By Mike Antich

Multiple trends are converging that will ultimately reconfigure the future composition of public sector fleets, especially light-duty assets. One ongoing trend is the mandate to green public sector fleets. Around the country, politicians and city managers are issuing executive orders to "green" their jurisdictions and fleet operations are instructed to purchase more "carbon friendly" vehicles. Meeting the goals of these executive orders will require the acquisition of non-traditional fleet vehicles. Presently, there is not a sufficient diversity of hybrid and alt-fuel medium-duty trucks to meet the multifaceted needs of public sector fleets, so most of these alt-fuel acquisitions will be light-duty vehicles.

There is also a strong embryonic trend (desire) among public sector fleets to replace light-duty vehicles with EVs and PHEVs whenever possible. As more EVs and PHEVs are introduced by OEMs, one of the  markets targeted for the sale of these vehicles will be public sector fleets. Public sector fleets will be willing buyers as acquisition of these vehicles ties into the commitment to reduce greenhouse gas emissions. Facilitating this trend is the current availability of record amounts of "free money" in the way of clean air funding and grants. However, not all "green vehicles" are ideally suited for public sector fleet operations. There is a risk of trying to make motor pool operations fit grant requirements. Mismatched vehicles inadequate for the fleet application will ultimately result in under-utilization, defeating the primary reason for their acquisition, unless, of course, the acquisitions are primarily meant to be public relations "window dressing."

In addition to acquiring increased numbers of green vehicles, many political subdivisions are striving to reduce their carbon footprints by reducing the number of miles driven, which in turn   decreases fuel consumption and vehicle emissions. Fleets are also placing increased emphasis on smaller vehicles equipped with smaller displacement engines to meet mandated green fleet initiatives. However, many fleet managers are concerned (and rightly so) that downsizing will result in an uptick in issuance of ergonomic-related Workers' Comp claims. The reverse corollary to this trend is "upsizing" so a single vehicle accomplishes what previously required two. This "upsizing" option contributes to a  fleet's utilization strategy to reduce vehicle head-count.

Another significant upcoming vehicle composition change is the emerging new era of police packages. Dramatic changes in police packages, starting with the 2012 model-year, are forcing fleet managers to assess the cost of changing over a CVPI police car fleet to something new. Whatever decision is made will require the backing of law enforcement personnel driving these new police vehicles. Some fleets are trying to delay the inevitable by retiring units early so they can acquire additional CVPI vehicles prior to the model's discontinuation.

The trend with medium-duty trucks is to keep pre-2010 diesel assets in service for longer periods. Techs are well-trained to maintain this equipment, which facilitates extending the lifecycle of these diesel assets. The new diesel emissions standards are prompting some fleets to re-evaluate the purchase of 2010-compliant diesel engines, if alternative options are available. Some fleets are opting for the gasoline engine option if it can accomplish the fleet application. There continues to be concerns in the minds of many fleet managers as to whether DEF will increase maintenance costs, especially with fire apparatus and other large diesel-powered assets.

2011 Replacement Budgets Look Bleak

Many fleets are buying fewer new vehicles and redeploying low-mileage, low-utilization vehicles to higher-mileage applications. As staffing has been reduced at user departments over the past several years, many fleets now have excess vehicles and equipment, resulting in the need for fewer replacement vehicles. The  downturn in property and sales tax revenues is causing some user departments to downsize staff and reduce spending for vehicle replacements. The downturn in tax revenues has occurred across the country and in some areas the revenue shortfalls have been dramatic, especially in California, Nevada, and Florida.

In the past several years, many political subdivisions reduced the size of their fleets to cope with decreased revenues. Some fleets are looking to stretch acquisition dollars by leasing assets instead of purchasing them. Other fleets are postponing vehicle replacements, causing an uptick in maintenance expenses with older, higher-mileage units, which would have been replaced if vehicle replacement funds were available. However, this experience isn't universal. Other fleets report maintenance costs have not increased appreciably despite extending replacement cycles.

Another approach to coping with smaller budgets is transitioning to a standardized fleet, which would reduce costs by leveraging price negotiations with OEMs by bidding higher volumes of vehicles and help control maintenance costs by limiting needed diagnostic equipment, parts inventory, technician training, etc.

When I talk with the fleet managers in the "trenches," they tell me predictions for an economic recovery are not panning out as hoped. Many are even more concerned about 2012 budgets, which they anticipate will make them worse off than they are today. The ongoing economic slowdown of their local economies is not generating sufficient property and sales tax revenues and no upturn is anticipated in the near-term. All of the "hidden" budget money squirreled away by governments is being rapidly expended and the proverbial well is running dry. The anticipation is user departments will have to scale back operations even further.

A growing number of fleets are only replacing what needs to be replaced and are instructed to keep maintaining aging inventory. Most fleet managers will tell you it is a "pay me now or pay me later" conundrum. Until tax revenues start to pick up, this will continue to be the state of public sector fleet management for the foreseeable future. Even when the economy does turn around, historically, there has always been a one-year lag before tax revenues start to catch up.  It looks like it will be a long slough.

Let me know what you think.

mike.antich@bobit.com

 

Author

Mike Antich
Mike Antich

Editor and Associate Publisher

Mike Antich has covered fleet management and remarketing for more than 20 years and was inducted in the Fleet Hall of Fame in 2010.

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Mike Antich has covered fleet management and remarketing for more than 20 years and was inducted in the Fleet Hall of Fame in 2010.

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