All things considered, Canadian fleets are weathering the pandemic rather well.
While the global pandemic has certainly had a major impact on business, the overall Canadian fleet picture is not as dark and gloomy as some might think. It’s true that some sectors of fleet, like rental, have been devastated, but others are still in business and coping with change.
How a fleet may be doing really depends on the business they’re in, as well as where they operate geographically. Basil Marcus, Commercial Director for Foss National Leasing explains that certain customers in the food, construction or essential services side of the economy are still very busy.
On the construction side, for example, we have a customer who needs a large number of trucks right now. They’re in the road building industry and with the roads being so quiet, they’re doing a lot of resurfacing.
— Basil Marcus, Commercial Director, Foss National Leasing
Marcus explains that some small and medium-sized businesses have been hit hard by the mandated closures, while many corporate and government fleets are still functioning well. “Many businesses are part of the supply chain of an essential service,” he says.
Geoff Seely, Vice President & General Manager of ARI Canada agrees. “Government fleets are working as usual, especially when you consider essential service fleets such as health services and police departments,” he says. “Corporate fleets are a bit different. Working from home has quickly become the new normal, although service vehicles are still on the move. It really depends on how a particular industry or organization has been impacted by the pandemic.”
One of the challenges facing fleets is vehicle acquisition. “New vehicle ordering has certainly been impacted but for the most part, the supply chain is one of the areas that has kept moving,” says Seely.
“Fleets have been able to obtain units from dealers as dealers have found new and innovative ways to hand off vehicles to clients. Inventory was available and dealers were able to adapt their delivery model to be able to supply clients,” he adds.
Seely admits that the stock supply is going to dry up because of production delays at the OEM level, but says that he was surprised when he looked at his customers’ orders and delivery numbers. “They weren’t as far off as I thought they would have been.”
While some fleet managers wanted to cancel orders completely in order to cut costs, Seely and his team worked closely with these customers to examine both the short- and long-term ramifications of these decisions and how they will impact operating costs throughout vehicle lifecycles.
“It’s a short-term decision which may have a long-term negative effect as vehicles remain in service longer than originally anticipated,” he says.
The remarketing side of the equation isn’t as encouraging, however. “Selling vehicles right now is a bit of a challenge with relatively low demand negatively impacting vehicle values. Generally speaking, we’re recommending fleets hold onto their vehicles until the market bounces back,” Seely explains.
Auctions are closed, so fleets can’t sell vehicles. “Even if you could take your vehicles to a virtual or online auction,” Marcus adds, “they have nobody to recondition the vehicles, and they’re limiting the number of vehicles you can run.”
On the bright side, Marcus says he’s seen about a 25% drop in price when remarketing, “which isn’t terrible,” he says, especially when you consider that there aren’t too many buyers out there. “Once the U.S. opens up, we think that will have a big impact on the Canadian market, with such a high percentage of used vehicles going down over the border,” he adds.
Another key concern is depreciation, which experts warn will be a major problem, especially for fleets that have not managed this piece of the puzzle properly. “If a vehicle was depreciated incorrectly before the pandemic they’re going to be in big trouble now,” Marcus warns.
“Money was easy for a while, so if you were playing games with depreciation, and you were more focused on monthly payments, I think you might really suffer because there won’t be much value left in the vehicle at the end.”
Regardless of the kind of business a fleet may be in, employee safety and security are now more important than ever. “Some of the commonalities that all fleets have had to work on include employee safety, which is a top priority in all industries,” Seely explains. “Sanitization and social distancing have become a part of everyone’s daily routines.”
Sharon Fleming, Director of Fleet Services at the City of Calgary knows how important employee safety is today. “When it comes to our road crews, we can’t have as many people sharing a vehicle,” she explains.
“From a maintenance perspective, we’ve undertaken a number of strategies to increase social distancing. Between every shift we leave an hour for people to have time to get on and off the premises. We also clean between shifts to prevent the spread of the virus.”
While no one can predict the future with complete certainty, Canadian industry experts offer a few insights into how fleets will continue to cope with our new collective reality.
“My personal view is that come September we’ll see some normalization of the marketplace,” says Marcus. “Production will be back in swing, 2021 models years will be out there, businesses will be planning for 2021, and that’s when we’ll see what the new normal is.”
He adds, “When it comes to sharing vehicles, companies are going to have to find a way to assure their drivers that vehicles are being properly cleaned between drivers so that the next driver can get in and feel safe.
“We’ll see the rightsizing of fleets for companies as they try to reduce overhead. I don’t think we’ll be seeing a lot of growth because they’ll be making more careful decisions about who needs vehicles and who doesn’t, because they’ll be fully remote.
“Rental fleets will be in a difficult position, especially with the reduction of air travel. People will be hesitant to get into those vehicles unless they’re sure they have been properly cleaned. Government and corporate fleets will continue as is.”
Seely says ARI has an entire task force looking into the question of what the ‘new normal’ will look like. “I think companies will choose to do business with suppliers that they trust,” he explains.
“For example, they will prefer to take their vehicles for service into facilities that they can trust will take the time to sanitize those vehicles to make them safe for drivers. Employee safety has always been a concern, and it will be even more important as we get back to business.”
As for getting back to some kind of normal, Seely is optimistic. “I think we’ll see a return to a normal economy sooner than we think.”