Magazine for the car and truck fleet and leasing industry
Issue link: https://autofleet.epubxp.com/i/140727
❲ MARKET TRENDS ❳ The State of Commercial Fleet Management in 2013 MIKE ANTICH T here is ongoing pressure to contain feet costs due to corporate cost-cutting initiatives. Pressure for spend reductions is occurring at all levels within corporations, and feet operations is simply another department mandated to cut costs. Reducing feet costs is a constant, never-ending struggle for all feet managers. Despite an improved business climate, many companies continue to remain cautious in terms of capital expenditures. Most feets are seeking cost reductions by increasing operational efciencies. For instance, fuel efciency considerations have become a greater factor in vehicle selector decisions. Many feets are mandating minimum mpg requirements before a vehicle can be added to a selector. In addition, companies are looking to rightsize vehicles in reaction to cost containment and fuel-efciency initiatives. Truck feets continue to focus on aerodynamics, reduced rolling resistance tires, revising vehicle specifcations, and use of engine governors to maximize fuel economy. Tere is also widespread adoption of idling reduction policies, route optimization, tire pressure monitoring, and driver behavior modifcation. A parallel approach involves driver education/behavior modifcation by encouraging drivers to maintain proper tire pressure, drive less aggressively, and minimize unnecessary idling. One bright spot has been maintenance costs, which have remained fat as the quality of vehicles from all OEMs continue to steadily improve, and extended powertrain warranties have covered some expensive repairs at higher mileages. However, one operating expense that has been on the rise is the cost for replacement tires. A key factor to higher tire prices is commodityprice increases for raw materials, in particular the higher cost of oil, which is a key ingredient in tire manufacturing. Another positive trend is with resale values, which continue to remain strong. Today's resale values are strong, as dealer demand continues to exceed wholesale supply. It's not that demand is substantially greater for used vehicles; rather, demand is strong because the inventory of used vehicles in the wholesale market is low. However, used-vehicle supply will increase in reaction to increased new-vehicle sales. Tis will cause resale prices to moderate as supply matches demand in the wholesale market. Operating Cost Trends Sustainability and Safety Still Strong with Fleets An ongoing challenge facing today's feets continues to be the elevated cost of fuel. As the largest cost component of operating expenses, feet managers are focusing on a multitude of fuelreduction strategies. Te shock from fuel-price spikes in prior years prompted many feets to downsize to smaller vehicles and engine displacement to increase overall feet fuel economy. A corollary concern is the ongoing fuel-price volatility, which has kept managing fuel spend a top concern for feet managers, who, in turn, are being pressured by management to search for ways to improve overall fuel efciency. Te industry has been experiencing fuel-price volatility since 2002. A key reason is that there are pre-existing weaknesses in the nation's refning infrastructure. For example, no new refneries have been built in the U.S. since the Garyville, La., refnery went online in 1976. Tis has resulted in limited refning capacity, especially for the production of reformulated gasoline, which increases the frequency of regional spot shortages. Fleets are taking a multi-pronged approach to control fuel costs, such as spec'ing four-cylinder, instead of six-cylinder, engines, implementing anti-idling programs, and increasing the number of hybrids in operation. Other feets are using telematics and GPS to improve route optimization and gain the ability to locate nearby low-cost fueling stations while on the road. Some are increasing personal-use charges to recoup higher fuel costs. Fleet managers are also seeking to control fuel costs at the driver level by setting tighter and more frequent exception reporting. Fleet sustainability initiatives remain important to commercial feets, but many feet managers report that corporate management is now viewing "green" increasingly through an economic perspective. Despite these economic concerns, many companies remain fully committed to achieving self-imposed sustainability targets, especially multi-national corporations. Cost continues to be the largest challenge to reducing a feet's environmental impact. In today's economic environment, many companies are cautious about spending money without a quick, proven payback. However, corporate sustainability initiatives will play a greater role in vehicle acquisition. Te increased number of hybrid models and body styles available from OEMs will facilitate this trend. Tere is increased concern about vehicle and driver safety and minimizing liability exposure, which is ofen being driven by senior management. Fleets are seeing an uptick in preventable accident frequency, primarily due to driver distraction. Driver distraction has become a major issue due to employees multitasking behind the wheel and the widespread proliferation of smart phones and other handheld data devices. Despite some negative trends, the 2013 calendar-year, on the whole, promises to be a good one for the commercial feet management industry. Let me know what you think. AF 8 AUTOMOTIVE FLEET ❙ 2013 mike.antich@bobit.com