Many of today’s fleet vehicles are being kept in service beyond their scheduled replacement date due to limited availability of new replacement vehicles. These higher-mileage fleet vehicles that are being kept in service beyond their scheduled replacement dates and are now experiencing the predictable uptick of unscheduled repairs.
With the accelerated (earlier than anticipated) fleet ordering deadlines, it is becoming increasing difficult to source some high-demand models if a fleet missed the early order deadline. These vehicle availability issues, coupled with budget constraints, have forced some fleets to extend the service lives of vehicles that otherwise would have been replaced.
In addition, an ongoing parts shortage is lengthening repair times as vehicles are idled waiting for back-ordered components to arrive at a repair facility. Similarly, supply chain constraints, such as the ongoing microchip shortage, is an additional factor impacting fleet maintenance turnaround rates and uptime.
These were among some of the findings of AF’s 26th annual fleet vehicle maintenance survey conducted exclusively by the fleet management company Emkay based on an analysis of actual maintenance expenses incurred during calendar-year 2021.
“Maintenance costs increased in 2021 for various reasons. Raw material costs of oil and tires saw fairly significant increases. Part prices across the board saw increases due to supply and demand imbalance. Labor prices increased for their own variety of reasons,” said Dale Jewell, senior director of fleet service operations for Emkay. “Vehicle usage increased in 2021 due to reduced COVID restrictions. Fleets extended the service life of their units in 2021, mainly due to the inability to source replacements.”
Due to the shortage of new replacement vehicles, some fleets have kept units in service longer than normal, which has led to increased maintenance incidents and expenses.
“The unknown of the pandemic has affected the fleet industry. As new waves and new variants come and go, decisions to change units or update fleet vehicles is in the air,” said Tony Hernandez truck maintenance lead for Emkay. “Because of those concerns, traditional vehicle replacement patterns are no longer the norm. Customers are keeping vehicles longer which also equates to higher than expected maintenance costs. Where the initial focus is on maintenance, the new focus is on larger repairs or unexpected repairs.”
Top Maintenance Trends
Fleet maintenance costs have increased in the 2021 calendar-year compared to the 2020-CY for multiple reasons. The key factor that influenced maintenance costs in calendar-year 2021 has been the upward trend in the average months in service for fleet vehicles. This extension in vehicle replacement cycles has driven up maintenance costs.
According to Troy Fleener, maintenance team lead for Emkay, the top 5 trends in fleet vehicle maintenance are:
- Parts availability.
- Higher labor rates.
- Vehicle retirement mileage extended.
- Lack of service technicians.
- Electric vehicle maintenance.
PM Costs Continue to Increase
Preventive maintenance (PM) expenses in CY-2021 increased compared to CY-2020. “PM costs increased due to raw material prices, part prices, and labor cost increases,” said Jewell.
Also, PM intervals are now longer for most cars and light-duty trucks as more vehicles are required to use longer-lasting synthetic motor oils. A key factor contributing to the increase in PM costs is the ongoing shift by OEMs to these more expensive, but longer-lasting, synthetic motor oils. The frequency of oil changes have decreased, but the cost of preventive maintenance is increasing due to changes to more expensive synthetic oil requirements. The reason for this change is the proliferation of smaller displacement engines that tend to run hotter. Synthetic motor oil provides 50% better engine protection, which, in the long run, helps to maximize engine life.
The ongoing trend of increased PM cost per service will continue as older fleet vehicles requiring conventional oil are taken out of service and replaced with models that require synthetic motor oils.
“OEMs have not made significant changes to the PM schedules in 2021, but have been made changes over the past several years by using synthetic oils and fluids, which has allowed significant reduction in the number of PM visits their units require. Specific to 2021, OEMs as a whole have offered more electrified options like hybrid, plug-in hybrid, and full EV, many of which require a reduced number of PM visits,” said Jewell. “The sales numbers of these electrified units would indicate a rapid trend in this direction.”
Tire Expenses are Up
Replacement tire expenses trended higher in 2021compared to 2020. In fact, one of the greatest contributors to increased fleet maintenance spend in 2021was higher prices for replacement tires.
“Overall tire expenses have increased compared to CY-2020. The upswing in the cost of raw materials, such as rubber, has led the tire manufacturers to raise the cost of tires,” said Fleener.
The forecast is for replacement tire expenses to further increase in the 2022 calendar-year. “Tire expenses have jumped from 10-15% in the beginning of 2022. This may increase even more as a tire shortage has begun to appear in some areas of the country,” said Fleener.
In addition to higher commodity prices, there are other factors putting upward pressure on replamcent tire expenses such as higher fuel prices, which increase logistics cost to transport tires to retail stories. These increased costs are passed on to end-users in the way of higher prices.
Labor Rates Escalate
Labor rates are continuing to increase since the start of CY-2022 driven by inflationary wage pressures with the shortage of qualified technicians which is causing competitive offers for highly qualified techs. Nationwide, there is intense completion for the limited number of skilled technicians between dealerships, independent service providers, and fleets that operate in-house maintenance facilities.
“Labor rates have increased in 2021. The number of technicians entering the workforce is far less than the number leaving it, which would indicate a continued high demand and increase in labor cost,” said Jewell.
As vehicle functionality and operation become increasingly dependent on electronics and software, it has also begun to stretch the skillset of some technicians at independent service providers.
“The availability of technicians, specifically specialists like transmission and electrical diagnostic techs have made the largest impact in repair costs and delays,” said Jewell.
Constraints in Spare Parts
Part shortages for automotive components continue to be an issue with lead times ranging from days to months prior to arriving at a dealership or national account vendor. Although this is not new phenomenon, the frequency of the shortages is at an all-time high. In addition, higher prices for the commodities to manufacture these replacement parts are causing the cost of parts to trend higher.
The inventory for many automotive parts has remained lean throughout the 2021 calendar-year. The biggest impact has been caused by the microchip shortage, which has led to sporadic temporary shutdowns of a number of assembly plants, resulting in lost new-vehicle production industrywide.
“In addition, the introduction of more and more electronical items in units has also been impacted by the continued chip shortage. Although we do have streamlined partnerships that allow us to get parts, we have had to be creative in how we locate and procure parts to expedite repairs,” said Hernandez.
But the automotive parts shortage goes far beyond just the shortage of microchips. Today, there is a wide cross-section of automotive parts that are in short supply varying by type of part and make and model of vehicle. Today, when a vehicle incurs an unscheduled repair and a part has to be ordered, no one seems to know exactly how long it will take to fix the vehicle. Repair facilities don’t know when back-ordered parts will be received. The bottom line is that these parts constraints are causing repair jobs to take much longer to complete, thereby lengthening fleet vehicle downtime and increasing fleet costs.
Vehicle Quality Remains High
Without question, vehicle quality in 2021 continued to increase compared to prior years.
“Overall quality has risen in 2021 with better manufacturing processes in place from all OEMs. The demand by the American consumer to build quality automobiles will continue well into the future,” said Fleener.
While vehicle quality is at an all-time high, the forecast for overall fleet car and truck maintenance expenses is for individual transaction costs to continue to increase.
Another factor putting upward pressure on maintenance costs is the increasing complexity of vehicles. As vehicles become more complex so do vehicle repairs when malfunctions occur.
While the technology being introduced in today’s vehicles is very reliable, when a malfunction occurs, it is often very expensive to fix due to diagnostic testing needed to isolate the source of the problem. Diagnostic testing can drive up certain repair expenses such as infotainment system, for example.
Overall vehicle quality is anticipated to continue to increase especially as the industry transition to electric vehicles, which promise to be more reliable than vehicles with internal combustion engines since there are a fewer number of moving parts.
Truck Maintenance Trends
The top fleet maintenance issue for Class 1-2 light-duty trucks is the cost of replacement tires and lubricants, which continue to go up.
“From a fleet perspective, we generally talk about the units and the cost associated to those units. We need to make sure that when we look at our fleet, we are also look at the equipment and additional items associated with the units and the costs we incur in them,” said Hernandez.
The top maintenance issue impacting Class 3-6 medium-duty trucks is supply chain constraints.
“This has led to several different issues including the short supply of items needed for and required for maintenance and repairs of units. The primary maintenance costs for new units are PM services, brakes, and tires. The biggest increases we have seen have been in tires and lubricants. These are two items that continue to be affected by the supply chain industry and have led to additional costs in servicing of units. Thankfully, all of our partners have done a great job to try to minimize the impact by keeping pricing static, but we are now starting to see those increases,” said Hernandez.
The pandemic has also impacted our ability to schedule services or maintain consistent timelines.
“Downtime is extremely important in fleet, but especially on the truck side. Unlike light-duty vehicles, it is not easy to rent a truck, especially those that have specific equipment required to perform their services,” said Hernandez. “Because of these delays, we have had to partner with new and different vendors to be proactive in servicing our units. Mobile servicing has always been something we have relied on, but it is something that we have increasingly utilized.”
Forecast for Balance of 2022
The forecast for fleet maintenance expenses going forward into 2022 is that it will be similar to 2021.
“Calendar-year 2022 will likely see the same challenges from 2021 continue. Eventually, production and distribution of parts, and new vehicles, will normalize as will costs,” said Jewell. “However, as that stability returns, we will also continue to see the transition toward EV vehicles. These trends will decrease overall maintenance costs in the future.”
There continues to be maintenance issues that were a consequence of the COVID pandemic.
“Parts availability and service facilities that are understaffed or closed are the biggest areas that are causing fleet drivers to have extended downtime with their vehicles,” said Fleener.
The forecast for fleet truck maintenance expenses going forward into 2022 and beyond is positive.
“We have seen some positive changes over the last several months in regard to arrival of some long-delayed parts. We have also seen the downtime of some repairs get smaller. This does provide us hope that the changes are coming down the road. If we continue to see the relief of supply chain issues, we can see new units and less maintenance costs. We do not expect this to change until later in the year,” said Hernandez.