11 Jul 18

Issues and trends in North American Fleet Management


As any fleet professional with experience on both sides of the Atlantic will tell you, Fleet Management in North America is a different beast from its cousin in Europe. Yet, as this portrait of the industry will show, many of the issues and trends are very similar.

To get a sense of where the Fleet Management industry in the U.S. and Canada is at right now and where it’s headed, we asked three experts for their insider insights. To get things going, we asked them what they thought the state of the industry in 2018 so far.

“Fleets and businesses are purchasing new vehicles to replace older models, but they’re also moving to a ‘shared’ environment, versus regular assigned vehicles”, says Sherry Calkins, Associate VP at Geotab. “This shift could ultimately reduce vehicle sales, as fleets use data for better scheduling and utilisation of their assets. Additionally, mobility management is a growing trend in North America. People are increasingly using ride-sharing programmes”.

“Vehicle orders for 2018 are significantly exceeding our initial projections”, says Rick Tousaw, Executive VP and CCO at ARI. “Oil and gas and other industries that until recently had faced financial challenges are now replacing vehicles. And as they’re playing catch-up with these replacements, many are taking the time to review lease funding options. Given the rising rate environment, we’re seeing more interest in fixed-interest rate lease options”.

What do you see as the main evolution in Car Fleet Management in North America this year?

Sherry Calkins: “A clear shift to electric vehicles (EVs).  Customers are asking for data to support this, requesting analyses of their fleet and trip patterns to see where they could include EVs”.

Michele Cunningham, Senior VP at Element Fleet Management: “Vehicle connectivity benefits are increasing rapidly this year, as companies move from adding telematics to vehicles to integrating connected data into Fleet Management. Before, telematics was seen as an ‘add-on’ for fleets, but connected data solutions will enable access to key driver safety and productivity metrics. This will lower fleet cost, improve safety and reduce downtime”.

Rick Tousaw: “Telematics and Big Data have been hot topics for a number of years, but many fleet operators were overwhelmed by the sheer extent of data generated. However, we’re now seeing a distinct shift in the fleet mindset towards analytics, with a focus on making better decisions via data, and tracking the results of those decisions”. 

Will taxation and legislation have a significant impact on Car Fleet Management, either in the U.S. or Canada?

Michele Cunningham: “Driven by concerns around Facebook and Cambridge Analytica and the introduction of GDPR in Europe, fleet managers should monitor data privacy legislation in the U.S. and Canada. Take the proposed Consent Act (in the U.S.), which would require opt-in consent from users if companies want to use, share or sell certain data. Passed a few weeks ago, the California Consumer Privacy Act is the most sweeping privacy legislation in North America now. All fleets should consider what their stance on data privacy is, and educate themselves on the trends and regulations around the world”.

Rick Tousaw: “The new IFRS 16, going into effect on 1 January 2019, is the most influential tax-related initiative for vehicle fleets. These new accounting rules allow expensing of certain capital expenditures immediately, thereby potentially lowering current-year taxable income. However, other provisions may offset these benefits. Depending on your company’s lease structure and tax position, the new (U.S.) tax law may provide tax benefits if you plan to increase fleet size or replace existing vehicles”. 

What about the threat of increased import tariffs?

Rick Tousaw: “There’s too much uncertainty to make a realistic prediction of what will actually happen if such tariffs are imposed. What’s certain, is that if the threats become a reality, there will be a reverberating impact on international supply chains that fuel automotive production. This will affect fleets with a large share of imported vehicles, and will also significantly impact the used-vehicle market. Tariffs will also affect fleets with upfitted vehicles”.

What does the road map for digitisation of Fleet Management in North America look like?

Sherry Calkins: “This is a fast-moving area. Predictive analytics will continue to advance and become mainstream within Fleet Management, as we analyse data through machine learning and create algorithms and learnings from patterns”.

Will the Total Cost of Ownership of a fleet vehicle in North America increase, decrease or remain stable?

Michele Cunningham: “According to our own TCO Indexes for the past few years, costs remained relatively flat for 2015 and 2016, but higher fuel prices and a 17% increase in tire cost contributed to a marked increase in TCO for car and truck fleets in 2017”.

“Companies should not expect lower fuel prices anytime soon. They’re expected to continue to increase, from an average of $2.42/gallon in 2017 to $2.57/gallon in 2018. With that increase continuing, fleets should look into reducing fuel factors such as drive time, idling, vehicle weight and routing. Telematics can provide the required insight”.  

Rick Tousaw: “One TCO topic we’re discussing with clients is the transition from sedans to SUVs. Based on customer demand, OEMs focus on producing compact SUVs, and that will have an impact on passenger-vehicle fleets. On average, crossovers and SUVs have a TCO about 10-12% higher than comparable sedans. That difference is mainly driven by upfront acquisition cost: fuel economy and maintenance have less impact. However, the sustained demand for crossovers and SUVs is increasing the projected Residual Value by as much as 50% - helping to offset some of the initial cost burden”.

“Another relevant trend: the rebound of crude oil and fuel prices. Refineries are operating at near-maximum capacity. While these price increases are moderate compared to before, a prolonged upward trend will significantly impact TCO”.

What other trends do you see having an impact on Fleet Management in North America?

Michele Cunningham: “The transition to mobility management, happening as fleet, transport, travel and operational expense management continue to converge. Without ‘ownership’ as part of the model, companies will look to define Total Cost of Mobility (TCM) instead of TCO. TCM will help companies better understand their mobility costs, their mobility footprint, their employees’ satisfaction, and the impact of their mobility strategies on business outcomes. Mobility management – it’s the new competitive advantage”.

Rick Tousaw: “The Fleet Management space is buzzing with disruptive technologies. Mobility is one trending topic. Organisations will have to leverage their fleet data to align their employees’ functions with the most appropriate mode of transportation. An unintended byproduct of frequent technology use is an increase in distracted driving. More and more fleet managers are consequently ramping up investment in driver safety assessment and training. A related topic is Canada’s legalization of recreational marijuana. That’s a landmark decision, and fleet operators will have to amend their driver trainings and policies by October 2018”.  

Authored by: Frank Jacobs