree is the current vehicle supply chain for the fleet industry still being disrupted?

DAVIS: The ability for fleets to procure the necessary supply of replacement vehicles as well as new vehicles to support business growth continues to be one of the major pain points facing the industry.

OEMs continue to struggle to provide accurate, timely, and ample vehicle supply. Additionally, frequent cancellations add pressure to fleet managers as they have to build in contingency plans for vehicles ordered that ultimately are not delivered.

Given the lingering procurement challenges, fleet operators are no longer just facing the short-term challenge of satisfying today’s vehicle needs, they’re also faced with the challenge of adjusting their operating parameters as vehicles remain in service longer than anticipated.

How will the challenges of yesterday and today play into their future lifecycle planning and optimization? How will limited vehicle availability impact repair versus replace decisions? How will increasing cost pressures impact available capital to keep fleets healthy and effective in the future?

Couple all of this with the need to understand emerging fuel alternatives and today’s fleet managers certainly have their hands full.

AF: Nowadays, it seems that the price of everything in fleet is increasing. What is your forecast as to how long fleet managers should anticipate these price increases to persist?

DAVIS: With inflationary headwinds still present in the marketplace, fleet managers will continue to be faced with rising costs associated with operating a fleet. From rising interest rates to the cost of vehicle acquisition, maintenance and fuel, nearly every cost associated with fleet operations is on the rise.

In fact, compared to 2020, new-vehicle acquisitions costs are approximately 19% higher while maintenance and fuel costs rose between 25-40% in a similar timeframe.

Ultimately the rising cost of fleet operations continues to be a major pain point for every fleet and although we’ve seen marginal improvement in tactical areas such as availability, the uncertainty of the global economy continues to overshadow the broader financial environment and will likely continue to do so for the next 12-24 months.

AF: What is your assessment of the current market dynamics as the fleet industry transitions to increasingly electrified fleets?

DAVIS: I like to refer to it as alternative fuel adoption. While some may call this EV adoption, I chose to say alternative fuel adoption as the industry continues to see evolution in technologies beyond EV, such as CNG and hydrogen fuel cell.

The challenge for fleet managers comes by way of understanding how best to introduce alternative-fuel vehicles into their fleet mix to align with corporate ESG goals while also ensuring that the vehicles meet the needs of daily operators and are able to accomplish the tasks at hand.

Fleet managers are faced with understanding how each vehicle will integrate into their fleet and how alternative fuel based vehicles will impact short-term items such as refueling (charging/fueling), routing, payload, and upfit as well as longer term items such as acquisition costs, maintenance cycles, and overall lifecycles.

In a time where basic fleet acquisition is challenging enough, the integration of alternative-fuel vehicles adds another layer of complexity to the already complex environment of fleet management.