NAFA, the Fleet Management Association, convened in Detroit this week for its annual Fleet Management Institute & Expo. While fleet managers who attend NAFA command much larger fleets than the 50 and under crew of Business Fleet readers, the Expo is ground zero for manufacturer and fleet information. Here is a compendium of "news you can use" from a few corners of the industry.
On the Ground
Companies with larger fleets are putting increasing scrutiny on fleet operations. Right sizing, maintenance costs and fuel volatility are all issues, and metrics and fleet data are increasingly on a "need it now" basis.
With the improving economy, expect higher fuel prices. To boost fuel-efficiency and lessen fleets' carbon footprints, fleets are continuing the move from six- to four-cylinder engines. However, meeting new emissions requirements are increasing fleet costs, especially in regards to 2010 diesel truck models that meet the new emissions controls.
Though fleets are increasing acquisitions as pent-up demand is released, well-built vehicles are allowing longer hold times. Lead by Hyundai's 10-year, 100,000-mile warranty, look for OEMs to offer longer warranty periods. The typical 36-month, 60,000-mile lease is becoming a thing of the past.
Inventory remains tight, especially for those you buying off of dealers' lots. For those that order from the manufacturer, do so further out and you'll be okay. "There is adequate production to meet those needs for fleet," reassured Peter Grady, vice president, Network Development & Fleet Chrysler Group LLC.
The Manufacturers' POV
Auto manufacturers reiterated the message that "fleet business is good business." GM's Vice Chairman Bob Lutz noted that "fleet is sold first and built first."
While retail sales were up 5 percent in the first quarter of 2010, fleet registrations were up 47 percent. Much of that, admitted Grady, came from pent up rental fleet sales. OEMs are tempering a different message for rental, however. Mark Fields, Ford's president of the Americas, said Ford now tightly manages its daily rental fleet sales while focusing on more profitable government and commercial fleet sales.
"Our growth will come from large commercial and government markets," echoed Peter Grady of Chrysler.
An Audi representative said Audi sees fleet as "no longer a way to make up retail sales," but "a way to grow the brand."
Subaru said it has tripled fleet sales in three years. The manufacturer is increasing production of its Tribeca and Outback models for fleet.
Volkswagen is now becoming a player in fleet. Look for a story in the July/August issue of Business Fleet.
There may be quibbling as to how and when both GM and Chrysler will be paying off their government loans, but the financial outlook for both is solid, and this financial health is coming sooner than expected.
The three domestic manufacturers are holding the line on incentives. Bob Lutz said that GM has solved its $8,000 fixed labor cost per car.
Lutz, in closing remarks of his final public address before retiring from an illustrious automotive career, showed his gratitude to the fleet market. "We at GM want to thank fleet customers," he said. "At a time when retail market turned its back on us, fleet supported us and was an integral part of our recovery."
Fuel and Powertrain Outlook
Manufacturers like to toss around the phrase "agnostic" when it comes to what fuel or powertrain will gain greater market share. Indeed, all manufacturers are developing multiple alternative-fuel and powertrain technologies.
Biodiesel, ethanol, CNG, LPG and propane are niche plays but are important for fleets that have dedicated routes and fuel availability close by. Chrysler said its alliance with Fiat will factor in fleet because of Fiat's strength in CNG technology. Honda continues to sell its CNG-powered Civic GX into fleet.
Mercedes, Audi and VW are realizing very good diesel sales. Right now, Volvo has no plans to bring a diesel car model to the U.S.
The mainstream path to energy independence, however, seems to be a move from gas-electric hybrids to all-electric to fuel-cell technology.
Mazda has begun a partnership with Toyota on hybrids. Subaru will introduce its first hybrid in 2012. Look for Toyota's plug-in hybrid in late 2011. Volvo is on a two-year test of a plug-in hybrid; Audi's e-tron sports car is in testing as well. VW will introduce its hybrid Touareg this fall.
The Ford Transit Connect Electric will be out near end of 2011 with a Ford Focus electric to come in 2012. GM remains on track for limited Volt release in the fourth quarter. The first offering from the Chrysler Fiat partnership will be the Fiat 500, with an electric model to follow.
Honda's FCX Clarity, a dedicated hydrogen fuel cell-electric vehicle, is being leased to fleet and retail customers for testing right now. Mercedes is leasing a limited number of its B-class fuel cell vehicle in the fall. GM forecasts that it will have a hydrogen vehicle on the road by 2015.
There is a grid infrastructure issue that exists for electric vehicles, however, the resources being put toward solving this problem are all-encompassing, from the manufacturers and leasing companies to local and state governments and Clean Cities.
OEMs are not giving up on gas power, far from it. Mazda is pushing its ICE SKY engine and transmission system; Ford is ramping up its EcoBoost engine production; the Chevy Cruze will get a version that gets 40 mpg hwy. Manufacturers are squeezing four-cylinder-like miles-per-gallon numbers out of six-cylinder engines with the same six-cylinder horsepower.
Chrysler will introduce the new Charger this fall. This model will play big in the police car market, Grady said. Chrysler is also looking into bringing over two commercial vans produced by Fiat Industrial.
On the government front, be aware that NHTSA is recalibrating how it rates vehicles under its five star rating. Some vehicles that received five-ratings previously will be downgraded under the new system.
Pat O'Connor, NAFA's U.S. legislative counsel, presented excellent information on new rules and legislation.
Expect state legislation on texting while driving, on top of recent U.S.-wide orders for a ban on texting while driving for trucking fleets and federal employees.
The Senate and House as well as Senators Graham, Lieberman and Kerry are pushing different versions of a cap and trade bill. The House bill gives authority to the EPA to require certain fleets with annual GHG emissions of more than 25,000 metric tons of CO2 to report greenhouse gas emissions. That comes along with fleet funding for electric and plug-in electric vehicles.
Fuel tax incentives for CNG, propane and biodiesel expired at the end of 2009. Legislation to reinstate the incentives has passed the House and Senate, though no timetable for implementation is in place
There is pending legislation to increase the tax credit for natural gas vehicles, while legislation would substantially increase the tax credit on medium- and heavy-duty hybrid trucks.
A Fuel Performance Tax Credit is being proposed in an amount proportionate to the new vehicle's excess fuel efficiency above CAFE. If passed, rebates would be substantial: the Ford Escape Hybrid would be eligible for a rebate of around $2,500, a Toyota Prius owner would receive about $4,000, and a Volt driver would get nearly $8,000.