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Fleets boosting their truck purchases

Jan. 5, 2016
NTEA Executive Leadership Summit coverage

FLEETS’ intent to purchase trucks has gone up every year since 2012, with 91% saying they will this year. In addition, 38% say they will acquire more trucks this year than a year ago—an increase of 5%—and 1% will acquire the same amount, 22% say they will acquire fewer trucks, and 9% say they plan no new acquisitions.

That is the encouraging news contained in the 2015 Fleet Purchasing Outlook, which was presented by National Truck Equipment Association executive director Steve Carey and NTEA managing director Doyle Sumrall in “Gaining Perspective: Work Truck Industry Trends and Expectations.”

Fleet types represented in the survey: 43% government/municipal; 19% utility/telecom; 14% delivery/cartage; 11% construction; and 13% other.

“The important thing is not that they will buy, but what is the velocity? Are they in expansionary buying mode with the fleet operation?” Carey said. “There were a lot of trucks parked by the fence and were idled. A lot of trucks had to be brought back into service and worked into the system. Fleets are still showing they will buy at the same level or more than they were in previous years.”

In terms of average vehicle age, 39% of fleets say it’s increasing, compared to 46% a year ago; 21% say it’s decreasing, which is unchanged; and 33% say it’s remaining the same, down from 40% a year ago.

“We paid a fair amount of attention to age,” Sumrall said. “We continue to see a lot of pent-up demand and a lot of upside possibility because trucks are older now. Trucks and equipment are much better than they used to be. Where maybe I used to keep a truck three years, I keep it five. Where I used to keep it seven, maybe I can stretch it to 12.”

A 5- to 10-year truck age is common for many fleets, with that range existing in 67% of the trucks of large fleets (with more than 5000 trucks), compared to 25% fewer than five years old and 8% in the 10- to 15-year range.

The survey showed that 64% said fuel usage would impact spec changes—a 1% decrease from a year ago.

Steve Carey, NTEA

Their fuel-saving strategies: driver training and monitoring (40%); powertrain optimization (28%); telematics and route optimization (28%); use of engine start/stop technology (27%); vehicle weight reduction (27%); alternative fuels (22%); improved vehicle aerodynamics (11%); electrification of truck systems (10%); auxiliary power units (10%); and environmental control systems (9%).

“A few years ago, we started looking at it and saw the first phase of alternative fuel coming into commercial vehicles, and we asked the buying community, ‘Was the price of fuel or fuel utilization starting to change how trucks were specified and engineered?’ ” Carey said. “We found over time that what they’re really saying is it has become a question of productivity and efficiency. Whether its alternative fuel application or new technology application, they’re looking at incorporating the spec of the truck a little differently based on fuel questions. We believe they’re still asking that question today, even though we’re at a depressed level of diesel gas prices.”

Last year, the most popular method of deploying alternative fuels was E85 (27%), but that fell to 17% and was overtaken by compressed natural gas (18%). Biodiesel fell from 22% to 15%.

“I’ll be the first one to tell you that diesel is with us certainly until I’m in the ground. But alternative fuel today is at 10% or 11% of the total work truck fuel segment. Five years ago, it was non-existent. That’s a pretty important move for things in our industry.”

The survey showed that 45% of responding fleets are using telematics. They use it in the following ways: real-time data collection and transmission (31%); geofencing and location following (26%); passive data collection (20%); route optimization (16%); and dispatching (14%).

“They figured out that they can put the best stuff in the world on a truck, but if drivers are not engaged and involved, it didn’t make the difference they expected,” Sumrall said. “If they got drivers engaged and involved, they got the paybacks. A profound thing has been occurring in the past few years: Truck manufacturers are putting telematics and other things on trucks, and they can actually look at what they’re doing and really tune that truck. How fast is it doing? Is he standing on the brakes? Where is it at geographically?

Doyle Sumrall, NTEA

“Truck companies want telematics and need it. You want leverage in your truck. This is the single largest supporter of driver behavior management. Really aggressive fleets are using it as way to talk to their drivers and get them engaged in the program. If you’re not looking at how the data can be gleaned off trucks and used in your segment of the industry, it’s a fabulous opportunity.”

According to the 2015 Work Truck Electrification and Idle Management Study, the motives for utilizing engine-off electrification systems are: less idle time (81%); reduce fuel utilization (78%); lower overall operating costs (63%); follow internal corporate policy (19%); meet regulatory requirements (19%); and take advantage of government subsidies (10%).

Sixty-seven percent of total survey participants are not incorporating engine-off electrification systems, but 54% say they will increase electrification use in the next three years, and 31% said their penetration will be 1% to 5%.

Thirty-one percent say the acceptable payback period for new electrification systems is one to two years, with 22% saying three to four years, 21% saying six to 12 months, 9% saying more than four years, and 6% saying fewer than six months.

“Fleets are telling us that their primary reason for wanting to go to electrification are to reduce their fuel utilization and lower operating costs,” Sumrall said. “They didn’t really say regulatory. I think a little bit of that is if there is a regulation, they try to comply, but it isn’t a real motivator. It’s a thing they have to do.”

The average truck idle time per day: for the construction industry, 40% of the idle time is one to two hours; 30% is less than an hour; 20% is three to four hours; and 10% is over four hours. For delivery/cartage, 38% is less than one hour, 33% is one to two hours, 19% is three to four hours and 5% is over four hours.

For government/municipal, 41% is less than one hour; 33% is one to two hours; 21% is three to four hours; and 1% is over four hours. For utility/telecom, 39% is three to four hours; 37% is one to two hours; 7% is over four hours; and 5% is less than one hour.

Strategies to streamline vehicle engine idling in the next three years: driver behavior modification/training, 61%; telematics, 43%; vehicle engine-off electrification technologies, 39%; timed engine shutdown, 38%; and automatic vehicle engine start/stop technology, 36%.

Key findings from NTEA’s Business Conditions Survey:

• As of July, employment levels had improved 55% since the beginning of the year—down 1% from the previous year.

“We’ve heard many sidebar conversations about recruiting and training people,” Carey said. “Based on three years of data, it’s showing a bit of a pullback in employment. We think it’s understated. We think if you could find them, you’d hire them. But we know there is a very tight labor market out there, especially when you get into technical areas of the operation.”

• As compared to the last half of 2014, sales for the first half of 2015 were 66% higher.

• For the remainder of the year, 43% think business will improve, compared to 60% at the same time a year ago; 40% think it will stay the same; and 17% think it will decline.

“The takeaway is that there is a high expectation that market conditions will be good and remain strong for the next couple of years,” Carey said.

• Eighteen percent of plants were at full capacity, compared to 21% a year ago; and 61% were at three-quarters capacity, compared to 55%.

• Backlogs have increased by 43%, with 35% staying the same and 22% decreasing.

• One-third of lead times are 30 days or less, compared to 32% a year ago; 29% are 30 to 60 days, compared to 31%; and 38% are 60 days or more.

“Certainly the industry is looking at lead times that are pushing out a little longer than people would like,” Carey said.

• In terms of current business challenges, local economic conditions were of the most concern (57%), followed by federal government financial or regulatory policy (38%), global economic uncertainty (36%), tight credit market (22%), low consumer confidence (21%), and continuation of the poor housing market (20%).

• Biggest areas of concern: finding and keeping qualified employees (64%); higher cost of doing business (51%); shifting industry conditions (42%); increased competition (38%); access to truck chassis (31%); growing the business (23%); complying with regulations (23%); changing customer expectations (19%); and availability of working capital (10%). ♦

About the Author

Rick Weber | Associate Editor

Rick Weber has been an associate editor for Trailer/Body Builders since February 2000. A national award-winning sportswriter, he covered the Miami Dolphins for the Fort Myers News-Press following service with publications in California and Australia. He is a graduate of Penn State University.