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As the turbulent economy of 2020 ends, businesses are experiencing uneven patterns of equipment investment demand depending on which market sectors they serve.

Equipment and software (E&S) investment collapsed 27.7% (annualized) in the second quarter of 2020, the sharpest decline since the Great Recession. However, E&S investment is forecasted to return to positive territory during the second half of 2020 and entering 2021.

Based on the Equipment Lease Finance Foundation’s U.S. Equipment & Software Investment Momentum Monitor, most vertical sectors are showing historically weak momentum after the COVID-19 pandemic abruptly halted investment during the first half of the year.

Many Transportation Segments Are Seeing Quicker Recovery

Vertical segments that are highly affected by a standstill in consumer mobility, particularly aircraft, are likely to remain weak. Meanwhile, other vertical segments have the potential for a stronger recovery, including Class-8 tractors, other industrial equipment and medical equipment.

This stronger recovery for transportation fleets is a result of many of the country’s reopening plans that placed heavy reliance and shipping activity for transporters, which subsequently has placed more miles on trucks on the road today. As a result, truck replacement and acquisition strategies will increase entering 2021, and will be an important decision for many companies.

This activity has already begun to pick up, as the latest figures show that preliminary orders for North American Class-8 heavy-duty trucks in September were up 60% from the previous month, and up 145% compared to the previous year according to ACT Research.

In the release of its Commercial Vehicle Dealer Digest on Sept. 25, ACT Research reported that an “unforeseen robustness of the perfect storm of positives into late spring and summer, following the initial shock of COVID-19 shutdowns and other mitigation efforts, has resulted in sharp upgrades in commercial vehicle expectations since May.”

Grocery, Retail, Health Segments Driving Demand

With so much emphasis now on replacing older trucks that have stressed utilization and mileage with newer, more efficient trucks, business owners and fleet operators have important decisions in how they structure the financing of these replacement units heading into 2021.

For example, transportation fleets are placing more miles on their trucks handling an increase of shipments on everything from grocery orders, health and sanitation products, as well as everyday goods now purchased through online channels.

Procurement Strategies Keeping Costs Down

This means that organizations are increasingly scrutinizing the impact that the cost of truck operations, fuel, and maintenance and repair has on their transportation bottom line as trucks will be central to these distribution channels.

Regardless of the price of diesel, more organizations today are making changes to the life cycle of their trucks to benefit from newer units that offer more fuel-efficiency and overall total cost of ownership (TCO). A recent analysis of truck life cycle data shows that fleet operators are now realizing a first year per-truck TCO savings of $16,856 when upgrading from a 2016 sleeper model-year truck to a 2021 model. The fuel savings alone are $5,084 per vehicle.

The improved fuel economy of newer trucks—even when fuel prices are low—is a big reason why a fleet should stay updated, in addition to the safety improvements and CO2 reductions as well.

Innovative Programs Infuse Cash, Prepare for Future Procurement

While some companies focused on grocery distribution saw banner years, not all transporters saw gains in 2020, and the difficult economic climate has placed significant challenges to their fleet operations and bottom line.

Many organizations needed to scale down their fleets because of the downturn in business activity, such as distributors serving restaurants that were closed. In fact, more than a quarter of executives polled in a recent industry study, Fleet Advantage COVID-19 Truck Utilization Survey, (27%) said they downsized their fleets, and new industry programs were introduced to help organizations scale their fleets accordingly while infusing much-needed cash into their operations.

These innovative programs will continue to serve businesses that need to right-size their fleet operations yet wish to remain competitive with their future truck procurement strategies entering 2021 when the economy hopefully begins to rebound.


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