Editors Note: This article is part of a three-part package that addresses fleet maintenance costs in 2017. Read related articles covering oil service costs and tire costs.
During calendar-year 2017, maintenance expenses, on average, increased year-over-year compared to CY-2016 for passenger cars, crossovers, minivans, and compact SUVs.
“The increase in maintenance expenses was primarily driven by a 5-7% increase in labor rates and parts costs,” said Chad Christensen, senior strategic consultant for Element Fleet Management.
The key area where maintenance costs are increasing is with labor rates, especially at service facilities located in high-cost-of-living metro areas.
Many shops increased labor rates in 2017 and the anticipation is that this trend will continue in 2018. Labor rates for several national service providers for non-menu repairs increased in 2017 due to labor shortages of qualified service technicians. The forecast is that labor rates will rise in 2018 at the rate of inflation, perhaps greater.
With more technology embedded in each vehicle, independent shops are being required to make significant diagnostic equipment investments in the ability to diagnose and repair using the data from in-vehicle technology. In addition, increased vehicle complexity is requiring the hiring of technicians with a higher technical skillset, who typically command higher salaries.
As new technology becomes increasingly prevalent in fleet vehicles, it will begin to stretch the skillset of some technicians at independent service providers. There is intense competition for skilled technicians between dealerships, independent service providers, and fleets that operate in-house maintenance facilities. The demand for these technicians exceeds the labor supply. Compounding this problem is that older skilled technicians are retiring from the trade at a rate faster than younger technicians entering the profession to replace them. This is increasing pressure on independent shops to boost wages to attract the new talent.
Another contributor to higher maintenance costs in CY-2017 has been price increases for replacement parts. One notable example was increases in brake and caliper costs associated with increased tire diameter sizes.
These were some of the key findings of AF’s 23rd annual fleet passenger car maintenance survey conducted exclusively by Element Fleet Management. The study is based on actual maintenance expenses incurred by 240,000 passenger cars, crossovers, minivans, and compact SUVs during calendar-year 2017.
Preventive Maintenance Costs Increase
One factor exerting upward pressure on passenger car maintenance expenses was an increase in scheduled preventive maintenance (PM) costs.
“Although up, PM cost was one area that saw a smaller-than-average increase of only 3%. However, increased oil drain intervals have offset most of these cost increases” said Mark Lange, CAFM, technical services consultant for Element Fleet Management.
Another factor contributing to the increases in PM costs is the ongoing shift by OEMs to recommend more expensive, but longer-lasting, synthetic motor oils. “Changes in manufacturer requirements for oil specs are driving up the cost of preventive maintenance,” said Lange. “The frequency of oil changes may remain the same, but the cost of preventive maintenance is increasing due to changes in oil requirements.”
While longer drain intervals may decrease preventive maintenance (PM) costs, there is concern that drivers may become complacent and may not be as diligent in regularly checking motor oil levels. “This is more important than ever with extended service intervals,” added Lange.
Replacement Tire Costs Rise
An additional factor exerting upward pressure on replacement tire costs is the ongoing trend to larger diameter tires and unique tire sizes.
The increase in OEM automobile wheel diameters has driven up the price of fleet replacement tires, primarily because the larger the tire, the greater the manufacturing expense.
“Larger diameter tires are still causing clients ‘sticker shock’ on the cost of replacement tires. Common feedback received from fleet managers is that they did not budget for such significant tire expenses,” said Christensen.
Extended Replacement Cycles
A final factor that influenced maintenance costs has been the upward trend in the average months in service for fleet vehicles.
“Fleets are keeping vehicles longer and because of this are required to perform additional PM maintenance, such as spark plugs, cooling system, and transmission service,” said Christensen. “For the most part, recommended OEM scheduled maintenance has remained unchanged in 2017. Technology improvements will ultimately happen and should have a positive impact on reducing maintenance costs in future years.”
Maintenance Forecast for 2018
Although maintenance costs increased in 2017, the forecast is that fleet car maintenance expenses will increase at a slower rate than last year for the balance of calendar-year 2018.
“We expect to see labor rates increase in 2018, but closer to 2-5% instead of the 5-7% in 2017,” said Christensen.
One factor putting downward pressure on maintenance costs is the ongoing vehicle quality improvements occurring each model-year. “Vehicle quality appears to have improved. We haven’t seen widespread issues across a specific one or two individual makes of vehicles as in years past,” said Christensen. “We’ve seen a reduction in the need for complex major repairs.”
Today’s vehicle quality is very high, increasing component reliability, which, in turn, is driving repair costs down. This should offset anticipated ongoing increases in labor costs and parts prices.
One consequence to increased vehicle reliability is the temptation to keep vehicles in service for longer periods. “Fleets will keep vehicles longer due to increased vehicle reliability,” said Lange.
Reliability will also help to increase vehicle utilization rates. “There will be fewer idle assets due to increased vehicle reliability,” said Lange.
As vehicles become more complex, so do vehicle repairs. While the technology innovations being introduced in today’s vehicles are very reliable, when they do malfunction, they are very expensive to fix. This can drive up certain repair expenses, such as infotainment systems, for example.
“One example of newer technology reducing maintenance and repair costs is electronic steering, which is more reliable than mechanical hydraulic assist,” said Lange. “Another example of reduced maintenance costs due to higher component quality is that brake pad life continues to improve for cars.”
Looking farther in the future, new technologies such as autonomous vehicles will have a radical impact on fleet maintenance expenses.
“As autonomous cars are introduced in the coming decade, maintenance events, such as brakes, tires and oil changes, will become more predictable, as driver influence is almost entirely removed from the equation,” said Lange. “This type of new technology also tends to shift spend behavior from using lower cost maintenance/repair providers to using the OEM dealerships.”
Follow @automotivefleet on Twitter
from Automotive Fleet http://ift.tt/2CS1EuR
Sourced by Quik DMV - CADMV fleet registration services. Renew your registration online in only 10 minutes. No DMV visits, no lines, no phone mazes, and no appointments needed. Visit Quik, Click, Pay & Print your registration from home or any local print shop.
0 comments:
Post a Comment