Fleet maintenance cost-per-mile (CPM) expenses remained flat during the 2020 pandemic despite strong headwinds from other factors exerting upward pressure on fleet maintenance costs that most likely will be more noticeable in CY-2021.
For example, maintenance costs are potentially trending upward as a result of more onboard vehicle technologies, skilled technician shortages, increased vehicle utilization due to longer service lives, and widespread use of more expensive synthetic motor oils. Despite these potential headwinds, total maintenance costs have remained flat during the pandemic of 2020.
“The number of maintenance events is down due to COVID-19, while the overall cost per mile is flat, if not slightly lower. Vehicle quality continues to improve offsetting some of these costs,” said Mark Lange, CAFM, technical services consultant for Element Fleet Management.
Similarities Between 2008 & 2020
Many long-time professionals in the fleet industry cite the similarities between the Great Recession of 2008-2009 and the COVID-19 pandemic on their impact on fleet maintenance.
“Similar to what we experienced during the Great Recession years, there is an acute potential for unscheduled maintenance repair increases related to fleet managers extending vehicle lifecycles due to budget restrictions,” said George Albright, director, fleet maintenance for Merchants Fleet.
Another maintenance-related issue caused by the pandemic is a shortage of replacement parts that is extending downtime for some vehicles awaiting out-of-stock components that are on backorder.
“The pandemic has affected global supply chains causing an increase in backordered parts. The resulting downtime can create soft costs through lost productivity and rental expenses,” said Kelley Hatlee, senior service advisor for Enterprise Fleet Management.
The increase in downtime caused by the pandemic-induced parts shortage was also cited by LeasePlan USA.
“Parts delays for the manufacturers has been a continued concern in 2020 and even more so with the added difficulty and shutdowns from COVID,” said Mark Ackerman, director, maintenance and repair for LeasePlan USA.
In addition to replacement parts, the pandemic is causing inventory constraints in other areas, such as the difficulty in getting replacement tires with same-day delivery service.
“A growing number of shops have stated that the pandemic is impeding their ability to keep tire inventory on hand and same-day tire delivery has become more challenging,” said Jamie Grams, national service department manager of Enterprise Fleet Management.
For a variety of other reasons, the pandemic has resulted in longer turnaround times when a vehicle is taken into a shop for maintenance.
“The increase we have seen may in part be due to each shop seeing fewer vehicles going through their shop, but may also be due to drivers not needing their vehicles back right away, which allows vendors an opportunity to better inspect a unit. Fleet historically has been a very fast paced, immediate need, and reactive business. With more drivers working from home, the mindset of drivers and vendors has transitioned a bit,” said Tony Hernandez, team lead, truck maintenance for Emkay.
But perhaps the No. 1 maintenance concern within the industry is that fleets are keeping vehicles in service for longer periods, which is putting upward pressure on unscheduled maintenance costs as aging components fail.
“Since Q1 2020, average fleet age has trended upward as more fleets still face uncertainty due to the 2020 pandemic, resulting in cycling and replacement plans being extended, if not on hold,” said John Wuich, vice president, strategic consulting services for Donlen. “The resulting age increase coupled with a slight shift downward in PM compliance indicates that increased unplanned spend is likely. In fact, spend on scheduled repairs has fallen to about 47% for the most recent quarter.”
Other fleet management companies likewise are reporting an uptick in unscheduled maintenance. “We too have seen the frequency of unscheduled repairs go up,” added Troy Fleener, team lead, maintenance for Emkay.
Extended vehicle downtime is becoming a more prominent issue on the minds of fleet managers during the COVID-19 pandemic.
“While not necessarily a direct hard expense, extended downtime is definitely a concern for many fleets during the pandemic, and for most, there’s undoubtedly a tangible business cost associated with this unforeseen downtime,” said Chris Foster, manager, truck & equipment maintenance for ARI. “During the height of the pandemic, a large number of maintenance facilities were either closed entirely or operating with significantly reduced capacity. Further complicating the issue was the fact that most maintenance vendors also introduced sanitation protocols, adding to the length of time it took to service a vehicle.”
Order-to-delivery delays are contributing to vehicles being held in service for longer periods awaiting the replacement unit, which creates the potential of unanticipated and unscheduled near-end-of-life vehicle expenses.
“Maintenance costs may rise slightly for fleets that have to hold vehicles longer as a result of delayed new-vehicle factory orders and depleted new dealer stock,” said Grams of Enterprise Fleet Management.
Offsetting some of these cost-increasing headwinds is the ongoing increases in vehicle build quality and longer-lasting components, which are helping to keep a lid on unscheduled maintenance increases.
“Vehicle quality continues to improve, reducing the number of unscheduled repairs, which has contributed to offsetting price increases in labor and materials,” said Chad Christensen, strategic consultant at Element Fleet Management.
Another factor why fleet maintenance costs remained flat in calendar-year 2020 was because vendors kept prices stable.
“Most dealerships and large repair vendors have kept their pricing flat in 2020,” said Lange of Element Fleet Management
But maintenance cost stability isn’t true for all fleet segments, in particular last-mile delivery fleets. Due to their dramatic uptick in business activity during the pandemic and the stop-and-go driving characteristics of last-mile deliveries, these companies have witnessed maintenance costs increase.
“Maintenance cost increases were observed per repair in 2020 compared to 2019. However, the impact of the COVID shutdown was realized for most fleets with lower total costs in 2020 versus 2019. Reduction in vehicle utilization during the shutdown was most common among fleets in the hospitality and tourism sectors. Unchanged from 2019, brake repairs were the second highest repair category, which was especially reflective in the rapidly expanding last-mile delivery sector,” said Albright of Merchants Fleet.
After state and municipal governments began lifting economic shelter-in-place mandates, fleet began to see maintenance costs start to increase.
“Unfortunately, we observed an uptick in mechanical failures and road service requests following the May to June period, as fleet vehicles were reactivated throughout the country,” said Albright of Merchants Fleet. “Overall, labor costs increased, which can be partially attributed to the continued labor shortage trends. Technical school enrollment tends to increase during periods of high unemployment, so it will be interesting to see if that trend results in future technician availability.”
As vehicles were idled during the lockdown, there was an uptick in maintenance issues resulting from prolonged inactivity.
“As fleets were again put in motion after sitting idly, we did see an uptick in repairs corresponding with excessive inactivity. Battery jumps and replacements, unplanned tire repairs, low fluids levels, and even fuel-related repairs all saw spikes as fleet vehicles picked up activity,” said Wuich of Donlen.
This impact from inactivity was particularly hard on fleet vehicles operated by what the government deemed were non-essential businesses that parked their vehicles for the duration of the pandemic-induced economic shutdown.
“Overall, there was a drop in PM spend corresponding with fleets grounding vehicles during the pandemic. PM compliance also dropped as vehicles sat idle,” said Wuich of Donlen.
The economic shutdown also resulted in the closing of many maintenance facilities around the country, which extended vehicle downtime.
“As a result, fleet operators were challenged to find vendors who could service their vehicles in a timely fashion, leading to extended downtime. For the most part, these limitations have eased and most facilities are operating at relatively normal levels but capacity limitations are something we need to be mindful of if there’s a resurgence of COVID cases in the months ahead,” said Foster of ARI.
2021 Fleet Maintenance Forecast
The forecast of the cost of maintenance and unscheduled repair is anticipated to go up in CY-2021.
“We are expecting a return to normal in 2021,” said Christensen of Element Fleet Management. “We are expecting an increase in both labor and materials for 2021. As the economy improves, we expect a rise in the cost of raw materials, which should have an impact toward the end of 2021.”
Also foreseeing maintenance costs increasing in calendar-year 2021 is Emkay.
“We do see recommendations of repairs and the costs of unscheduled services to continue to increase. Repair facilities are businesses and they need to try to maintain their business and cover their expenses. This may lead to more thorough inspection and more items being recommended, along with a pricing increase,” said Fleener of Emkay.
Another factor that may play a bigger issue in 2021 is that vehicle service lives are being extended as companies right-size their fleets or look to reduce new-vehicle acquisition budgets.
“For example, perhaps your company reduced the number of vehicles in your fleet to account for changes in business volume or maybe you now need to keep units in service longer than anticipated due to budget constraints limiting new-vehicle orders. These types of changes to your operating parameters are certainly going to influence your maintenance strategy,” said Foster of ARI.
Higher utilization rates will require fleet managers to reassess their maintenance policies to reflect this new operating norm.
“If you’ve right-sized your fleet leading to higher utilization rates for your vehicles, you’ll need to examine your PM intervals and be sure to adjust accordingly for this increase in utilization. Also, if you anticipate your vehicles are going to remain in service longer, you need to adjust your maintenance strategy – and your budget forecast – to account for this additional utilization during the most costly portion of a unit’s lifecycle,” said Foster of ARI.
Higher labor costs have also increased the maintenance spend for routine repairs. “The skilled labor shortage among automotive technicians continues to drive shop labor rates. During the pandemic, many technicians were protected from job loss because they were deemed essential workers, so there was little impact on the labor market for technicians. As more experienced technicians continue to transition into retirement and fewer young adults enter the field, shop labor rates will likely increase, especially in cities where technicians are in very short supply,” said Gardner, corporate business development manager of Enterprise Fleet Management.
On a positive note, the pandemic has resulted in several maintenance innovations such as curbside drop-off and pick-up. “Many service vendors now offer curbside drop-off and pick-up and vehicle sanitation services to address driver safety during the pandemic. Some vehicle sanitation services may be offered for a reasonable fee which, while small, adds an additional cost to routine maintenance expenses for 2020,” said Erin Mills, national service department manager for Enterprise Fleet Management.
Uptick in Mobile Maintenance
One trend that is gaining momentum among commercial fleets during the pandemic is the use of mobile maintenance vendors. There has been a substantial uptick in fleet requests for mobile maintenance solutions as fleet managers look to minimize downtime and the administrative burden of taking their vehicle to a repair shop and having the driver wait.
A mobile maintenance solution allows the vehicle to be serviced during off-hours and avoids many fleets from paying the costly expense of renting a temporary replacement vehicle. Many providers can also perform warranty work, avoiding a lengthy visit to the dealership.
“Light-duty mobile maintenance has received a lot of attention recently. Several reasons are driving this including safety concerns due to the pandemic, increased productivity, or simply convenience. Mobile maintenance is easy to schedule, location flexible, and allows drivers to continue being productive while their vehicle is maintained. There are a few things to consider before using a mobile maintenance provider,” said Brian Simek, director – maintenance, repair, & workforce management for Wheels, Inc. “Mobile maintenance does tend to cost more, and you need to determine if the extra costs are offset by the benefits. Although mobile maintenance providers can perform many repairs and services, but not all services can be performed and this needs to be considered depending on your service need. Depending on the location of where you are having the service performed there may be federal, state, or local environmental regulations to be aware of or even homeowner associations or landlord agreements that need to be considered.”
Mobile service offers many benefits, such as overnight service and minimized downtime, but convenience often comes at a higher price. For example, mobile service vendors may charge higher hourly rates and travel time; however, as the market matures the anticipation is that prices should become more competitive.
“Increased utilization of mobile service providers and an expansion of the mobile platform by traditional brick-and-mortar repair providers will likely result in per repair costs going up,” said Albright of Merchants Fleet. “However, overall operating costs among fleets leveraging mobile service may decrease due to improved PM compliance and drive downtime reduction.”
Impact of New Technology
The adoption of new onboard safety technologies, such as Advanced Driver-Assistance Systems (ADAS) is adding new complexity to fleet maintenance programs.
ADAS technologies require special equipment and training when service is needed. These systems add new parts to vehicles, such as cameras, proximity sensors, and radar/lidar. A minor collision that used to only require a bumper cover replacement can now involve bumper cover and radar replacement, along with pre- and post-system scans and ADAS recalibration. ADAS cameras built into windshields and rearview mirrors are adding complexity and cost to windshield replacements.
When repairs are required on vehicles equipped with new technologies the costs can sometimes be shocking; however, the failure rates for these components are relatively low. Instead of just replacing a part, you will now have to add the cost to recalibrate the ADAS, potentially adding hundreds of dollars to the repair.
“As ADAS become more common in new vehicle models, alignment costs are rising because of the increased complexity and required steps to complete what was once a basic service. Repairs such as windshield replacements and bumper cover replacements, that do not involve any steering or suspension components, now commonly require a scan tool for recalibration and computer aided equipment for ADAS alignment,” said Mills of Enterprise Fleet Management.
Many previously simple repairs now require a calibration of the ADAS system, consisting of cameras, sensors, and controllers, which requires specialized and expensive tooling and equipment. There is a growing number of vehicles equipped with ADAS. These systems are now included as standard equipment on several popular fleet models and these more expensive components are pushing repair costs higher. For example, the replacement cost of a windshield in an ADAS-equipped vehicle is typically higher than that of a non-ADAS unit. In addition to the increased cost of the windshield itself, the vehicle also often requires a recalibration of the entire system, an additional cost driver.
While the adoption of ADAS does involve increased maintenance expenses, these costs are offset by a reduction in preventable accidents or saving someone’s life.
“There is no question these systems increase safety and maintaining these systems is necessary after certain repairs to keep the systems functioning properly. However, the extra time and expense to perform the calibration frequently catches both drivers and fleet managers by surprise,” said Simek of Wheels, Inc. “The calibration process could add 30 minutes to more than an hour of labor time to a repair increasing the total cost, which can be significant. Even more frustrating, is when drivers are required to bring their vehicle to a second repair facility or dealership to complete the calibration process increasing downtime.