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Preventive maintenance (PM) expenses in CY-2020 were lower compared to 2019, primarily due to the pandemic-induced economic shutdown resulting in fewer miles driven as many fleet vehicles were idled. On the flip side, companies that were deemed essential businesses saw a dramatic uptick in their business activity.
“While some organizations had fleet vehicles sit idle for extended periods, other companies experienced a dramatic uptick in business volume. Each scenario influences PM strategies and there are several factors that need to be considered to both control costs and keep vehicles in top operating conditions, which requires adjusting PM schedules accordingly,” said Chris Foster, manager, truck & equipment maintenance for ARI.
Reduced fleet utilization was the key factor impacting PM costs in 2020.
“Without question, the most significant impact affecting PM costs was the widespread reduction of vehicle utilization resulting from COVID. With employees in countless industries shifting from a commuting workforce to a remote workforce, overall repair costs dropped for a multitude of fleets across most sectors,” said George Albright, director, fleet maintenance for Merchants Fleet. “However, average per repair costs increased, which can be attributed to several factors, including labor rate increases, increased utilization of mobile repair services, and COVID-related cleaning.”
The disruptions caused by the pandemic puts upward pressure on fleet PM expenses. “PM costs per service should continue to increase, as OEMs manage through supply-chain disruptions associated with pandemic volatility. Continued labor shortages will impact multiple areas of the repair industry, as national labor statistics reflect an increase on average hours worked,” said Albright.
Other fleet subject-matter experts likewise agreed that most of the fleet-related PM disruptions that occurred in 2020 were pandemic related. “Donlen saw PM compliance fall as fleet vehicles were grounded,” said John Wuich, VP of strategic consulting services for Donlen. A key factor causing this was the decrease in overall miles driven, which has an impact since PM intervals are typically based on a mileage and time.
“The ongoing pandemic has impacted virtually every aspect of our industry and that certainly includes PM practices. With most PM strategies built on a foundation of miles driven and/or time intervals, these important milestones have been significantly altered for most fleet operators,” said Foster of ARI.
Many fleets modified oil drain intervals to correspond to the longer OEM-recommended intervals. “There were a number of companies that modified PM intervals to more closely align with what the recommended interval was from the OEM. In most cases, this change resulted in an increased oil change interval, which reduced overall oil change costs,” said Chad Christensen, strategic consultant at Element Fleet Management. “This has included doing additional PM services such as transmission services. Some companies are considering retaining units that had a reduced driving rate in 2020.”
During the pandemic, many fleets started to schedule preventive maintenance intervals solely on the basis of miles driven. “During the shutdown from March to August, we have seen a decrease in miles driven. In working with our customers, they do not want vehicles serviced based on mileage and time. Where most clients wanted services every six months or the mileage interval they had in place, now they are strictly looking at mileage intervals and once a year,” said Tony Hernandez, team lead, truck maintenance for Emkay. “Most vehicles have gone from 6-8 oil changes on average per year to only one or two.”
Transition to Synthetics
For the past decade, more OEMs are recommending the use of more expensive synthetic motor oils, which is increasing the cost of each PM service. But the higher quality motor oil also allows the intervals between these services to lengthen, which is offsetting some of the additional per-transaction costs.
“The transition toward full synthetic engine oil requirements continues to grow. Increasing numbers of new-vehicle models require full synthetic oil, which costs more than conventional or semi-synthetic oil,” said Dawn Schremp, national service department director for Enterprise Fleet Management.
The shift to semi-synthetic and synthetic blends has increased maintenance intervals but it also increased oil drain prices. As a result, the average cost of oil drains to fleets has increased. “We see a cost increase in the price per transaction, but there have been fewer transactions this year,” said Troy Fleener, team lead, maintenance for Emkay.
The longer drain intervals are offsetting the higher per-transaction price, making PM costs, on average, flat for CY-2020 when compared to CY-2019.
An additional factor impacting fleet PM costs is that the oil capacity for some models has increased, necessitating the use of more quarts of oil than what was used in the past.
“Many new models have larger engine oil capacities beyond the typical five-quart capacity of older vehicles, adding to the cost of oil change services. The higher cost of synthetic oil and increased engine oil capacities can be offset, to some degree, by longer recommended drain intervals set forth by vehicle manufacturers,” said Schremp of Enterprise Fleet Management.
New PM Expenses
The pandemic-induced economic lockdown impacted not only fleets but also many fleet vendors. “Some vendors closed their doors during COVID-19 impacting some clients in terms of vendor availability and driver convenience. Most of the vendors impacted were small business owners who typically offer more personal service including concierge, mobile and even storage of client’s idle vehicles,” said Mark Lange, CAFM, technical services consultant for Element Fleet Management.
During the pandemic, fleets are encountering new additional expenses charged by some maintenance facilities, such as disinfecting services. “While virtually all maintenance facilities have adopted some form of sanitation processes, we are seeing a small number of vendors charge an additional fee for this cleaning service,” said Foster of ARI.
Another trend has been for maintenance providers to reduce the number of motor oil options available during PM intervals. “One factor that continues to gain momentum in the marketplace is the trend of many maintenance vendors opting to reduce the number of engine oil options available for service. For example, we’re seeing more vendors eliminate the option of a semi-synthetic oil in favor of full synthetic alternatives. This strategy allows maintenance vendors to reduce their overall oil inventory,” said Foster of ARI. “As a result, we’re seeing a slight increase in the average cost of an oil change service as some vehicles are now forced to opt for a full synthetic service rather than a more economical semi-synthetic option. With that in mind, we are working closely with both our national account vendor partners and our customers to adjust budget forecasts accordingly to help minimize the impact.”
Forecast of PM Costs in 2021
The trend of increased PM costs per service will continue as more and more vehicles requiring conventional oil are taken out of service and replaced with models that require synthetics.
“We expect cost per mile to increase over 2019-2020 as the economy improves with both labor and materials increases to exceed inflation,” said Christensen of Element Fleet Management.
The cost of lubricants is another maintenance expense that is expected to increase. “Lubricant prices tend to follow the crude oil market. The crude oil market has experienced a recent drop due to the COVID-19 pandemic and decreased demand. As the economy slowly recovers in the year ahead, any price increases will probably be small and then grow gradually over time,” said Ryan Gardner, corporate business development manager for Enterprise Fleet Management.
One concern is that the economic recovery from the pandemic may take longer than anticipated. “We forecast costs will continue to rise. As the demand lessens, the cost will increase. Even if a vaccine is in place, there is still hesitation in returning to business as usual. Some analysts predict another year before some industries turn around,” said Fleener of Emkay.
by Mike Antich
Source: https://www.automotive-fleet.com
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