April 2009, Work Truck - Feature
Medium-Duty Operating Costs Increase in 2008-CY
The biggest factor behind the spike in medium-duty operating costs was the increase in diesel prices, which jumped 32 percent from the then-historical high in 2007. Other factors included increased labor rates and higher taxes.
By Mike Antich
Average U.S. diesel pump prices, calendar-years 2007 and 2008.
"The economic slowdown has resulted in many fleets, particularly delivery fleets, seeing a drop in their vehicle utilization," said Stanford. "Fewer deliveries lead to fewer miles, and in some instances, the need for fewer trucks. So a key area in cost management over the next year will be properly managing fleet resources to what are likely lower levels of demand. Decisions made this year on the capital budget side will impact operating costs many years into the future. Trying to 'save' money by delaying vehicle replacement will only result in higher maintenance and associated downtime costs later on."
The high cost of replacement tires is prompting some fleets to increase use of retreads. "We saw a lot of tire price changes in 2008, especially in the first half of the year. For the entire year, tire costs rose about 6 percent overall, which influenced some fleets to start looking closer at recaps for at least a portion of their fleet," said Charlie Thomas, manager, PHH Vehicle Maintenance Assistance.
Maintenance costs are also experiencing upward price pressures due to rising labor rates. "Preventive maintenance (PM) costs relating to the individual parts items have risen a small amount, but the labor and other costs associated with PM services rose about 11 percent. Average tax rates also rose about 1 percent in 2008," said Thomas. "As we see the first vehicles equipped with diesel particulate filters (DPFs) gaining higher mileage, we are starting to see some costs associated with repairs and maintenance to these systems. This will probably be factored into costs even more in the future, as trucks with SCR (selective catalytic reduction) systems and advanced EGR (exhaust gas recirculation) systems start hitting the road to meet 2010 emissions standards."
Longer truck service life is another reason maintenance costs are forecast to rise. "New truck sales have slowed in the past year, so this will increase the maintenance operating costs of vehicles that would have otherwise been replaced," said Byrd.
In addition, the 2010 emission standards will introduce entirely new maintenance items, plus increase the initial acquisition cost of trucks.
"New tighter emissions in 2010 will increase the price of new vehicles, increase their weight, and may cause reluctance to buy new vehicles. Larger classes of vehicles will use SCR and urea solutions - another addition to operating costs," said Byrd.
The volatile price of commodities, such as steel and aluminum, will have still another impact on truck costs.
"Most medium-duty trucks have bodies, and the rising cost of material surcharges in commodities has increased the cost of bodies," said Ezel Baltali, fleet services applications engineer for PHH Arval. "If the bodies are refrigerated, these bodies need a reefer unit. We believe the cost of these additions to the chassis will remain high, especially with so many competing companies. Many body companies now offer their own reefer systems. Rather than install as a separate item, a company may purchase a body at a premium price, fully functional as a reefer system."