Top of mind for most fleet professionals are the ongoing sourcing constraints for replacement vehicles, the inflationary pressures on fleet total cost of ownership, the operating cost impact of managing older than normal fleet vehicles, and fleet electrification trends, in particular, the challenges of simultaneously operating an EV and ICE fleet.
Below are the top 15 trends impacting the commercial fleet market based on feedback from fleet managers and suppliers.
1. Ongoing Sourcing Constraints & Logistics Delays
Probably the top trend impacting fleet managers is that there continue to be ongoing sourcing constraints to acquire replacement vehicles amplified by logistics delays throughout the entire order-to-delivery process.
While there have been improvements, every fleet manager I talk with says they continue to experience constraints in sourcing replacement vehicles primarily due to the fleet ordering allocation system adopted by most OEMs that limits the number of new vehicles they can order. These allocations are invariably less than what fleet managers need to maintain their traditional vehicle replacement schedules. Even when OEMs accepted fleet orders, they could still be canceled months later when it was too late to source from another OEM.
Suppose a vehicle is involved in a crash or unexpected new hires need company vehicles. In that case, there continues to be difficulty in buying these emergency replacement vehicles out-of-dealer stock. Fleet managers tell me that dealers prefer retail sales over fleet since retail sales generate higher margins. And if they sell to fleet, they are doing so at MSRP, and there continues to be market price adjustment beyond MSRP.
In addition to new-vehicle sourcing constraints, there are increasing delays revolving around the logistics of moving vehicles from factories to dealers or, at the end of their service lives, moving vehicles to auctions for remarketing.
2. Extended Order-to-Delivery Times
A second trend – or perhaps better phrased as a challenge- has been increased order-to-delivery times.
I’ve been tracking order-to-delivery times in the commercial fleet industry for almost 30 years, and complaints about long order-to-delivery times have always been. While order-to-delivery times have improved recently, especially compared to the dismal 2021-2022 model years, today’s order-to-delivery times continue to be much longer than historical norms -- namely, pre-COVID.
Today, many factors impacting order-to-delivery are similar to those we experienced pre-COVID. For instance, a perennial issue causing order-to-delivery delays is the shortage of railcars, and these railcar shortages continue today, especially for units manufactured in Mexico to be exported to the U.S.
Sometimes, no one seems to know why particular fleet orders are delayed. These fleet orders are stuck in a limbo status where fleet managers have difficulty ascertaining delivery dates.
These delays impact the fleet dollar and cents, especially when vehicle delivery does not arrive when needed and an employee must be put in a long-term rental vehicle.
3. The Average Age of Fleet Vehicles is Increasing
Third, the average age of fleet vehicles is increasing. The limited availability of replacement vehicles has forced fleets to extend the service lives of those currently in service. This has resulted in fleet managers being forced to operate older vehicles in a high-mileage fleet environment, resulting in the inevitable uptick in unscheduled maintenance.
4. Inconsistency in Makes and Models in Fleet Operation
Fourth, an inconsistency in the makes and models of vehicles in fleet operation has emerged over several model-years.
The difficulty in sourcing replacement vehicles has caused fleet managers to use multiple OEMs or to compromise and settle for vehicles that may not be their first choice but are a secondary choice to fulfill the fleet application. This creates complexity in maintenance schedules due to the diversity in models in operation.
5. Limited Availability of Compact Vans
Fifth, there continue to be limited alternatives in the compact van market. It’s not that fleet applications in this area have diminished. The need for compact vans in the commercial fleet market continues to be strong. The problem is the lost production capacity as some major fleet OEMs have exited this vehicle segment.
6. Limited Availability of Fleet Hybrids
Sixth, some fleet managers complain of limited or no allocation for hybrid vehicles for fleet ordering. These fleet managers say that hybrid availability is mainly directed to the retail market at the expense of fleet buyers.
7. End-User Demand Outpacing Medium- and Heavy-Duty Chassis Production
Seventh, business activity remains strong at many vocational truck companies, causing end-user demand for medium- and heavy-duty products to remain high. In certain market segments, end-user demand outpaces chassis production for some models.
8. Higher Inflation & Escalating Interest Rates
Eighth, inflationary pressures and higher interest rates put upward pressure on total fleet costs, such as fleet acquisition expenses aggravated by lower or no fleet incentives, higher repair expenses, higher labor rates, and the ongoing price increases of replacement parts.
Plus, the unscheduled fleet expenses from operating higher mileage vehicles have had a major impact on fleet budgets.
9. Cost Containment Pressures
Ninth, fleet costs are increasing across the board, and management has more pressure on fleet managers to control these higher fleet costs. Easier said than done.
In the final analysis, the total cost of ownership or TCO is trending upward due to higher base prices and interest rates, and softening resale values.
10. Electrification Transition Harder Than Anticipated
Tenth, the transition to an electrified fleet has been harder than anticipated. The transition to an EV fleet has created pain points for some fleet managers primarily due to higher vehicle acquisition costs, limited EV models capable of meeting specific fleet applications, and inadequate charging infrastructure to accommodate a nationally dispersed fleet.
The reality is that infrastructure for EV charging continues to be inadequate in non-urban areas, which tend to have higher mileage fleet applications.
11. Ongoing Shortage of Skilled Workers
Eleventh, there is an ongoing shortage of skilled workers.
There continues to be a shortage of qualified technicians to repair fleet vehicles. For service fleets, there continue to be difficulties in recruiting and retaining drivers.
12. Staffing Constraints at Vehicle Transport Companies
Twelfth, most vehicle transport companies have difficulty recruiting and retaining drivers, contributing to longer order-to-delivery times for fleet vehicles.
13. Delays in Vehicle Upfitting
Thirteenth, there continue to be sporadic delays during the upfitting process. Upfitters, like other manufacturing companies, are experiencing difficulties recruiting qualified workers, especially those with specific skills, such as welders.
Also, the ongoing parts shortages have impacted the upfit process by slowing production during shipping delays.
14. DMV Delays for License and Title Processing
Fourteen, there continue to be delays in the license and title process at DMVs. The source of many of these delays goes back to the closure of DMV offices during the start of the COVID-19 pandemic. DMVs have had a slow recovery, and many fleet managers still complain about delays in getting their vehicles licensed and titled.
In addition, fewer dealers are offering title and registration services for new vehicle deliveries.
15. More Tech-Driven Change to Occur
Lastly, more tech-driven change will impact the fleet market, which will go beyond what we have experienced in the past. On the horizon, I foresee an acceleration of change – fundamental change - in the fleet market driven by technology.
In particular, artificial intelligence, or AI, will most likely occur faster than we think. I believe AI will become a mainstream tool in fleet management.