Taking the Fleet Industry’s Pulse at NAFA I&E

“With all the new electric vehicle companies this year, it feels like it did in the mid-2000’s, with the telematics companies,” said Holly Hill of FLD on the show floor at the 2022 NAFA Institute & Expo in Columbus, Ohio, which convened April 11-13.  

True. Back in 2004 and 2005 and the dawn of the telematics age, the NAFA exhibit hall was filled with smaller, upstart telematics companies, many that went out of business long ago or folded into one of the larger telematics companies that dominate today.  

This year, replace “telematics company” with “independent EV maker.” The EV market will consolidate too, though it’s not easy right now to know when and how.   

Yet while electrification was on fleet attendees’ minds, most haven’t yet begun their electrification journey. The most urgent issues discussed are sourcing vehicles and the cost of those vehicles due to low supply.

“The days of big fleet incentives are gone, at least for a while,” said Tom Coffey, VP of sales at Merchants Fleet on the show floor. No one is disagreeing.

Used Units, New Upfits

Fleets that never considered buying used are exercising the option out of necessity, and their fleet management companies (FMCs) are facilitating the transactions.

When it comes to used vehicles, fleets are working every angle. In one instance, a cable company had a sizable number of vans to de-fleet to willing buyers. Why’d they sell? Instead of sending technicians out to install cable equipment in homes, the cable company is now shipping the equipment directly to consumers to install themselves. (And using last-mile delivery to do it.)

The never-ending rise in delivery is having a knock-on effect here. Delivery contractors for last mile are flipping cargo vans around 30,000 miles, which make for good used units in their second life. Merchants is reconditioning them and are even adding new bodies, interior upfits, and equipment for their customers.

We are here at #NAFA2022 and @FleetChrisBrown got to drive a @VIAMotorsInc EV prototype van, built on a skateboard platform. These will be rolling off the line in 2023. pic.twitter.com/5nl8kBbOmz

— Fleet Forward (@fleet_forward) April 13, 2022

Delivery Market Effects

More on delivery fleets: Many retailers are transitioning a portion of their business from brick-and-mortar sales to online. Accordingly, they’re growing their own delivery services or outsourcing to package delivery couriers. They have short-term vehicle needs due to the seasonal spikes inherent in that business.

Coffey said Merchants Fleet is seeing a strong uptake from package delivery couriers, their contractors, and other fleets for Merchant Fleet’s short-term lease (legally a rental) of three months or more, up to a year. It’s two-thirds vans and one-third pickups, he said.

Creative Vehicle Sourcing

Tricia Guidarini, managing director for Element Fleet Management, is also seeing an uptick in fleeting used. Her clients are getting creative in this environment — some are communicating amongst themselves on sourcing vehicles directly from the other when they’re ready to de-fleet. Element will facilitate the transaction, she said.  

Because fleet clients can’t find replacements easily, some are elongating their amortization periods to hold vehicles past their usual cycles.

Government fleets are analyzing their duty cycles to sell off under-utilized units to take advantage of the hot resale market. “The days of, ‘I’ll hold onto this vehicle just in case’ are over,” said Mario Guzman, director of public works for the City of Boynton Beach, Florida.

Reconsidering Reimbursement

Other customers are reconsidering reimbursement as a temporary option. “If you’re hiring salespeople and you can’t get them a car, reimbursement is an option,” Guidarini said. “We wouldn’t normally consider it, but in these challenging times we’re thinking about all ways to help our clients.”

Higher Costs, More Delays

The other big issues for fleets: supply chain disruptions around parts, fuel, and maintenance costs, managing reduced fleet budgets, and finding qualified technicians.

As vehicles creep up in age, maintenance costs are on rise. Element data showed an 11% increase in maintenance costs in the last 12 months over the previous period, while 3.4% of that was in the first quarter of 2022 alone.

In one session, the presenter remarked that an employee had previously worked as a last-mile delivery driver. The employee said that one in five vans had a check in engine light on.

With the theft of catalytic converters still on the rise, fleets are facing a double whammy of not being able to source replacements quickly, so the vehicles sit. And when they arrive, they’re double the cost. It doesn’t help moving forward that Russia supplies 40% of the world’s mined palladium, a key element in catalytic converters.

Topsy-Turvey Ordering

The lack of vehicle supply is also creating a topsy-turvy schedule for ordering. One automaker is set to open fleet orders later in April, but pricing for government fleets won’t be made available until a month later. However, by the time that pricing comes online, the order banks will most likely be closed.

To address the issue, some leasing companies are using blanket purchase orders to get their clients vehicles — and will figure out pricing when it becomes available.

App-Based Telematics

Back to telematics: The market has settled into maturity from those days at the beginning of the second millennium. The promise of connectivity to OEM modems — leaving aftermarket installs behind — is upon us, and we’re just beginning to scratch the surface on use cases.

While service fleets were among the first adopters of telematics, there was less penetration into sales fleets. Guidarini of Element is seeing this side of the market grow with app-based programs on smartphones.

“It’s less about tracking and more about driver behavior and safety,” she said, adding that Element’s salespeople use the company’s client-facing system too. The system collates driver behaviors from the app to score and rank participants. While this “gamification” amongst peers isn’t new, gaining these insights without an installed modem is an effective tool to create safer fleets.

Continuous MVR Checks

Guidarini added that Element clients are moving away from yearly or bi-yearly monitoring of drivers’ motor vehicle records to continuous alerts.

So, what about the elephant on the show floor, electrification? There is so much from NAFA 2022 to cover that we’ll save those electrified insights for the next blog.