While fleets are integrating a wide array of changes on separate fronts, they all tie in together to build a leaner, faster, and safer operation on the ground.
A spectrum of challenges confronts fleets, such as connectivity, data analysis and AI, fleet electrification, charging infrastructure, major market shifts, and change management.
A panel of experts recently delved into those topics loosely centered on a fleet industry S.W.O.T. (strengths, weaknesses, opportunities, and threats) analysis. The panelists spoke at the 6th annual Fleet Forward Conference and 2nd annual Fleet Safety Conference on Nov. 8 in Santa Clara, California.
Speakers included Charlotte Argue, senior manager of sustainable mobility at Geotab; Jeff Schuchardt, vice president of information technology at Enterprise Fleet Management; and Mike Hauge, fleet manager at Ecolab.
Connection Leads to Performance and Efficient Operations
The first rule for fleet operations preparing for the future is that vehicles lacking connectivity miss out on healthier operations — which can lead to better use of vehicles and reduce road miles, Hague said. Fleets are not controlling costs, supporting driver safety, or protecting vehicles when not fully connected with telematics and other technologies.
Schuchardt pointed out that of the one million VINs in the Enterprise Fleet system, 80% of the fleet vehicles are not yet fully connected. “If the vehicle is down, it’s detrimental to the customers and the ability to do business.”
The latest technology tools are allowing fleets a far higher level of sophistication that leads to more productive operations, Argue said. There is also a growing synergy between connectivity and electric vehicles which are data rich.
“Before, you had dots on a map,” she said. “Now the data is supporting business decisions. Data is not helpful unless it’s turned into insights. It’s not just about location and maintenance, but we can now use data to look in aggregate as to what is happening across fleets.” With machine learning, fleet operations can look more closely at batteries and recommend replacements before predicted failures.
The data tools also can help fleets see how electric vehicles are performing at certain speeds and temperatures to predict range, as well as determine which fleet vehicles are the best candidates for electric replacements.
ChatGPT and AI-Drivers
While many AI apps such as ChatGPT have generative capability, they are not 100% accurate, Schuchardt said. But they can help in focusing on the needs of customers in a database.
AI can offer practical uses to benefit customers, such as identifying the worst offenders in a fleet, looking at individual use cases, and tracking performance trends. “It’s still in its infancy, but now we’re looking at real life use cases on the customer experience side,” he said. “What can you do to avoid problems? Those are the most valuable ways to leverage AI to make customers more efficient and minimize breakdowns.”
AI also can be deployed to remove roadblocks for fleet drivers.
“They don’t want to have to spend time dealing with vehicles,” Hague said. “If you can remove barriers, then anything can be automated via AI or password resets. What can you do to keep your vehicles on the road? How do you get ahead of failures? How do you get parts and reduce lead time between failures on the road and repairs?”
AI solves specifics in a faster way, Schuchardt added. “We’re leveraging data to get answers faster for us and our customers.
Other preventive actions include reducing idle time on fleet vehicles, Argue said. “AI brings the right information to the right person without you having to find a report or do your own analysis. That’s where data intelligence can really help.”
Fleet Electrification must make sense first through practical examples of good use cases, Schuchardt said. “Don’t let the perfect be the enemy of the good. About 80%-85% would be a success. There will be nuances in charging infrastructure and vehicle availability.”
With 130 BEV models available today, there are plenty of opportunities to test, learn and iterate with electric vehicles, Hague said. “What needs to be true to take EVs from pilot stage to expansion and deployment? We’re looking at variables and uses, metrics such as weight and range, and the feasibility of home charger installs.” His company is laying the groundwork on compliance and policies as it works toward a 2030 goal of fully electrifying 100% of its light-duty fleet vehicles.
Many global and economic factors now interfere with electric vehicle adoption, Argue said. “We’re still seeing positive uptake and increases and every year over the last decade, the line gets steeper. It’s not easy, but the fact is it’s good technology and fits many uses cases, which are growing.”
With advancements in technology and investments in larger vehicles, the fleet industry is seeing a lot of demand, interest, and commitments in the larger commercial vehicles space.
“You start with where fleet electrification makes sense today and work into other vehicle classes,” Argue said. “The worst thing now is to not do anything. There are many things to do now to make fleets more efficient and work toward a business case based on TCO.”
Schuchardt recommended suitability assessments to see what percentage of vehicles can be electrified by certain dates. “Incremental progress is still a success.” Fleets also should consider hydrogen fuel cell vehicles and expand their approach to any vehicle type that reduces carbon emissions, helps the environment, and meets ESG goals.
Tips and Insights on Better Fleet Practices
Among challenges that keep panelists up at night:
- How do fleet operations prioritize and focus? You first need to get internal buy in from financial and change leaders on the vision. It’s easier to do nothing than something.
- What additional power will be needed for electric vehicles that have to be upfitted with heavier equipment that adds weight, such as liftgates and rear-mounted toolboxes?
- Overcoming reluctance from drivers who don’t want EVs forced on them. If fleets don’t succeed in winning over the first wave of EV drivers, then all the positive efforts built up will disappear.
- Identifying suitable driving patterns for electric fleet vehicles that match the needs of the fleet and can be adequately powered.
- Because electrified fleets require a large and steep learning curve, success lies with the champions in an organization who can push them through.
- Understanding true capabilities, and bringing those factors into TCO calculations: What will the EV cost? Can you use ICE vehicle data on parts and inform a strategy for infrastructure? Which vehicles will be parked longer to help determine usage of level 2 vs. level 3 chargers? And once vehicles are deployed, do they match the training, telematics, and power load capacity?
- Put into context all the increasing pressures and mandates companies are facing with emissions reductions. EVs are only one part of the solution. Fleets need to be stepping in and addressing how to track emissions now. What are they doing about that? It’s not just about electrifying but reducing waste.
How to Develop a No Accident Safety Culture
Of course no fleet operation can succeed with the latest technology and innovations unless it has its bedrock safety act together. In a keynote presentation for the Fleet Safety Conference, Brian Fielkow, executive vice president of Risk Resources, posed four key questions on Nov. 8 for fleet managers to encourage developing a consistent safety culture.
“How strong is your safety culture? Is your team living and breathing safety? Are we really living our values? Are we truly providing safety leadership?” Fielkow asked.
“Customers don’t want to do business with rogue operators,” he said. “Safety is a hard-core business proposition. You must think differently about safety; we can’t keep doing same thing time and again and expecting different results.”
While priorities shift and checklists change, and sometimes compete for each other, safety should stand solid no matter how an organization evolves.
Fielkow outlined 12 underlying principles for a strong fleet safety culture:
NO. 1: Manage an organization by a core set of immutable, non-negotiable values. That’s where safety belongs. Productivity and production pressure can never trump safety.
NO. 2: What fleets call an accident is not an accident. Very few things are accidents. Accidents happen by chance and cannot be prevented. Instead, they should be called crashes or incidents because they are “behavior based and preventable,” he said. “Get accident out of your vocabulary. Call it a crash or an incident.”
NO. 3: 99% is not good enough. If you are an actuary, you look at crashes and probability. Zero is a mindset. You may not get there but you need to not accept preventable crashes.
NO. 4: If you think safety is expensive, consider the cost of the opposite. Crashes and incidents can result in deaths, in addition to higher insurance costs and expenses, legal problems, bad morale, loss of customers, retraining and rehiring employees, and a competitive disadvantage. A consistent safety program is priceless compared to the loss of life and permanent disability.
NO. 5: Safety extends beyond compliance. Just because you’re compliant, does not mean you are safe. If a driver is sick or fatigued, don’t drive. That concept is not found in any regulation, but it’s behavior that a fleet safety program can discourage or prohibit.
NO. 6: Safety is leader driven and will not bubble up organically. Safety is central to operational excellence.
NO. 7: Safety is employee owned if it’s leader driven. The most important group is front line opinion leaders, or champions. If you bring in the front-line drivers and employees, an operation can change for the better. Quoting McKinsey & Company, Fielkow said, “A blind spot seems to be the failure to involve frontline employees and their managers in the effort.”
“Let’s get out of the habit of saying good-bye. I’m lukewarm to exit interviews. Figure out how to say hello. Building bridges instead of breaking bridges.”
By building bridges to new employees, a fleet operation can build a stronger safety culture. “Orientations are like fire hoses. People can’t retain that much in a week. Compare that to integration. It takes six months to a year to properly integrate an employee into your environment. What happens on day 45, day 60? It takes that long to decide whether you want them to be there, or they want to be there.”
NO. 8: Move from a blame culture to a just culture. “When things go wrong, and incidents and mistakes happen, this idea of progressive discipline leads to mistakes.
You are human; humans make mistakes: Was it an honest mistake or reckless behavior?”
NO. 9: Instill unconditional respect for processes. “We’re drowning in a sea of papers and PDFs. What holds everything together? Professionals follow procedures. They do the right thing when no one is looking. At the core of incidents is a lack of respect for processes. We need better processes, not more.”
If a process is written at a high school or collegiate level, then it’s not readable to most employees. A checklist provides consistency, whether it’s for the “first flight or the 5,000th flight,” Fielkow said, invoking an aviation comparison.
Categorize life critical violations, such as: If an act is likely to kill or maim an employee; using a handheld cell phone while driving; working while drunk or stoned; failing to report accidents; near misses; vehicle damage; reckless driving; pulling unauthorized equipment; improperly securing a load. “Isolate behaviors that are acute in your operation,” he said.
NO. 10: Dismiss severity: If you run a safe operation, you cannot get caught up on severity. Whether an outcome is severe or not is a function of luck. Focus on behavior and retrain after a so-called minor incident. A fleet operation cannot measure safety success by a lack of crashes.
NO. 11: Tear down the silos: “If we run large organizations, operations is responsible for safety,” Fielkow said. “You can’t delegate to a department. Safety is not a department, it’s a way of life. Who’s responsible for safety in this organization?”
NO. 12: Overcome the fear of change: “The ability to drive change is a matter of trust; the more they trust you, the more they will change,” he said. “The champion is no good unless there is clear leadership support. Put people first. The more you capture the power of front-liners to drive change, the more you’ll get it. A top-down memo on Monday won’t work. Employees won’t support it unless they are included. Bring them in.”
Vehicle Markets in Flux: How Are Fleets Doing?
Fleet managers must keep up with the latest vehicle market dynamics, especially with electric vehicles, when finding the most efficient turnover and replacement timelines for individual vehicles. Another keynote speaker on Nov. 9 provided a dense run-through of the markets for new, used, and electric vehicles, giving some direction on pricing and supply.
“So where are we right now? There's a lot of press, a lot of misinformation out there; half-truths, and in some cases lies,” said Tyson Jominy, vice president of data and analytics at JD Power, who opened Day 2 of the Fleet Forward Conference. In almost every one of my slides, the answer is always better than last year, but not quite to where we were in 2019.”
Bottom line: Automakers are producing more vehicles, and as a result, selling more to everyone. The number of retail vehicle buyers is growing, but at a slower rate.
On the fleet side, automakers are selling new vehicles directly to the fleet channels, such as daily rentals for government fleets and corporate fleet accounts, Jominy said. Fleets generate about a fifth of automotive industry business.
“It's growing dramatically, up 50% from a year ago. We’re almost back to where we were with fleet sales in 2019.”
The rest of the buying segments are trailing fleet since fleet operations are willing to pay top dollar for vehicles, which prompts the automakers to sell more into fleet and keep the retail prices high, Jominy said. Some automakers are reporting $17,000 increases in transaction prices compared to those of 2019.
Gone are the days when an oversupply of vehicles would be dumped into the fleet channel at discounts, he said. “Now, if we start to produce too many of a certain kind of vehicle, we have an equally profitable channel, which is the fleet channel,” he said.
Rebounding Up to a Point
Overall, vehicle supply and production have been rebounding from the pandemic era slowdowns, he said. Vehicle production is up to 15.6 million annually in the U.S. The industry lost about 7.5 million in vehicle sales since the start of COVID. Some of those losses result from fleets keeping vehicles longer, thereby forgoing or delaying replacement purchases. Meanwhile, retail consumers are waiting to buy vehicles, as in waiting for the right colors and the right prices/interest rates. So even if the industry wanted to get back to the 17.5 million in annual vehicle sales before COVID, it couldn’t because the demand in an atmosphere of high pricing pressures is not all there, Jominy said.
Of the vehicle model segments, smaller SUVs are growing the fastest since 2019. Since COVID started, 60% of all vehicle sales are SUVs, about 20% are cars, and another 20% are trucks. And while vehicle sales have shifted for years from sedans to SUVs, that trend is receding, except in the fleet segment.
“When I look at fleet sales, there's a very dramatic shift going on, and the shift away from cars toward SUVs is still happening,” Jominy said. “And I don't see that anywhere else in the industry. The way we came back both by automaker and by segment is radically different than where we were in 2019.”
Used Vehicle Supply to Remain Tight
On the used vehicle front, supply will remain tight for the next few years, keeping prices higher in the wholesale vehicle channels through mid-decade. Even when the total volume of used vehicles increases, the supply will not get back to pre-COVID levels due to fewer lease returns.
The backbone of the entire U.S. market — the three-year-old off lease vehicle — is not coming back to dealers at the same rate as before, reducing that supply line, Jominy said. “With a lower supply of used vehicles, on average, we will expect higher prices of used vehicles.”
While high used vehicle prices will at some point revert, they will only fall back to previous highs, and remain historically higher than prior averages, he said. He referred to the COVID-driven used vehicle price spike as a “Mt. Everest” on the price graph of the last few years.
Prices will come down, but they will ease and moderate out at a level to what would have been the best year in history, he said.
“Basically, we're talking about end of the decade until U.S. supply levels will reach pre COVID levels,” he said. “COVID will be a 10-year event in the used vehicle sector,” he added. “I've been in my job 14 years, and I'm still going to be talking about COVID almost to when I retire at this rate, because the U.S. market is still quite impacted by it and will not return to normal for several more years.”
EVs Turning Negative, But Numbers Still Positive
“Even as we've been talking about how nobody wants EVs and everyone hates them we’ve actually been selling a lot more EVs with the share of the industry hitting 9% on a retail basis in September,” Jominy said. Most sales still go to Tesla, which despite competition and price cutting, retains 60-62% of the new EV market.
Today there are 48 electric vehicle models on the ground, compared to 16 in 2019. Most are selling for between $50,000 and $60,000. In 2024, there will likely be 80 EV models on the market.
Despite such momentum, the average new car dealer in in the U.S. sells fewer than one EV per month, which causes days’ supply to reach the 100 level, hence the negativity, Jominy said.
EV-ICE Pricing Parity?
Determining price parity between EVs and ICE vehicles is near impossible given the varying levels of government and utility rebates, tax credits, incentives, and sales tax levels among the states for electric vehicles. “What does price parity even mean anymore?” Jominy asked. “An automaker can't see the price parity. Even if you're Tesla and you've got consistent prices for everybody, where you live causes radical differences in total ownership costs.”
Given the expected future demand for EVs, public charging will not be able to keep up, Jominy said.
“EVs may or may not be right for your fleets,” he said. “But something to keep in mind is there is very little (charging) infrastructure, at least from the federal government. In terms of how government is spending our money, it is highly skewed toward variable marketing and getting consumers into EVs and nothing for making EVs livable.”
Consumers need a “map” to figure out and understand the “Byzantine requirements” surrounding the purchase of vehicles, such as the income limits, pricing guidelines, and location of where the EV is built, Jominy said.
As a result, 55% of all EVs are being leased, since the benefit amounts to $3,500 for the lessee and avoids the tax forms, reporting requirements, and lower resale values brought on by the new EV price cuts.
Citing the EV index at JD Power, affordability in October 2023 hit 102% for EVs, which means that on average, an EV is 2% cheaper to own than an ICE vehicle for the first time ever, Jominy said. He credits the myriad federal, state, and local utility funds and credits that reduce the cost of owning an EV and even provide some chargers for free. Ownership costs still vary based on mileage and local area, but overall EVs can be a better purchase financially than an ICE vehicle, he said.
On the lack of reliable public charging stations, for example, Jominy underscored that 88% of all EV charging happens in homes. But now the growth in data will help EV owners identify in real time which public chargers are working, when they are available, and the speed of the charge.
“As you get into your fleet, you want to know if you can get these vehicles charged,” he said. “The good thing is that now the data is finally starting to pour in about public charging.”
Despite the negative press on EVs, J.D. Power stats show consumer consideration is still high as the data surrounding EVs expands and can help identify and solve problems. Data also helps a fleet operation figure out which fleet vehicles to replace with EVs, whom to assign them to, and where to deploy them.
“That's a very hyper local situation, depending on where you are, where your people are, and where your customers are, which can greatly impact your cost of ownership,” Jominy said. “It requires some sophisticated analysis.
“Now we’ve got a lot of great data out there that can help you solve some of these problems, like total cost of ownership and working through all the pieces of what goes into an electric fleet.”