Looking back over the last 15 years or so, new commercial vehicle costs were somewhat controlled—with average increases in original equipment costs coming in at about 1% to 2% every year—according, to Brian Antonellis, SVP of fleet operations at Fleet Advantage.
Unfortunately, those days of controlled equipment costs are a distant memory. Fleets continue to struggle to procure new equipment, while OEMs are running out of build slots for the year.
“We probably need around 300,000 vehicles to be built a year and we are getting around 270,000,” Antonellis told FleetOwner. “That 30,000 is putting pressure on everybody. Even the largest fleets in the country that we work with have had their allocations cut year-over-year.”
Ongoing market challenges aside, industry stakeholders are starting to see the light at the end of the tunnel. In a late-May ACT Research trailer report, Frank Maly, ACT Research’s director of CV transportation analysis and research, pointed out that the end of the first quarter saw some supply chain relief, with progress—albeit choppy—expected to continue.
And over the last 30 days, Fleet Advantage’s Antonellis has seen stabilization in both vehicle components and in the labor force. He’s also seen OEMs start to provide directional pricing guidance for year-over-year equipment increases.
“While we weren’t sure if it was going to be a 10%, 15%, or 20% increase, we saw a low single-digit increase—not the 1% to 2% we had seen prior years—but still single-digit increases going into 2023 for directional guidance,” Antonellis said.
Cost management
Even with some stabilization in sight, the annual inflation rate in the U.S. slowed slightly to 8.3% in April from what had been a 41-year high of 8.5% in March. For May, however, the latest numbers show the U.S. inflation rate unexpectedly accelerated to 8.6%, the highest since December of 1981.
Energy prices have also increased, and after a few consecutive weeks of slight declines, the price of diesel jumped 16.4 cents in a week to a national average of $5.703 per gallon.
“The fleet managers and executives that we work with feel like they are getting hit from so many different directions,” Antonellis said. “They are asking for help with how to manage the incoming cost increases and still put together a plan to react to them.”
To better manage costs, Antonellis recommends fleet executives break down their expenses into four major buckets: fuel, maintenance and repair, labor, and equipment.
“When we look at fuel, fleets need to focus on how many miles they are running and their mile per gallon per truck,” he advised. The second approach to fuel is to understand your true lifecycle and how fuel degradation over time affects your fleet.”
When it comes to equipment and vehicle lifecycles, Antonellis said Fleet Advantage has tried to shift fleets’ focus to planning out over the course of three to five years, rather than for one year. That, he added, is important amid truck order backlogs and OEMs becoming more interested in long-term planning.
This planning approach could also help fleets plan out their environment, social, and governance (ESG) goals, Antonellis noted.
For instance, some fleets that Fleet Advantage works with have expressed interest in electric vehicle adoption. So, they started by converting their terminal tractors and other applications like regional haul to electric, where today’s battery-electric technology is proven.
Natural gas has also made a comeback as a near-zero emission fuel alternative for fleets and OEMs looking to meet both ESG goals and 2024 and 2027 federal emissions regulations.
See also: Industry reacts to EPA’s truck, engine emissions proposal
Fleet Advantage just released an industry whitepaper addressing the future of heavy-duty trucks and “building a bridge” to alternative energies. In its report, the company illustrates a “bridge” approach by leveraging today’s readily available clean-diesel technology into tomorrow’s alternate-fuel options.
Antonellis added that the key for fleets moving forward is to make sure they are staying educated on what’s happening with alternative fuels.
“I don’t think it’s going to be electric for everybody, but we use the term bridging to the future,” he said. “Staying on top of it and understanding what your trucks do for work are required for selecting the correct zero-emission targeted vehicle, as well as what will be available in the next three to five years.”
