Budgets, safety tech, telematics and sustainability
By Mark Boada, Executive Editor
September 2020
Editor’s note: One of the highlights of last week’s virtual NAFA Institute and Expo 2020 was a wide-ranging panel discussion on the current state of the fleet industry. The panelists were Stephen Carey, president and CEO of NTEA, the association for the work truck industry; Patti Earley, president of NAFA and fleet fuels specialist at Florida Power & Light; and Katie Keeton, president of AFLA, the Automotive Fleet and Leasing Association and fleet manager at Siemens. The panel was moderated by long-time fleet journalist Mike Antich. The transcript below has been edited for length and clarity.
Antich: What’s the likelihood of commercial and government fleet budget cuts next year and, if they do occur, what effect will they have on fleet priorities and vehicle orders?
Earley: I think that depends on the organization. For government fleets, I think it’s a high probability because tax revenues are down and the government fleet managers, I’ve talked to are anticipating budget cuts. In the meantime, they’re prioritizing their vehicle replacements and extending life cycles of some vehicles, looking at hiring freezes, postponing some initiatives that they’re working on and looking really hard at any discretionary spending.
Keeton: I would say that, given the state of the economy, among business fleets we’re definitely going to experience some budget cuts. As Patti said, it’s going to depend on the type of fleet that you manage. So, when we look at the service vehicles that are on the road, depending on the business, they’re remaining active and you’ve got a normal amount of volume there.
But when we look at some of the other applications, such as sales and even management and executive fleets, this is where we’ve seen a lot of the average mileage has gone down drastically. This segment of the fleet is really rethinking how they’re doing business. A lot of companies have been really creative to try to retain the employees that they have and so aren’t necessarily changing or drastically cutting the number of vehicles they have on the road right now. For model year 2021, I don’t see a huge impact. But I think if we look ahead, people are learning how to do things differently without necessarily putting a sales associate in a vehicle going from location to location. And so, I think as we look at different possibilities or potential for different ways of doing business, it’s going to impact overall fleet size.
Carey: You have to put commercial fleet orders in the perspective of the past few years when we’ve had incredibly high sales volumes. So, even before COVID hit in March, we were already looking at this year’s order volume being a little softer than 2019. Then, as we went through the OEM shutdowns, inventory got stretched a little bit. We think we’ve got some headwinds right now and we don’t really know what the overall economic impacts are going to be on the small business commercial buyer. But everything we’re seeing would lead us to believe that 2020’s volumes will be below 2019’s by about 15 percent, which would still be pretty high volume by historical standards. And we see some recovery in 2021, maybe five or 10 percent off levels we expect for this year.
Antich: Fleets have been asked by management to cut expenses for a long time. Is this becoming an even more urgent issue now?
Keeton: You’re right, Mike, this is nothing new to a fleet manager. Cash is king. We do everything based on TCO. It’s at the forefront. But at the same time, we’re concerned about safety and sustainability and all of these other really important initiatives. And they cost money, but some also lead to cost savings down the road. So, I think there are some creative things you can do.
Safety equipment is being offered at all trim levels, sometimes even in entry-level vehicles. Maybe when you started to incorporate that technology you had to go up a trim level. Now, for 2021, maybe you can bring it back down to a lower trim level. But I think the most important thing you can do is to express to your management the importance of all the investment that you can make in your fleet in terms of safety and sustainability, because these things ultimately will pay for themselves. But if you’re a mature fleet, the low-hanging fruit is gone, and so you’ll have to just make sure that you’re conveying to your management and organization’s leadership that there’s a cost of doing business and you will do everything you can to control it.
Antich: Steve, what kind of trends are you seeing in terms of the development of vocational trucks and vans, both from large lead small fleets?
Carey: We’re hearing a lot about the evolution of the vehicle, with fleets in collaboration with their supply chain, to achieve greater productivity and efficiency at the fleet level. We hear more and more dialogue between the customer and the supply chain around things like light-weighting, about optimizing uptime from an engineering perspective. For example, is there equipment that can be added to the vehicle that might allow it to be mission capable with a smaller crew size, say from a crew of three down to two? Can the vehicle be engineered to be multi-mission capable?
Another trend is that manufacturers are looking at technology that was designed for automobiles and adapting it now to the larger vehicles, things like the ergonomics and collision avoidance systems. And of course, they’re always looking for ways to make vehicles more fuel- efficient, which then, of course, leads to emission reductions, because I think most fleets are looking for that too.
Antich: What trends are all of you seeing in safety and telematics?
Earley: Vehicles are being equipped with more and more safety features all the time, things like collision avoidance systems, lane departure and adaptive cruise control, automatic braking, and blind spot monitoring. And there’s even a system out there now that can detect if the driver was drowsy, which I think is a really fantastic feature.
Fleets that have the funding available are definitely already ordering those systems. The nice thing is more and more manufacturers are including those features in their base and mid-level trim packages, so it’s really becoming more widely available to fleets without adding a lot of cost. We’re also seeing more of this kind of advanced driver assist technology becoming available in trucks and vans.
Most of the fleet managers I talked to are either in the process of implementing telematics or already using them for things like vehicle tracking, gathering odometer readings and on-the-fly dispatching. We’re also seeing the use of telematics to monitor driver behavior getting much more common. But all of this new technology is coming on top the wonderful infotainment systems OEMs are installing, and you need to be careful that you’re not loading so much in there that you are causing driver distractions.
Keaton: Patti’s one hundred percent right that most fleets are using some sort of telematics at this point. But now many fleets are saying,” OK, we’ve had this in place for quite a while now. In what ways can we step it up even more? What little nugget have we identified maybe around driver behavior and other vehicle information that’s coming in?” One trend you’re seeing is the integration of video with telematics. Now you’ve got a camera in the cab of the vehicle that’s watching the driver as well what’s outside the vehicle. I’ve seen some of the video footage of drivers on YouTube and it’s really interesting to see what some of them are doing.
Carey: The other new thing is the ability to utilize sensors to monitor very specialized equipment. One example is being able to monitor the operation of a lifting device its operating parameters aren’t being exceeded out in the field.
Antich: What is the current status of sustainability and electrification initiatives among your association members?
Earley: Overall, I think sustainability initiatives are still very important to the to the majority of fleet organizations, and they’re trying a lot of different alternatives to meet whatever the organization’s sustainability goals are. Electrification, of course, is huge right now. I think there are around 30 light-duty vehicles on the market that are fully electric and more coming out in 2021. It is difficult to find good options for class six, seven, eight work trucks, and even in the pick-up market. It’s been difficult to find good electric options, but I think that’s changing now.
And of course, propane and CNG [compressed natural gas] are still big options for fleets. We use a lot of biodiesel. Some fleets are using ethanol. So, while there are a lot of options out there, when fossil fuel prices are low it may seem like the potential extra cost for alternative fuel vehicles doesn’t make sense. But even when traditional fuel prices are low, if you look at total cost of ownership like you were talking about, alternative fuel vehicles can come out to be cost competitive or even better than a standard vehicle.
Keeton: At AFLA we see the same strong level of interest. We do a survey after our yearly conferences and we ask for topics our members would like us to cover in next year’s conference. Sustainability or electrification are always mentioned. Also, our breakout sessions on the topic have been growing in popularity over the years. It remains top-of-mind stuff and there’s a lot of passion around it.
I work for a company that was one of the first industrial companies to commit to being carbon- neutral by 2030. It’s near and dear to my heart. I drive a hybrid and so, as a fleet manager, it’s almost re-energized me and given me something to be really passionate about. I’m having a lot of fun working with my company’s sustainability council and with AFLA members and people within the industry. There’s so much to learn. We know how fuel cards work, but we don’t know how our home chargers work, and our drivers have their own perceptions about range anxiety. So, there’s a lot of work to be done here. But I’m really excited to see, as Patti said, that OEMs are bringing more of the vehicles to market. It’s just a matter of time before we’re all driving EVs.
Antich: Steve, among your members, are you seeing companies putting in work and purchase orders for alternative fuel modifications to their fleet chassis and engines?
Carey: We do. Some of our research within the fleet community shows an uptick in interest in the things you just mentioned. We also see an increased use of data today to help the fleet make a good decision around fuel type and match it to the application of the vehicle so you can optimize what that spend is as you address your sustainability goals.
One of the things that I think is most interesting today in the effort to achieve zero emissions, is that we see a lot of new technology applications in the area of subsystem electrification. I’m talking about looking at ways to make complex vocational trucks to remain mission-capable while sitting on the worksite without the primary engine running. There’s been a lot of work done in collaboration with the fleet community and our members to do that through a lot of different methodologies.
And as has been noted, there is a multifaceted, multipronged approach to the end goal. There isn’t really a silver bullet in this. It’s seeing what’s working in each application. There’s so much going on with energy storage and APUs (work truck auxiliary power units) and in all types of activities, including the ability today to simply optimize and reflash a power train to more precisely match the vehicle’s operating environment. There’s a lot going on that’s really interesting around this sustainability objective and it’s driving collaboration across the whole value chain.
