Fleet professionals voiced their opinions on scheduled replacement cycles, the topic of a recent article by AF Editor Mike Antich, Scheduled Replacement Cycles Are Becoming a Distant Memory. Key points from the article include:
- Pent-up fleet demand continues to exceed model-year availability of fleet-configured new vehicles from most OEMs.
- Multi-year fleet ordering constraints have forced extending service lives of vehicles that cannot be readily replaced, inevitably increasing unscheduled maintenance expenses.
- Sourcing replacement vehicles is not only harder but more expensive as today’s fleet incentives are minimal or non-existent.
- The “institutionalization” of pre-approved fleet allocation ordering, originally created for benign reasons, is a key factor in sourcing constraints persisting into 2024.
- Order-to-delivery times continue longer than historical pre-pandemic norms with the added possibility that an accepted fleet order can be canceled.
Nothing New Under the Sun
I read the Market Trends blog entitled “Scheduled Replacement Cycles are Becoming a Distant Memory” and want to add that there’s nothing new there. In 1981, in Australia had a credit squeeze, and within a few weeks, just about all Australia’s big fleets stopped buying at the same time and didn’t resume for about a year.
Lesser crunches are less dramatic, but you soon find out when dealing with fleets that any bad news usually means the Financial people will tell the Operations people to freeze Capital Expenditure, so you have to set sales budget on a longer term rather than shorter. The Financial people who pull these purse strings aren’t always good at looking ahead — the philosophy of fleet managers who set standard replacement times.
The way around this is to record costs by Fleet Unit (itself a fertile ground for mistakes). This allows the Fleet Manager to show the Financial Controller why the vehicle will be low cost for several years but will then require another engine, and that will blow its total cost to bits. On a big fleet over a long time, the differences are huge. I was once able to show a FinanceYear 4. He junked the “cheaper” vehicles.
Alan Hood, Owner, Fernside Information Technology, Melbourne, Australia
Fleet Takes a Back Seat
I read the Market Trends blog “Scheduled Replacement Cycles are Becoming a Distant Memory” and want to add that the OEMs’ need to placate shareholders and maximize profitability for Wall Street has replaced the business relationships with fleet customers. Fleet vehicles are less profitable and will therefore take a (distant) back seat to retail-optioned vehicles that can now be financed at higher rates for additional profit.
Brian Reynolds, Owner, Reynolds Premier Motors, Brownsboro, Texas
I read Mike Antich’s Market Trends blog entitled “Scheduled Replacement Cycles are Becoming a Distant Memory,” and yup, it’s a sad reality of shift in focus by OEMs. Spot on Mike!
Of note, if fleet vehicles are owned and need extending, using original Tier 1 OEM-only replacement parts will significantly extend the life of the vehicle. Not “OEM solutions.”
Michael L. Croft, Business Development, American Axle & Manufacturing, Scottsdale, Ariz.
Our hands are tied. I’ve been doing this for 26 years now. We are being penalized for not ordering when being held to an allocation of “4 vehicles per quarter”!!! When our allocation is based on delivery of vehicles, NOT the orders we made. It is beyond frustrating.
Lisa Kneggs, Fleet Manager, FleetPride, Dallas/Ft. Worth
Costs Keep Rising
In reply to Mike Antich’s Market Trends blog on scheduled replacement cycles, timely replacement is key to maintaining uptime and to minimize running costs.
Another issue for public fleets is replacement capital. A public agency has an approved budget of $XXX for eight sedans or pickups. Between fleet allocation and the associated price increases, the agency can only get five or six units. The agency reluctantly orders six vehicles instead of eight. So the replacement of two additional units are deferred — pay me now or pay me later.
In the end, we are in the business of providing our customers with tools to do their jobs. And costs are rising…
Rick Teebay, EV Consultant, Retired from County of Los Angeles, Pasadena, Calif.