Fleet trends – 2024 Q4 Report insights
November 21, 2024
Discover the trends to boost your fleet performance in 2024 and beyond
As 2024 draws to a close, inflation rates show signs of stabilization. Anticipated rate cuts, suggested by recent economic forecasts, could offer some financial reprieve, but the overall economic activity remains lukewarm.
To help you stay one step ahead, we’re covering the trends in economics, safety and remarketing. Fleet managers must remain vigilant, focusing on strategic planning around vehicle acquisition, resale, and sustainability initiatives to minimize financial constraints while maximizing resources. Navigating this economic climate will require a balanced approach to costs and innovation.
Key highlights influencing your fleet
Economics
The overall economic outlook remains cautiously optimistic as interest rates have been dropping and the fleet industry has shown resilience in dealing with market fluctuations. Shifts in buying power are creating opportunities for fleet expansion and more efficient vehicle upgrades. As the economic environment stabilizes for some costs, new challenges managing total cost of ownership (TCO) are emerging, particularly when it comes to rising insurance rates. These economic dynamics are pivotal in guiding strategic decisions and planning for sustainable growth within the industry.
Safety
Adapting to winter conditions is crucial for fleet safety. Key trends this quarter focus on effective tire management, advanced vehicle technology like intelligent all-wheel drive, and the use of real-time monitoring of vehicle conditions and driver performance. Upgrading safety protocols continues to be a priority, along with investment in safety training and technology to reduce accidents and improve driver behavior and well-being.
Remarketing
The increase in vehicles returning from leases is putting pressure on resale values, requiring strategic adjustments. OEMs are stepping up with more incentives, particularly within the luxury segment, affecting how fleets manage their buying and selling decisions. Additionally, EVs are depreciating faster, influenced by rapid technological advancements and battery considerations.
2024 Q4 key economic trends for fleet management
Increased purchasing power
With the latest survey to come out of the American Transportation Research Institute (ATRI), it’s no surprise that the economy was the top concern of the trucking industry last year.
The U.S. Federal Reserve’s decision to lower the interest rate to 4.75%-5% should come as welcome news to fleet managers looking to acquire new vehicles. With vehicle financing now cheaper than it has been in previous quarters, the door is open for fleets to invest more in new vehicles. They can either purchase more vehicles or upgrade to higher-end models within their budget. Fleet managers should note that while purchasing power has improved, vehicle availability in certain segments such as diesel and compact vans are seeing a decline in model availability.
The Bank of Canada recently reduced its key interest rate to 3.75%, marking its first significant rate cut in over four years. This signals a shift back to a period of low inflation, when it dropped to 1.6% in September, below the target of 2%. Previously, the central bank had raised rates to combat high prices but has now cut rates four times since June.
In Mexico, the last two consecutive rate cuts, are a signal that a rate normalization cycle has begun. Analysts in Mexico expect the trend of target rate cuts to be maintained at 10% by the end of this year. Two announcements are pending on 14 November and 19 December.
Combined interest rate graph information for Mexico, U.S. and Canada
Graph showing interest rates for Mexico, U.S. and Canada
Combined inflation rate graph Information for Mexico, U.S. and Canada
Graph showing inflation rates for Mexico, U.S. and Canada
Improvements in fleet total cost of ownership
Two key economic trends are combining to offer some much welcome relief in terms of your fleet TCO. In the U.S., the inflation rate has dropped to 2.2 % in Q4, down from 7% and 6.5% in 2021 and 2022 respectively. This combined with the recent interest rate cuts will have a positive impact on fleets in terms of both supply cost stabilization and vehicle purchase price. The improved economic conditions will also positively affect fleet costs such as maintenance and fuel expenditures.
Despite the general inflation adjustment in recent weeks, the sale of light vehicles in Mexico reached 122,051 new units in October of this year, which represented an increase of 7.03% compared to the same month in 2023. General inflation as of September 2024 was 4.58% higher than automobile inflation for the same period 0.66%.
Rising insurance rates
As the industry evolves with more advanced vehicle technologies, new considerations have come into play, potentially affecting insurance premiums and policies. Insurance premiums are expected to surge by an average of nearly 13% by the end of 2024, after a significant 11% rise in 2023. Emphasizing preventive measures can help reduce risks and control insurance costs. This may involve stepping up driver training initiatives and ensuring vehicles are properly equipped to handle adverse weather conditions. A proactive approach is required to deal with the recent rise in insurance rates.
Insurance premiums in Mexico have increased due to Chinese cars entering the country. Nearshoring and changes in tariff policies also have contributed to a 28.7% increase in the first half of 2024. Since there are many new vehicles entering the Mexican market from China, this increases the number of vehicles requiring financing. It should be noted that while insurance is not mandatory in Mexico, a financial institution will always require it for car loans and leasing.
As these vehicles are not from a local OEM, they need replacement parts which need to be shipped from overseas. Additionally, since these models are relatively new to the market, there is uncertainty surrounding their performance which is another factor causing insurance rates to increase. As more foreign investors set up in Mexico, this will cause a rise in demand for vehicle insurance. Finally, with more people working in the automotive sector, labor costs have increased further raising repair costs, prompting insurers to adjust their policy prices higher.
2025 Fleet management recommendations
- Look for ways to reduce costs during upcoming budget planning, consider a new baseline for deciding year-over-year spend.
- When setting your budget for 2025, consider the impacts of inflation, labor constraints and interest rates, as these will play an important role in total fleet spend.
- Stay on top of your fleet metrics and spending! This helps you collaborate with your fleet partners effectively to create a forward-thinking business plan.
2024 Q4 key trends in safety
Prioritize tire safety for winter conditions
Since 24% of vehicle crashes are due to winter weather conditions, winter tires are essential for U.S. and Canadian fleet vehicles. Winter tires offer the grip and traction fleet drivers need for control, and the stopping power to prevent accidents in a range of snow, slush, or ice conditions. Use the latest AI technology to find the best way to manage tire replacement with our tool that helps track your costs, safety standards, and timing.
Winter driving crash statistics
Infographic sharing winter driving statistics
Winter driving habits and intelligent all-wheel drive
Winter driving requires a shift in driving behavior and an increased reliance on vehicle features like all-wheel (AWD) drive to ensure fleet safety. The latest smart technology integrates advanced intelligent software and sensors with real-time monitoring. This feature distributes power to all four wheels to help keep traction and prevent skids on slippery roads. It enhances control and stability, which is crucial for navigating winter conditions.
AWD options have increased for a wider range of electric vehicles (EVs) and hybrid models, especially in SUV and crossover vehicles. They have become more affordable, and their performance has improved with dual-motor systems to get better range.
Fleet management software: Fleet telematics
Cutting-edge connected solutions are transforming safety by identifying risky driving behavior such as speeding, harsh braking, aggressive cornering, and seatbelt neglect. These advanced systems provide real-time alerts to drivers so they can correct any unsafe driving habits. Connected safety solutions use telematics to analyze driver behaviors to make targeted interventions and provide driver coaching, fostering a culture of safety and continuous improvement.
Telematics can help you reach up to a 50% improvement in your fleet’s overall risk picture. With predictive analytics, telematics not only warns of potential hazards but also significantly reduces the risk of accidents, ensuring safer roads for everyone. These habits and features together create a comprehensive safety net, reducing the likelihood of accidents and promoting safer fleet operations throughout the challenging winter months.
Top 3 fleet safety recommendations
- Check with your New Vehicle Acquisition Consultant (NVAC) to ensure your vehicle selections offer safety features that reduce accidents and related costs.
- Use technology to engage drivers in risk awareness and continuously monitor all drivers’ motor vehicle records (MVRs) while promoting safe driving policies.
- Remind drivers of basic tips that could save lives: seat belt use, sober driving, follow speed limits, avoid distracted driving and be cautious in poor weather conditions.
2024 Q4 key trends in fleet vehicle remarketing
Declining fleet vehicle resale value
According to the Vehicle Remarketing Association (VRA) the healthy used car market that we have seen in recent years may be deteriorating in Q4 of this year.
This is due to several factors such as an increase in the supply of vehicles coming off-lease, and a decrease in demand from consumers who are buying new cars at a slower pace. As a result, fleet managers can expect to see declining resale values for their vehicles.
The semiconductor supply crisis triggered by the COVID-19 pandemic, which once hindered automotive production, is now in Mexico's past. This, combined with the entry of Chinese brands into the Mexican market has generated higher levels of inventory of new vehicles than those recorded four years ago.
While this development marks a boost in new vehicle availability, it has contributed to a downturn in demand for semi-new and used vehicles at the same time. As the market adapts to new conditions, prices of used cars are expected to stabilize or even decline, reversing the upward trend seen in recent years when some models or versions appreciated by up to 30%.
OEMs stepping up incentives
To combat the decline in resale value, OEMs are stepping up their incentives for both new and used cars. This trend is especially prevalent in the luxury vehicle market, where manufacturers are offering bigger discounts and rebates to attract buyers and shore up sales volumes. These incentives are designed to stimulate demand and move inventory, but they also compress margins for resellers. Fleet managers need to monitor these incentives closely, as they can affect the timing and strategy of selling or purchasing fleet vehicles.
Mexico: Average Prices of 1-5 year-old gas cars, EVs, and hybrids
Chart showing comparable vehicle prices between gas cars, EVs, and hybrids
Heavier depreciation on the electric vehicle (EV) side
Electric vehicles (EVs) are facing significant depreciation, with the average used EV losing 25 percent of its value over the past year, dropping from $35,621 in August 2023 to $26,839 in August 2024. This contrasts sharply with the depreciation rates of internal combustion engines (ICE) and hybrid vehicles, which saw declines of 4.4 percent and 6 percent respectively within the same period. The steeper depreciation for EVs is due to rapidly changing technology and ongoing concerns about battery longevity and replacement costs. Fleet managers should carefully assess these trends as they influence the resale market potential of EVs in their fleets.
In Mexico, the price of new EVs is decreasing, causing the aftermarket prices to also come down. Mexico denied Chinese OEM investment when the government decided to not offer incentives such as low-cost public land or tax breaks for Asian OEMs looking to invest in electric vehicle (EV) production in the country.
However, in October, Mexico began exploring tax credits to entice foreign companies to invest and manufacture within its borders. This initiative specifically targets EV, semiconductors, rare earth minerals, battery, and electronics sectors, aiming to bolster domestic production and innovation.
The arrival of Chinese investments in Mexico is a cause for concern to some U.S. officials, who fear that Asian countries will seek to use the T-MEC (the Mexico-United States-Canada Free Trade Agreement) to relieve some of the restrictions imposed by the White House on trade. As the market adapts to new conditions, used car prices are expected to stabilize or even decline, reversing the upward trend seen in recent years.
Fleet vehicle remarketing recommendations:
- During replacement planning, monitor price trends of both new and used vehicles.
- Establish and adhere to a consistent vehicle replacement cycle to avoid market fluctuations due to seasonality.
- Determine if vehicles that were held on to during peak shortages can now be sold, as they were pushed past replacement parameter periods.
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