In 2012, the Obama administration enacted aggressive new CAFE regulations. Now, “so many of the 2014 trends can be traced back to [this] single initiative,” says ARI’s Director of Strategic Consulting Chris Morgan. “This publication will help fleet managers understand the ripple effect of these and other compliance issues, such as stricter violations enforcement, on their cost-control efforts. With this insight, they’ll be better prepared to make it a successful year through proactive and strategic planning.”
CAFE regulations require OEMs to increase fuel economy an average of 3.5% annually for five years, beginning with model year 2017. After that, for four more years, the OEMs must increase fuel economy an average of 5% per year. By the 2025 model year, all OEMs must achieve a CAFE of 54.5 MPG.
According to ARI, the increased fuel savings at the pump will increase vehicle purchase prices as well some operating costs. This process has already begun. For example, OEMS are using lighter materials, such as aluminum. Increased demand for these materials could increase prices and disrupt established supply chains. Similar cost increases are likely to be seen among upfitters and aftermarket suppliers.
The report also covers some of the positive ways CAFE is influencing the industry, such as the evolution of the cargo van segment and the expanding market for alternative-fuel vehicles. ARI finds that OEMs are diversifying their production of hybrid, electric, CNG and LPG vehicles. All of these trends, according to the report, will give fleet managers more vehicle choices in order to best meet their company’s performance needs as well as meeting their objectives for sustainability.
In addition to the CAFE standards and their continuing effects on fleet management, a critical issue for 2014, notes the ARI’s Industry Outlook, is that government and tolling authorities are making aggressive efforts to collect unpaid tolls, violations, and fees. In some cases, the authorities are willing to lock down non-compliant fleets until the accounts are settled. Texas and New York are leaders in these worrisome trends.
ARI predicts that this year, fleet managers will increase their use of advanced systems to track and monitor the effects that fuel efficiency, compliance, and policy changes will have on their fleets. These advanced systems will allow the transformation and visualization of sometimes seemingly limitless data, easy-to understand alerts, computer-display dashboards, and reports that will help fleet managers target key items for change.
ARI’s 2014 Industry Outlook begins with a thorough exposition of the current and future CAFE requirements, details of how OEMs, upfitters and aftermarket manufacturers are adapting their design approaches to comply with the new standards, followed by an analysis of how these changes will affect fleet management.
A section of CAFE’s effects on the Supply Chain concludes that order-to-delivery times could be lengthened. The increased of aluminum will add pressure all along the supply line, reports ARI, “as the OEMs’ changes force changes to the associated upfitters design and installation, all of which require testing to ensure they meet intended use requirements.” Fleet managers may be pressured to introduce new European-style compact cargo vans into their fleets, and at the same time manage order-to-delivery challenges that are likely to occur.
Alternative fuels and power systems continue to present opportunities and pitfalls to fleet managers. ARI concludes that fleet managers are finding that hybrids are reducing emissions and yielding operating savings. All-electric cars still require careful analysis before they are put into fleet service. Perhaps with an eye to recent lower gasoline prices, ARI suggests that fleet managers should consider a number of factors, including types of vehicles available, accessibility of infrastructure, rebates, grants, and gasoline prices before choosing alternative-fueled (or powered) vehicles. The report predicts that CNG and LPG will continue to grow, as infrastructure becomes more available and OEMs and aftermarket suppliers continue to offer more CNG and LPG options.
With vehicle operating costs increasing (despite better fuel economy and currently lower fuel prices), ARI says that more companies are seeking compensation for employees’ personal use of corporate vehicles. The average personal use charge per month was $121 per month in 2013, up $5 from the previous year. Many companies are now using telematics to automatically record permanent mileage, making IRS reporting simpler and faster. At the same time, many fleets are encouraging drivers to choose more cost-effective vehicles.
Fleet departments should be prepared for stricter enforcement of compliance regulations and requirements in many states. In part, this results from the states looking for additional revenue to ease their budget difficulties, but recent improvements in technology is the key driver because it enables this enforcement and collection. These new technologies include mobile weigh-in-motion installations, which can include checks for proper inspection, registration and insurance documentation. Texas and New York are poised to increase enforcement efforts with severe penalties, including loss of vehicle use. Addressing these problems, says ARI, requires that key fleet personnel are organized to meet compliance and keep up to date on relevant legislative changes. Drivers must also be educated on the need to keep their vehicles in compliance.
ARI’s 2014 Industry Outlook is available for download.