Fleet Sales Bolstered By Economic Growth, Low Fuel Costs
Photo of 2015 Chevrolet Colorado by Vince Taroc.
Sales of light-duty vehicles from nine manufacturers to commercial fleet users rose 17.1 percent in January mostly on the strength of trucks, vans, and SUVs, according to Automotive Fleet data.
The growth surge in fleet and retail channels has been propelled by pent-up pre-recession demand, a relatively strong U.S. economy, and low fuel prices, executives of fleet management companies said.
"We have seen a strong percentage of our clients growing their fleets once again," said Laura Jozwiak, vice president of client relations for Wheels Inc. "The low gas prices, pent-up consumer demand for all products, and the overall economy have certainly helped most industries rebound from the recession."
Sales of vehicles to commercial fleets and fleet management companies reached 41,874 units in January compared with 35,757 units sold in January of 2013. This follows an increase of 9.1 percent in the segment for the 2014 calendar year.
As in the retail channel, full-size trucks, vans and SUVs are driving the sales growth at the expense of passenger cars. The nine manufacturers sold 35,999 vehicles in this segment, which represented a 25.6 percent increase over the 28,662 vehicles sold a year ago. In contrast, sales of cars fell 17.2 percent to 5,875 from the 7,095 cars sold in January of 2013.
Fleet sales have kept strong forward momentum even if executives from fleet management companies may have different explanations for the underlying causes. Lower fuel prices appear to be fueling truck sales in the retail channel, but they may not be the same driver in the fleet channel, said Partha Ghosh, ARI's director of supply chain management.
"Fleet sales are usually driven by capital expenditure budgets and business needs," Ghosh said. "To the degree that more favorable operating expenses occur (perhaps as a result of lower fuel expense), companies will have more to invest in capital expenditures and if that occurs we may see a positive impact to fleet sales."
Fuel prices have been in a steady decline since late summer of 2014. For the week ending Feb. 3, the price of a gallon of regular unleaded reached $2.06. It has fallen from its perch of $3.70 per gallon in late June. A prolonged period of lower prices could have an impact, Ghosh acknowledged.
"Of course, if lower gas prices remain in place for a significant period of time, this also may enable companies to grow faster and hire more people, and that could have an indirect positive effect on fleet sales as well," Ghosh said.
In this lower-fuel-cost environment, fleet managers should keep a close eye on vehicle purchasing, said Jozwiak.
"Although fuel expenses have been cut in half as of late, our account managers continue to caution our clients to stay vigilant on fuel management best practices, expectations for future budgets, and proper vehicle selection," said Jozwiak. "The low gas prices give us all an opportunity to decide how to manage the windfall, and to mitigate any underlying risks."
By Paul Clinton