By Mike Antich
After 8,000 hours of research, more than
11,000 facts pertinent to the fleet industry have been collected for this
year’s Automotive Fleet Fact Book. Within
this wealth of data, one overriding fact stands out with klieg-light intensity
– the impact of the high cost of fuel. In recent years, many companies have
seen their overall fleet fuel expenses double. Especially hard hit are truck
fleets as the cost of diesel has risen at a faster rate than unleaded gasoline.
The nationwide average price of diesel, for the first time ever, surpassed $4
per gallon. These fleets are also now paying more for diesel due to the higher
price of mandated ultra-low sulfur diesel.
The high cost of fuel has wreaked havoc on
fleet budgets and caught the attention of senior management. Elevated fuel
prices are an ongoing reality check of the need to reassess selector choices to
minimize higher fleet expenses. Fuel economy considerations promise to play a
much greater role in selector decisions than in previous model-years. Ongoing
high fuel costs are prompting fleets to establish minimum mpg requirements for
vehicle inclusion on a selector list. However, the reality is that fleet application
restricts vehicle choices. Most fleets have limited options to change their
selectors and still get the right vehicle for the job.
Feeling the Pinch
The high cost of fuel has a domino effect in increasing prices of
other fleet-related commodities. All major tire manufacturers increased tire
pricing due to rising oil costs. All fleets are adopting compensatory
strategies to reduce fuel expense. Many fleets are not only looking to minimize
fuel costs, but they are also seeking to reduce their CO2 emissions as part of
a larger corporate initiative. Fuel management exception reporting is being
modified to be more robust. Some fleets have been able to deflect the impact of
fuel increases by shifting to more fuel-efficient vehicles. A growing number of
fleets are seeking to increase overall fleet mpg by spec’ing four-cylinder
engines instead of six cylinders. Other fleets are re-evaluating the use of
SUVs or have moved to smaller SUVs. Fleet policies have been changed so AWD and
4x4 are allowed only where absolutely essential.
Other fleets are transitioning from minivans to crossovers to
reduce fuel expenditures. Fleets across the board are looking to “right-size”
cargo vehicles to minimize fuel expenditures, but are restricted by fleet
application requirements. Increasingly, it is the lack (or future lack) of van
product that is prompting fleets to consider crossovers. Fleets that are
environmentally conscious or have green initiatives are acquiring hybrid
vehicles. Although hybrid fleet sales volume continues to be negligible in
terms of the overall industry, it is a growing segment. Several fleets have already
committed to becoming all-hybrid fleets.
To decrease fuel costs significantly, fleets have three options:
switch to a smaller vehicle, specify a smaller engine, or both. The concern
with downsizing is that it will negatively impact driver performance, safety,
and morale. For instance, smaller vehicles often can’t fulfill business needs
due to reduced room to carry samples, materials, and equipment. Vehicle downsizing
also raises liability concerns over driver ergonomics and safety.
A more promising strategy is telematic solutions to reduce fuel
spend by optimizing trip routing and curbing unnecessary idling and speeding.
Early pilot programs show the efficacy of telematic solutions. However, driver
resistance to the perception of “Big Brother is Watching” presents real
friction (albeit a temporary one) that is slowing more widespread telematic
Shifting Costs to Employees
Reimbursement discussions are re-emerging in reaction to the high
cost of fuel. The motivation behind this is pressure at some companies to
reduce the overall number of company-provided vehicles. One area receiving
increased behind-closed-door scrutiny is driver eligibility. The high of cost
of fuel is prompting companies to reassess and tighten employee eligibility to
receive a company vehicle as a way to reduce fleet costs. Historically, one
criterion for a company vehicle assignment is if an employee drives more than
12,000-15,000 business miles per year. Several major fleets are studying the
feasibility of increasing the annual mileage threshold. Employees unable to
meet the new criterion will be shifted to driver reimbursement.
The dramatic spike in the price of fuel has also increased the
cost of allowing personal use of company vehicles. A growing number of
companies now question whether they charge employees enough for personal use to
offset the increased cost of fuel. As the cost to provide this benefit
increases, companies are deciding to share this increased cost with their
Cost of Doing Business
As of press time, the cost of oil is at $127 per barrel and the nationwide
average cost of gasoline is at $3.79 a gallon. Both are record prices. As comparison,
in Europe, the equivalent price of unleaded
gasoline (converting liters to gallons) is $8 a gallon. Even at this
stratospheric price, fleet continues to play a strong role in European business
operations. Although everyone wishes the cost of fuel would be lower, the U.S. fleet market will continue to remain strong despite this ongoing cost pressure.
Although selectors may change, in the final analysis, the cost of fuel will
continue to be viewed as the “cost of doing business.”
Let me know what you think.