There remain a multitude of economic changes in 2024, and while this has been top of mind for many in the industry ever since the pandemic, heavy duty fleet executives are cautiously optimistic about the current year and how it may shape up for their organizations.
Today’s stronger emphasis on strategic planning
The economy in 2024 has been punctuated by a general sense that inflation is becoming more closely aligned with the Fed’s target, and this could spell lower interest rates at some point during the year. This would be a sign of relief for those organizations looking to invest in new trucks and equipment, especially as the cost of equipment has become a serious issue for many. Immediately following the pandemic, supply chains made availability a major issue. Today it is no longer about availability, and instead more about the cost of entry into new equipment.
Because of this shift, many leading fleets are now focused on building a strategic, multi-year acquisition plan based on a methodical and disciplined approach to life cycle management. A plan that can adapt to changing market conditions and is designed to inject more flexibility into procurement decisions while assigning stronger fundamentals to managing the organization’s TCO and bottom line is a necessity.
Other economic indicators in focus this year
As highlighted by the American Transportation Research Institute (ATRI), various industry issues such as truck parking, fuel prices, and driver shortages, remain front and center for fleets. Despite these ongoing challenges, it remains an exciting yet pivotal time in the industry. The transportation fleets that leverage a KPI driven asset management plan and focus on shortening their life cycles to create the lowest possible Total Cost of Ownership (TCO) will be the ones that are positioned most competitively at the end of the year.
Furthermore, observers at ACT Research believe U.S. freight fundamentals will improve in 2024. Entering the year, freight demand was below typical trends, but analysts believe it will continue to recover, driven largely by continued consumer spending and subsequent retail sales activity, according to ACT. What’s more, organizations with private fleets are faring better than for-hire carriers, especially as these businesses face harsher realities of the difficult economy.
Fleets utilizing data technology today
The use of data and analytics is playing a larger role in helping fleets make more informed decisions in responding to many of today’s economic drivers. While there remains a lot of chatter in the industry about the use of Artificial Intelligence (AI), for a variety of business uses, we must not forget that AI doesn’t exist without the actual data. If inaccurate data is used for AI systems, outcomes detrimental to any organization’s business strategy will follow.
Today, the use of this data has expanded to also include predictive modeling, which companies scrutinize to plan out their fleets’ life cycles. Combined with flexible lease options, we’ve seen that fleets that are leveraging this approach are some of the most competitively aligned in the industry today and ready to weather any changing market conditions.
Fleets no longer going “all in” on alternate fuel
Over the last few years, fleets have felt pressure from constant media headlines about reshaping their vehicle strategy to include electric trucks to adhere to new environmental regulations and mandates. And while it’s important to make decisions that lead with sustainability in mind, many fleets today are instead focusing on emissions reduction strategies as opposed to simply going “all in” on alternative fuel technology. Clean diesel and even hydrogen are much more in focus today, and they are both playing a significant role in company's decisioning for emissions reduction strategies.
In a benchmarking survey two years ago, we asked which type of alternate fuel trucks fleets are most interested in. In that survey, 65% of respondents said they were most interested in electric trucks, while 15% cited hydrogen and 25% CNG. Forty-five percent of the respondents also noted that the time frame to deploy alternative fuel trucks would be 5-10 years.
Almost one year later we are seeing those numbers are shifting, with 33.3% indicating EV over the next 5-7 years (29.6% saying another 10 years), and 38.5% indicating hydrogen. This timetable for electric truck adoption continues to change, as just two years ago the majority (54%) said they didn’t plan to deploy electric trucks for 5-10 years.
As more legislation is introduced to mandate the movement toward zero-emission vehicles, fleets are monitoring how these mandates may impact their near-term truck procurement plans. According to the survey, 59% of respondents are either expediting their procurement plans because of CARB pre-buy, or they are closely monitoring to see how it may alter their plans. The timeline and emphasis on CARB pre-buy continue to shift. According to ACT Research, the new standards will result in the largest Class 8 truck prebuy ever leading up to 2027, beginning in 2025 into 2026, with the cost of diesel trucks increasing between $25,000 and $30,000 more per unit, which is another driving reason why fleets must view flexibility as a business strategy, not just a fad.
Even though 2024 is just entering the second quarter, fleets will continue to be focused on interest rates and the cost of money throughout the year. Executive leadership teams will continue to rely on proven data so they can make smart, informed decisions that will have long-term benefits without financial missteps. They must have a larger focus on their business above and beyond what the Fed’s actions are. They must manage their life cycles with the right strategy and multi-year procurement plan. With this in mind, fleets will continue to understand that as they improve the performance of their trucks, they will improve the health of their business while also achieving their sustainability measures in 2024.
