Changes in the Auto Industry Could Mean Challenges for Your Fleet

The past few years have been challenging for the automotive industry. Plumbing contractors looking to purchase fleet vehicles have faced challenges stemming from what the automotive industry continues to experience. First automobile manufacturers experienced COVID shutdowns and supply chain stoppages, then the microchip shortage. Just recently there was the UAW strike against Ford, General Motors and Stellantis, which has been resolved. Add the push of electric vehicles (EVs) into the mix, and it is an interesting time for all—plumbing contractors that own businesses, consumers and the automotive industry.  

 When deciding to add to their fleets, plumbing contractors consider prices, efficiency, vehicle life, miles driven, cost of repairs, and more. But during the past few years, and this year too, they must consider other factors, such as vehicle inventory, and if it is indeed the right time to purchase a vehicle. Being knowledgeable of the state of the auto and work truck industry will help them make the best decision as to if it is the right time to add to their fleet. This is where the US Commercial Vehicle Market Report comes in handy. 

The Work Truck Association™ recently released the third edition of the U.S. Commercial Vehicle Market Report, Powered by Commercial Truck Trader, NTEA The Work Truck Association and S&P Global Mobility. This semi-annual industry report dives into details, data and trends around the commercial vehicle life cycle—from chassis sales to truck registrations to later stages when used vehicles re-enter the sales market.

The New vs. Used Consideration graph above shows that there is still a consideration for used cargo vans and this is higher than consideration for new cargo vans. Consideration is a measurement of the perceived effort an end-user puts forth to locate a suitable vehicle as measured by search data provided by Trader Interactive.

According to Kevin Koester, NTEA managing director, three main components have caused used cargo van consideration to grow: increased prices, decreased availability due to supply constraints and increased order-to-delivery due to industry backlog.  

“Given the unprecedented challenges the industry has seen over the past few years, there’s been a significant spike in interest in used vehicles as they have historically helped satiate some short-term spikes in demand,” explained Koester. “Fleets are spending a greater amount of time in the used market to meet their price, timing and availability needs. Cargo vans have maintained comparatively higher consideration for used product, likely speaking to ongoing challenges in acquiring new product.”

Shortages continue to limit build capabilities 

Although the microchip shortage is still affecting the availability of commercial vehicles, the industry has been adapting to it. Yet, there have been other component shortages impacting vehicle manufacturing. 

“Chassis OEMs are limiting some configurations and features, which have added chip requirements, and fleets are adjusting their expectations accordingly,” said Koester. “Having noted that, component shortages in total are impacting the industry. Simply put, there is always a next component that will limit build capability, and even the smallest disruptions can have a butterfly effect on a vehicle line.” 

EV registrations take a step back

Regarding EV registrations they took a slight step back in the first six months of 2023, but are anticipated to continue growing (see Electric Vehicle Growth by GVWR graph above). Growth in the second half of 2022 was driven by long-standing larger fleet orders, creating a spike as opposed to first-quarter 2023 stepping back. 

Large fleets can move the needle swiftly, which not only can cause quick increases of registrations, but also quick decreases. According to Koester, it is important to note that EVs are still being tested by fleet owners—as the first round of high-volume EVs were produced, the cutting-edge/early adopters received their first batches of vehicles for testing. 

“Given the relatively unproven nature of EVs across a broad range of applications, those early fleets are likely to run EVs through a longer range of testing when compared to traditional internal combustion engine (ICE) replacement vehicles,” explained Koester. “This means holding off from ordering a second round right away. We’re still early in the process of onboarding EVs to the industry, and we should not expect growth to be a straight line. The step back in first-quarter 2023 is likely part of an ebb and flow in the growth of the segment, and as more fleets test and prove-out vehicles, the volume will grow to reach an ongoing, ambient level.” 

There are some contractors that have researched EVs and have considered them for their fleets. 

“When checking into EVs for vehicles, our first challenge was our guys take trucks home because they are on call, but we could fix this to some degree,” explained Vincent Youndt, president of Vertex Mechanical, Stevens, PA. “More importantly, with loaded down vans we were very concerned about drivable distance, getting stuck in traffic, etc. We need a little more time to research and process this aspect, and we are in the middle of reviewing EVs for our sales team.” 

Most early adopters like Youndt are in a similar position. Thus, it is best for plumbing contractors to do as much research as possible when in the market for fleet vehicles, whether electric, hybrid or internal combustion engine.

Koester’s words of advice to small fleet operators and contractors: “In the end, plan far ahead, and stay in contact with your dealers and manufacturers, so you don’t get caught waiting for a vehicle that may or may not be buildable.”

Candace Roulo, a graduate of Michigan State University’s College of Communication Arts and Sciences, is a technical writer covering topics in the mechanical contracting, manufacturing and supply chain industries.