Vehicle acquisitions, one of the largest expenses for fleets, are driven by several factors. Among them are economic issues and financial and budget considerations. At the same time, vehicle replacement needs and future business and operational requirements also factor into those decisions.
“Our vocational segments are seeing elevated year to date sales growth,” said a spokesperson for Daimler Truck North America, the parent company of Freightliner and Western Star brands. “Federal infrastructure spending has spurred growth in the construction sector while aging vocational vehicles have generated demand for replacements. Looking ahead, we will remain agile in the coming year to meet our customers’ needs for equipment.”
To gauge how manufacturers see purchasing trends and the factors impacting them, Lift and Access discussed those topics with several market leaders. The panel of experts included:
Q: What purchasing trends are you seeing for trucks and equipment among utility fleets?
Caywood: In general, the drivers for asset replacement remain focused on utilization, age and overall operating cost. Areas with significant growth from population, data centers or other drivers are increasing fleet sizes to meet the demand. Leading trends with utility fleets also include fleet electrification. In our industry, the limiting factor is typically chassis mileage that dictates when an asset will be replaced.
Bistritz: Many utility fleets seem to be circling around idle mitigation and ePTO options when applicable and leveraging telematics data to drive better decisions. In addition, they are navigating OEM allocations and managing capital budgets that often aren’t sufficient to replace all their aging or maintenance-heavy assets.
Wrinkle: Recently, the storm damage across the southeast has spurred truck purchases. In general, utility trucks are purchased to support contracts involved with infrastructure maintenance or construction. Both industries have long term planning in place to create the utility demand.
Lieberum: We are observing a significant shift in purchasing trends with increased adoption of electric and hybrid models. Business owners and fleet managers are increasingly seeing the benefits of hybrid and electric vehicles related to total cost of ownership, vehicle efficiency and the added benefit of reduced emissions. This shift is driven by factors such as environmental regulations, corporate sustainability goals and the desire to maximize vehicle output to improve the average total cost of ownership per vehicle.
Q: What economic issues and financial considerations are driving fleet purchasing plans?
Bistritz: Higher overall interest rates are a factor. There have also been numerous electric utility rate increases that haven’t been approved. The investment promised in the Broadband Equity, Access and Deployment program hasn’t been deployed as quickly as some initially thought so all of this impacts utility customers.
Wrinkle: Government initiatives, such as the Green New Deal, are major contributors. For instance, many trucks are specifically dedicated to the construction and maintenance of windmills.
Lieberum: Economic considerations such as fuel savings, lower maintenance costs, and potential tax incentives are influencing fleet purchasing decisions.
Caywood: The impacts include lingering effects and lessons learned from the post-pandemic restricted supply chain and inflation. Fleet managers now have to plan further out and inflationary increases make their purchasing dollars less predictable.
Q: Are fleets continuing to replace older models that were left in service longer than originally planned due to supply chain issues?
Lieberum: While we cannot definitively say if fleets are replacing older models due to the supply chain, we do have data showing that Class 2-5 chassis cabs have grown 14.6% year-to-date from 2023.
Caywood: Utilities did operate equipment longer than planned due to availability, and they are now playing catch up to balance the age of their fleet. Everything changed from the supply chain disruptions. Now, the supply chain is normalizing but purchases are typically being made two or more years in advance.
Bistritz: To some extent this is occurring. However, in a world where capital budgets remain stressed due to inflationary pressures, the speed at which older models are replaced isn’t at the pace that many of our fleet customers would prefer.
Wrinkle: Fleets are keeping equipment in service longer due to extended lead times. While most utility body manufacturers have inventory available, the challenge lies in sourcing appropriate chassis, especially for more complex configurations. The more specialized the equipment arrangement, the harder it becomes to obtain a suitable chassis. To address these issues, companies are adopting innovative approaches, for example, using trucks in order to receive refurbished bodies removed from older equipment.
Q: Are fleets planning to pre-buy trucks and equipment in advance of upcoming engine emissions standards?
Caywood: Every time we go through an emissions change there are challenges. Some customers that have the capital and budget are hedging their bets, but across the board we are not seeing significant pre-buying.
Bistritz: The change in engine emissions standards will impact the cost of trucks and upfitted equipment. To the extent that fleet customers can mitigate or avoid that price impact as long as possible is something many fleet customers want to consider so pre-buying is an option.
Wrinkle: Fleets are planning to pre-buy trucks and equipment ahead of upcoming engine emissions standards. However, quantifying this trend is challenging due to existing backlogs and the long-range planning typically associated with these specialized vehicles.
Lieberum: Data shows that prior to major changes in past regulations it is sometimes possible to see a small bump in sales of affected units. However, sales quickly returned to normal levels within a short time of any of those prior regulation changes, so we don’t expect major impacts.
Q: Are OEM allocation plans for trucks and chassis impacting purchasing activity?
Bistritz: Forecasting for and having available manufacturing capacity to meet the needs of the market remains a challenge for most OEMs. Allocation will almost always impact purchasing activity.
Caywood: This was one of the biggest constraints over the last few years and all customers felt the impact. Additionally, we are all working to understand the various implications of state or California Air Resources Board (CARB) Advanced Clean Fleets regulations, so we continue to work with chassis OEMs and dealers as we navigate through these new rules.
Wrinkle: OEM allocations are impacting purchase activity by restricting supply. Dealers prioritize sales to local end users and that can create pent up demand or provide a path for competitive sales.
Q: What is your outlook for the truck and equipment market in these segments?
Wrinkle: The utility market remains robust, with a significant backlog for trucks, particularly those with more complex utility bodies. Inventory is limited but available utility products are quickly being consumed. As OEMs move away from allocation, the market is poised to become more competitive. The market is likely to rebound in spring 2025 and remain strong through 2026.
Caywood: Macroeconomic drivers, overall load growth and planned grid improvements support a positive market outlook for manufacturers.
Lieberum: The utility industry, like construction and related industries, generally moves in step with the overall economy. Given the number of large infrastructure projects and billions invested in building out new energy sources, the demand for trucks is expected to remain strong.
Bistritz: Market dynamics indicate high demand for utility services. We continue to work with customers on how to best find solutions that help them satisfy their fleet needs.
Lift & Access is part of the Catalyst Communications Network publication family.
