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Market Trends

Forecast of Operating Costs for Class 3-6 Trucks in Calendar-Year 2015

October 2, 2014, by Mike Antich - Also by this author

Operating costs for medium-duty, Class 3-6 trucks are forecast to remain stable for the 2015 calendar-year. The key reason for this forecast is that fuel prices, both diesel and gasoline, are expected to remain flat or decline in the 2015 calendar-year.

“The increase of U.S. oil drilling has contained the price of crude oil the past several years and we expect fuel prices to remain relatively the same in 2015, barring geopolitical risk,” said Collin Reid, strategic consultant at GE Capital Fleet Services.

Other truck subject-matter experts share the same assessment of future fuel prices. One is Megan McMillan, client consultant at Donlen. “The cost of fuel is declining gradually and will continue to decline in 2015,” noted McMillan.

Most forecast a near 5-percent decline in fuel prices. “We anticipate that gasoline prices will drop by about 4.9 percent and that diesel fuel prices will decrease by approximately 4.7 percent during the 2014-2015 time frame,” said Brian Tabel, manager, retail marketing at Isuzu Commercial Truck of America.

However, most cautioned that an increase in geopolitical uncertainty, especially in the Middle East, could put unexpected upward pressure on fuel prices, derailing these forecasts.

Another factor influencing fuel costs is that average age of a medium-duty truck asset has peaked. “During the recession, companies held back on cycling. But, companies are now replacing these older trucks with newer trucks, which have lower maintenance costs and higher fuel economy,” said McMillan.

Today, medium-duty trucks have the best fuel-efficiency in the history of this vehicle segment, which is being achieved not only by powertrain efficiencies, but a host of other engineering improvements. “For instance, better aerodynamics and lighter material are also essential to help improve fuel economy,” said Chris Thomas, fleet market requirements manager at Ram Truck. “We take a global approach to engineering and designing vehicles. Our global engineering team provides the latest and greatest in worldwide technological advances and improvements.”

Likewise, Ford promises to make further inroads in truck fuel efficiency in the 2016 model-year. “Our new 2016 F-650 and F-750 will utilize Ford engines and Ford transmissions specifically designed to work together more efficiently,” said Mark Lowrey, fleet trucks marketing manager at Ford Motor Co.

A dark cloud on the horizon is the possibility of increased fuel taxes. “Since the need for federal highway funds is significant, an increase in the gasoline tax may be discussed in the next several years,” said Reid. 

Maintenance Costs to Remain Flat in 2015

The other key component of medium-duty truck operating costs is scheduled and unscheduled maintenance expenses.

“We do not foresee a significant increase in maintenance expenses for the remainder 2014 and beginning of 2015, other than the normal increase from aging fleets,” said Marcin Michno, project manager, strategic consulting at Element Fleet Management.

One unknown variable is the severity of weather conditions next winter, which, in the past has caused fuel prices to rise and unscheduled maintenance to increase. “We foresee maintenance and fuel costs remaining constant into 2015. However, this is contingent on winter weather conditions. Most regions of the country experienced a harsh winter in 2014. Potentially severe winter forecasts for 2015 could very easily drive up the fuel and maintenance costs for any fleet,” said Chris Foster, manager, truck account administration at ARI.

Another factor putting upward pressure on maintenance costs is the shortage of technicians. “We expect maintenance costs to continue to be slightly above the inflation rate as qualified mechanics are becoming more limited. This is especially true with diesel mechanics and, as a result, Class 3-4 fleets are becoming more supportive of gasoline engines in this space,” said Reid.

 Multi-Pronged Approach

Cost reduction continues to be a constant pressure exerted on fleet managers by management. “The goal is to reduce operating costs and increase profits. Whether it is through telematics, best routing practices, increasing fuel mileage, lighter and more robust upfitting, better work truck configuration for increased work production, driver retention, reduced parts pricing, aggressive reduction in service costs, or a combination of these items, the trend is to drive to the lowest cost of ownership,” said Mark Steffens, medium- and heavy-duty truck consultant at Donlen.

In summary, the consensus among industry subject-matter experts is that operating costs for medium-duty trucks will remain stable for the next year. “With fuel costs decreasing and projections for 2015 to remain on the lower end, overall operating costs should remain in check. Fuel economy remains the most important driver of LCO (low cost-of-ownership),” said Todd Bloom, president and CEO at Mitsubishi Fuso Truck of America.

Let me know what you think.

 [email protected]

Comments

  1. 1. Joel Rosson [ October 06, 2014 @ 01:41PM ]

    Mike

    In the current Truck Industry for class 3-7, what do you think is missing as for customers and owner/operators? What is market is out there that current Big Corps are not addressing for fleets?

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Author Bio

Mike Antich

Editor and Associate Publisher

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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