THE FUTURE OF FLEETS An industry report from 1
Commercial transport at the crossroads Continued economic pressure, stricter emissions regulation, unpredictable fuel prices and growing competition are among the many factors that will continue to challenge the commercial transportation industry in 2017. But despite uncertainty and challenges at every turn, the European commercial transport industry is highly optimistic about its immediate prospects. The findings of ExxonMobil s Future of Fleets survey, which sourced responses from fleets in the UK, France, Italy, Poland and Finland, reveal an industry anticipating encouraging growth across the next 12 months. However, the findings also uncovered anxieties about upcoming legislative changes and concerns about rising costs. Taken as a whole, the survey s results reveal a complex picture of opportunities and challenges that are about to reshape the operational landscape for commercial vehicle fleets. It also uncovers some of the ways that the industry is planning to overcome these issues while maintaining and enhancing its competitiveness. The survey was conducted with input from senior managers of some of Europe's top commercial transport companies. Their fleets operate in both domestic and international markets, giving them unique insights into the sector s challenges and prospects. Taken together, their replies offer a strong indication of what 2017 holds in store for commercial transport businesses and how they can best negotiate their way through the maze of changing emission limits, ongoing training requirements and cost-saving options. Despite uncertainty and challenges at every turn, the European commercial transportation industry is highly optimistic about its immediate prospects. The findings of the "Future of Fleets" survey reveal an industry anticipating encouraging growth across the next 12 months. 1
A year of growth The most encouraging single statistic to come out of the survey was that 71% of respondents expected to see substantial business growth in 2017; a view held by owners, finance directors and fleet managers alike. Are you anticipating business growth in the next 12 months? Of that number, 36% predicted growth of between 11-20%. These figures closely align with ExxonMobil s The Outlook for Energy: A View to 2040 report, emphasising the industry s growth potential. Interestingly, just 7% expected their order book would tighten. The remaining 22% of the sample expected their businesses revenues to remain level. 71% of respondents expected to see substantial business growth in 2017. These figures closely align with ExxonMobil's 'The Outlook for Energy: A View to 2040' report, emphasising the industry's growth potential. Yes - 71% No, we are anticipating negative growth - 7% No, we anticipate growth remaining flat - 22% 2
Challenges to profitability Against a backdrop of positive growth projections, the industry is clear that it will be facing up to a wide range of challenges as we move into 2017. An ongoing concern about fuel price fluctuations was viewed by more than 50% of respondents as a trend that will continue to impact their business, but the issue of increased regulation was also a major concern. Some 30% of respondents anticipate that stricter emission standards will have a real impact on their business, with another 24% highlighting the general trend of changing and complex regulations as a concern. So, the industry finds itself facing as many difficult challenges as it does growth opportunities operating in as efficient a manner as possible has therefore never been more important if ambitious targets are to be met Some 30% of respondents anticipate that stricter emission standards will have a real impact on their business, with another 24% highlighting the general trend of changing and complex regulations as a concern. What will be the biggest trends to affect your operation in the next five years? Unpredictable fuel prices 52% Continued challenging economics conditions and volatile markets 44% Stricter emission regulations 30% Changing and complex legislation 24% Lack of new talent coming into the industry 17% Technology advancements 16% Increased focus on driver safety 15% Growing number of light duty vehicles increasing competition 11% Development of fuel alternatives such as natural gas 8% Tighter credit facilities 8% 3
Maximising fuel efficiency In a drive for efficiency, reducing fuel consumption specifically offers a real route for savings. When asked what steps has your business taken, if any, to specifically maximise fuel efficiency across your fleet? the answers were revealing, particularly as commercial fleet operators had already highlighted the challenge posed by any variations in fuel costs. Keeping a well maintained fleet was stressed in 65% of replies, followed closely by investing in driver training, mentioned by 53% of respondents. This question also demonstrated an increasingly technology proficient industry that utilises telematics to monitor performance and analyse driving data. As many as 44% of respondents cited this as something they are already investing in. Ensuring the use of fuel-efficient lubricants was singled out by 32% of respondents. An encouraging statistic in one sense, but fuel efficient lubricants should be viewed as an essential part of reducing fuel consumption given the ease with which they can be introduced into a fleet. Only half of respondents who said that they make this a priority also acknowledged the potential that fuel efficient lubricants can deliver. Keeping a well maintained fleet was stressed in 65% of replies, followed closely by investing in driver training, mentioned by 53% of respondents. What steps has your business taken, if any, to specifically maximise fuel efficiency across your fleet? Keeping a well maintained fleet (eg. tyre pressure optimisation) 65% Investing in driver training 53% Using data analytics through telematics systems to monitor performance 44% Undertaking in-house maintenance of our fleet 40% Ensuring we use fuel efficient rather than standard lubricants 32% Investing in aerodynamic vehicle enhancements 27% Upgrading to fuel efficient tyres 26% I do not think there will be any trends that will affect our operation in the next 5 years 3% 4
Carbon brakes What is the biggest impact EU 2020 Carbon reduction directives and associated legislation will have on your business? In 2020 the European Union (EU) will introduce a range of binding legislation to ensure its member states meet their mandated climate and energy targets. It is positive news therefore, that 79% of respondents feel that they understand the EU 2020 carbon reduction directives and their implications. However, when questioned about the likely impact of the 2020 legislation on their businesses the replies exposed an industry that, while aware of the potential impact, has not begun to proactively address the upcoming challenge. Just over a third of those polled (35%) expect the directives will cause significant added cost, but a consequence of that isn t necessarily smarter operations. Causing significant added cost 35% Making you look at where efficiencies can be made across the business 18% Making the industry increasingly complex 15% Forcing you to think more sustainably 15% Raising the importance of low emission innovations such as natural gas 8% EU 2020 Carbon reduction directives and associated legislation will not have any effect on my business 9% Just 18% said it would prompt them to look at where efficiencies can be made across their businesses. A further 15% were concerned simply that it would add layers of complexity to the industry. Just 18% said it would prompt them to look at where efficiencies can be made across their businesses. 5
Future fuel options The downward pressure on emissions and a widespread impetus to adopt cleaner technologies is being felt across the commercial transportation industry. Both compressed natural gas (CNG) and liquefied natural gas (LNG) are being touted as future fuel options because their use would help cut greenhouse gas emissions. What is the biggest barrier for the growth of CNG/LNG in the commercial vehicle sector? Almost two thirds (65%) of businesses thought that CNG/LNG would be an important fuel option in the future. However, further questioning revealed that the industry had identified a number of obstacles to its implementation. For 41%, the cost of changing fuels outweighed any perceived benefits, another 28% pointed to the lack of infrastructure to deliver CNG/LNG on a mass scale, while 17% suggested that a lack of education within the industry on the benefits of alternative fuel options was hindering its adoption. Almost two thirds (65%) of businesses thought that CNG/LNG would be an important fuel option in the future...but there are clear obstacles to implementation. Cost outweighing perceived benefits 41% Required infrastructure to deliver CNG/LNG on a mass scale 28% Lack of education within the industry on the benefits 17% OEMs not producing CNG/LNG ready trucks 10% There is no barrier for growth of CNG/LNG 3% 6
Lubricating the wheels of progress What influences your choice of lubricants? Drawing together all the survey s data reveals a number of interconnected themes, many of them closely linked with how to manage and minimise costs in the face of far-reaching change. One of the key insights of the survey is the industry is yet to fully wake up to the potential of lubricants as a genuine driver of efficiency rather than simply a cost. The survey companies were asked about their use of lubricants and what influenced the procurement decisions. Cost was the most common response 38% said they bought lubricants largely on price. A similar number, 37%, were influenced by recommendations from either their maintenance teams or their lubricant suppliers, while 34% reported that performance benefits, such as improved fuel economy, play a part in their purchasing choices. Cost cheapest option available 38% Recommendation from mechanic/distributor 37% Based on performance benefits such as improved fuel economy 34% OEM recommendation 24% Any final decision on lubricant purchases is governed by a number of factors. Legacy we have used the same brand of lubricant for years 12% 7
The most telling response regarding lubricants, however, was that although 36% of commercial transportation businesses see purchasing the best lubricants as an investment that can help save money in the longer term, 64% saw them as an unavoidable cost that they try and keep low. Do you view your lubricants as a cost or an investment for your business? With an industry so focused on cost, a change in approach is required by many. Selecting the best quality lubricant rather than simply purchasing on price will have long term benefits for fleets in terms of maximising performance and fuel efficiency, and reducing maintenance and off-road time. While a significant number of commercial transportation businesses recognised the ability of high performance lubricants to help reduce fuel consumption there was less of an understanding that they also facilitate emission reductions, thereby helping fleets meet their 2020 carbon cap obligations. Choosing the best lubricant for a specific job can also be a beneficial part of an integrated fleet maintenance programme, further cutting running costs. A necessary cost that we try and keep low 64% An investment that can help us save money in the longer term 36% It is an investment that will ultimately pay off for fleets in a world where efficiency is crucial for success. 8