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15 Factors Putting Downward Pressure on Fleet Operating Costs

October 20, 2014, by Mike Antich - Also by this author

For the second consecutive year, total fleet operating costs have remained flat for commercial fleets when compared to the prior year. Since fuel is the largest component of operating costs, stable pricing at the pump in 2014 was the key factor keeping fleet expenses flat. Second, fewer incidents of unscheduled maintenance repairs, due to increased vehicle quality and reliability, along with extended PM intervals, have also helped keep a lid on maintenance costs in 2014. The forecast is for this cost stability to continue into calendar-year 2015, which, if it occurs, will represent the third year of flat operating costs.

Below is a summary of 15 factors broken out by operating cost category exerting downward pressure on fleet operating costs:

 Fuel Price Stability

  1. The U.S. Energy Information Administration (EIA) is forecasting fuel prices to remain stable, perhaps slightly decline, during the 2015 calendar-year. U.S. domestic oil production continues to increase year-over-year, which is decreasing the country’s dependence on imported oil and lessening pricing volatility caused by political instability in oil-producing regions.
  2. There is an ongoing trend to downsize to smaller displacement engines due to dramatic improvements in fuel economy and horsepower capabilities of gasoline-powered powertrains through the use of turbocharging and higher-speed transmissions.
  3. When the fleet application allows it, a number of fleets have downsized to smaller vehicle classes, along with focusing on weight reductions to upfitted and auxiliary equipment.
  4. There is increased use of telematics to monitor employee driving behavior and initiatives to minimize unnecessary idling.

 Reduced Incidents of Unscheduled Maintenance

  1. The overall increase in vehicle quality and reliability, along with longer powertrain warranties, is keeping maintenance costs flat, when adjusted for inflation.
  2. Accelerated vehicle replacement schedules to compensate for the deferred replacements that occurred in the aftermath of the Great Recession is putting downward pressure on fleet maintenance costs.
  3. Average vehicle mileage and months-in-service have been trending downward, as fleets return to traditional replacement cycles. As fleets replace older, less-efficient vehicles, they reduce fuel spend and decrease the number of maintenance incidents.
  4. Routine maintenance costs are being reduced by longer maintenance intervals, due to platinum-tipped spark plugs, lifetime coolant and transmission fluids, etc. In addition, OEMs are extending recommended mileage intervals between oil drains.
  5. More OEMs are recommending longer-lasting synthetic oils, which extend oil drain intervals. The downside is that synthetic oils are more expensive; however, the price difference between mineral and synthetic (or synthetic blend) motor oils is decreasing.
  6. The industry’s transition to smaller displacement engines has resulted in fewer quarts of oil consumed during an oil change, since these engines have smaller crankcases for motor oil.
  7. More new models have oil-life monitoring systems, which allow for longer intervals between oil drains.
  8. A relatively recent trend of “bundling” services by some national accounts, which offer free tire rotations with oil change services. In addition, some OEM franchised dealers are offering complimentary PM services, generally up to about 24,000 miles, which is reducing preventive maintenance costs.

 Longer Tread Life Tires

  1. Commodity prices dictate replacement tire prices, which were stable in 2014. Tire prices are anticipated to remain stable in 2015. A key reason for the stabilization of replacement tire prices is less price volatility for the commodities used to manufacture tires, namely carbon black, oil, rubber, and steel. Although oil and commodity prices have often proved to be unpredictable, the forecast of crude oil prices is for them to remain stable. As a consequence, the prediction is for tire prices to likewise remain stable.
  2. Tire design and manufacturing is becoming increasingly sophisticated, allowing for longer tread life and lower rolling resistance to help enhance a vehicle’s overall fuel economy. The ongoing improvement in tire quality is translating into longer wear life. Tire life has been extended by 10 percent in the past decade.
  3. OEM introduction of more expensive, larger diameter wheels and tires has slowed and appears to have leveled out.

 Wildcards in the Mix

There are plenty of wildcards to upset these predictions, but barring unforeseen gyrations in fuel and commodity prices, these 15 factors, as a whole, are helping exert strong downward pressures on fleet operating costs.

Let me know what you think.

[email protected]

Comments

  1. 1. Allen Mitchell [ October 20, 2014 @ 04:11PM ]

    Mike,

    I concur that fleet operating costs should be reduced in the public sector as well. One factor that is important is driver compliance since driver actions have so much to do with operating costs. Maybe this aspect affects public fleets more.

  2. 2. Joao Simoes [ October 21, 2014 @ 11:13AM ]

    There are two more areas that operators should take care: a) specification of the vehicle according to the conditions where they are going to operate - for each chassis OEM give 2 engines, 2 gearboxes, 5 rear axles, so 20 diferente dynamic chains; the big diference is not in the price of the vehicle but in the cost of fuel; b) suitably allocate each vehicle to services wher it can be more efficent, having in consideration load factor, average speed and ramps.

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Mike Antich

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Mike has covered fleet management and remarketing for more than 20 years and entered the Fleet Hall of Fame in 2010.

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