Two challenges facing fleets when ordering 2021-model vehicles are longer lead times and tight product availability, particularly with van and truck chassis. Constrained chassis availability was a top concern in CY-2020 and it has continued into 2021.
The COVID lockdowns and the shutdown of all North American assembly plants from mid-March to mid-May 2020 triggered a domino effect resulting in delays with the new model-year bid process during a period of widespread budget constraints.
This was further complicated by early order build-out schedules from multiple OEMs. While the supply of vehicles has significantly improved since the temporary suspension of OEM vehicle assembly, lead times have increased on many popular vocational vehicles. With the longer lead times, some fleet managers fear they may have difficulty replacing or adding vehicles during the spring and summer months of calendar-year 2021.
Compressed Fleet Ordering Window
Not all fleets are experiencing longer-than-normal order-to-delivery (OTD) times, especially those that are primarily operating passenger car fleets. But in the van and truck segments, there is ongoing concern about OTD times, especially for units that require upfitting. One factor impacting product availability has been early order cut-off dates for some 2021 truck and van models. Many of these early cut-offs appear to be demand driven.
Manufacturers are being challenged to keep up with demand and several models have already achieved build-out for 2021. As a result, there has been a compression in the ordering window for many 2021 models. Due to this ongoing strong demand for trucks and vans, the tight inventory in the supply chain is causing chassis constraints for fleets. A key challenge say fleet managers is managing the OEM order bank opening and closing times that are all over the board for different makes and models, which, for them creates a lack of predictability and consistency in fleet ordering.
Compounding these challenges was an announcement last October that Nissan will end production of its NV Cargo, NV Passenger, and NV200 commercial vans in the summer of 2021, and focus on the Nissan Business Advantage program to meet the needs of its commercial customers.
Recently, Hino Motors announced on Dec. 23, 2020, that it will pause truck production in the U.S. and Canada until the end of September 2021 due to issues with U.S.-required certification of several of its engines. Some fleets say these announcements, along with early order cut-offs, may increase lead times since it reduces their ordering options.
One difficulty in sourcing vans is that cargo van production is being gobbled up by megafleets, such as Amazon, UPS, FedEx, and their numerous delivery service providers (DSPs) for contracted final-mile delivery. As a result, most fleets are finding it very challenging to source vans of varying sizes and getting product with the right specifications.
Some fleet managers complain that these megafleets appear to get preferential treatment on van deliveries and that small volume buyers are being moved to the bottom of the “food chain” when it comes to lead times. This may not be the case, but it is the perception.
Another factor contributing to the longer lead times is occurring with upfitters. Lead times for some body companies and upfitters are double what they were before March 2020. Some fleets report it can take a year to get an upfitted cab/chassis from the time an order was first place with an OEM. Common reasons cited for longer turnaround times at upfitters are due to delayed chassis deliveries, manpower constraints, restrictive workplace COVID protocols, and parts shortages.
Limited availability to acquire units from retail dealer stock is also a challenge due to COVID-related inventory constraints. In prior model-years, some fleets would order out-of-stock from dealer inventory. However, dealer inventory is still relatively low for vehicles that are popular in both the fleet and retail markets and it is difficult to find units with fleet options and pricing.
With inventory low, some dealers are reluctant to sell to fleets and would rather sell to higher margin retail buyers. FMCs looking to buy out-of-stock for fleet clients are saying some vehicles are sold to retail buyers before they ever land on a dealer’s lot.
Another issue impacting fleet uptime is longer maintenance turnaround due to the shortage of specific replacement parts that can be on backorder for months. There are various reasons for the parts shortages. For instance, there have been supply chain disruptions for parts shipped to the U.S. from Mexico due to several Mexican states increasing COVID-19 restrictions. In addition, I have spoken to some fleets that say they cannot get certain replacement parts for their vehicles because of the booming RV market since the air conditioning units used in vans are similar to those used in RVs. Some of these replacement parts can be on backorder for months.
An additional factor slowing new-vehicle orders is the longer fleet funding approval process by corporate management caused by their uncertainty about the future course of the COVID pandemic and how long it will continue to affect their businesses. Industry-wide, there continues to be fleet budget constraints at most major fleets. And even if budgets are restored, typically the dollar amounts are not at pre-COVID levels.
Anticipations in a Post-COVID Economy
Today, when a vocational truck is ordered, fleets say the average OTD is 10 to 12 months compared to the 4 to 8 months average it took in 2019.
This means if a 2021-model truck is ordered today, it will arrive after the 2022 models entered the market As companies increase their business activities in a post-COVID economy, their expectation is that there will continue to be a backlog in production and upfitting causing longer OTD. A growing number of fleet managers anticipate that these challenges will continue for the next 12 months.
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