Sound safety, fuel management, acquisition, and driver training are all key for fleets going forward.
Element Fleet Management’s Trend Reports always present some interesting observations and the Q4 2022 Report was no exception. Looking back on the last 12 months, there’s no question that many fleets have found the going tough.
Rising fuel costs for much of the year, a shortage of new vehicle inventory, and prioritizing retail over fleet sales when units were available made it difficult for fleet managers to procure new assets, while at the same time stretching maintenance and allocation resources.
The Q4 2022 Trends Report highlighted how the ongoing conflict in Ukraine is adding further to the challenges facing the industry since it continues to impact global energy prices and supply chains.
So, what’s a fleet manager to do? Well, despite the challenging economic operating environment many fleets are currently facing, there are always options.
And a good example is looking at the four key, macroeconomic trends that are currently impacting fleets’ business.
Regarding the former, it’s hard to turn a corner today and not hear a discussion relating to sustainability in fleet operations. Yet how fleets can develop and execute a meaningful and practical sustainability plan is still a complex and costly process.
Governments in both Canada and the U.S. have committed significant resources to help them. A key one is an investment in charging infrastructure. In Canada, we’ve seen commitments both federally and provincially of $1.4 billion toward charging points, including strategically located charging stations on the Trans-Canada Highway. Natural Resources Canada (NRCan) has also, through its Zero-Emission Vehicle Infrastructure Program (ZEVIP) committed to installing more than 34,500 EV charging stations across the country by 2027.
More funding in the U.S. too
These are ambitious goals mirrored by initiatives south of the border too. The U.S. Department of Infrastructure’s EV Infrastructure Deployment Plans have already been adopted by 35 states, each of which now has access to more than $900 million in National Electric Vehicle Infrastructure (NEVI) funding through 2023. This funding applies to approximately 53,000 miles of highways in the U.S. with the goal of having 500,000 electric vehicle charging stations operating across the country by 2027.
In Mexico, while development and pace for EV adoption have been slower, virtually all of the country’s 2000 or so charging stations are still free to use, while electric vehicle uptake has been steadily increasing (the report cited an increase in demand by 120% from 2021 to 2022).
And there are some companies in Mexico that have demonstrated their commitment to a greener transportation future. A good example (and cited in a case study within the Q4 Trends Report), is the famed brewery Grupo Modelo.
The company set several targets, including having 15% of its fleet be represented by EVs by 2025, with that rising to 500 EV units in operation by 2040. Based on Grupo Modelo’s own projections, the first-year savings in carbon dioxide represent 200 tons per gram.
To make this goal possible, Grupo Modelo partnered with Element Fleet Management and by the end of 2021 had become the very first EV heavy truck operator in Mexico, thanks to an acquisition of BYD 21-tonne trucks. The initial delivery of 20 units at the end of 2021 is being supplemented by another 35 (that were scheduled for delivery by the end of 2022) and a further 30-35 units in early 2023.
While there is still a lot of skepticism regarding the effective deployment of EVs in the heavy truck space, this case study illustrates that plans to electrify fleets are moving forward, and given the current cost of diesel fuel, the benefits, in terms of both emissions reduction and fuel costs could be significant for others that follow in Grupo Modelo’s footsteps.
On the acquisition side, procuring new units remains an ongoing challenge for many fleets. While inventory levels started to improve during the latter half of 2022, they are still significantly below pre-pandemic levels and some OEMs are facing more challenges than others. Far Eastern automakers, such as Toyota and Honda have been particularly impacted by semiconductor chip shortages and manufacturing disruptions over the last few months, while Domestic brands, which were hit hard at the beginning of the year, have, in many cases, been able to improve the supply of vehicles during the latter half of 2022.
Based on the current situation, the Q4 Trends Report determined that fleets need to plan for longer replacement cycles (currently, these are averaging 150 days or more), review existing vehicle usage based on employee functions and responsibilities; speed up and simplify the ordering process by batch ordering vehicles with standard features; take a holistic approach to vehicle renewal and acquisition plans; as well as consider a budget increase for each fleet group (at least 10-15%) in order to maintain vehicle specs, trims, and requirements for your fleet.
Last but not least, the report recommends that fleets also emphasize driver safety and training policies, making sure they are as current as possible and actively enforced. Doing so will reduce the risk of vehicle collisions and repairs—improving the utilization of existing assets during a time when replacement units are still scarce.
Safety features making a big impact
Speaking of safety, the Q4 Trends Report observed that advanced vehicle safety features are continuing to make a significant impact in the reduction in the number of and the severity of collisions. Automatic emergency braking features have reduced front-to-rear crashes by 50% for passenger vehicles and 41% for heavy trucks. Rear automatic braking technology has also reduced backing crashes by 78%, while on the injuries side, blind-spot detection and lane-departure warning technology have resulted in a 23% reduction in lane-change crashes with injuries and a 21% reduction in injuries (resulting from sideswipe, head-on, and single-vehicle crashes), respectively.
The report determined that there were four key areas where fleets can really zero in on when it comes to effective safety:
- Teaming safety policies with crash avoidance technologies, particularly in areas where inclement weather becomes more severe.
- Revisit driver training and education during the fall and winter months to prevent accidents and help drivers navigate dangerous road conditions.
- Consider stocking up on winter tires early in case of potential supply chain disruptions.
- Monitor driver behaviour through telematics, Motor Vehicle Record (MVR) checks, and a DUI (driving under the influence) policy to keep fleet costs in check
By combining these strategies with advanced vehicle safety features and sound driver training and safety policies, fleets have a real opportunity to mitigate risk on the road, while improving vehicle operating efficiency, employee safety, business reputation, and profitability.
In addition to safety, managing fuel costs are another critical part of fleet operations. During the course of 2022, average fuel costs rose by 16% in the U.S. and Canada—significantly impacting the bottom line of commercial vehicle operators. Additionally, supply disruptions including refinery fires and outages, as well as public policy, infrastructure concerns, and OPEC production totals have, and will continue to impact fuel price and supply for the foreseeable future.
To help manage fuel costs in this uncertain environment, the Q4 Trends Report outlined five key actions fleets can take:
- Plan for budget increases and set realistic expectations of projected fuel spending.
- Incorporate telematics to monitor speeding, idling, and harsh acceleration to enhance fuel efficiency and encourage self-correcting by drivers.
- Utilize a fuel management program to prevent fuel fleet fraud by identifying drivers with fraudulent or non-compliant fuel practices.
- Coach drivers to leverage fleet management applications to help drivers identify lower-priced fuel and lowest-cost gas stations.
- Ensure that vehicles aren’t being overloaded and the most fuel-efficient vehicles are being used for each task to save on fuel costs.
While it is unlikely that the economic environment will improve significantly in the next 12 months, armed with the right information and strategies, fleets will be able to navigate effectively through these uncertain times, positioning themselves for a better and brighter future.