Are Vehicle Order Lead Times Improving?

While the automotive industry is recovering from the worst of the pandemic-era disruptions, many vehicles still have extended lead times that are disrupting fleet acquisition plans.

Pre-COVID, lead times for most vehicles were about three months, which stretched to as much as 12 months during the pandemic. The lead time has fallen to around six months now, depending on the type of vehicle, according to Phil Dunne, U.K. managing director at the global strategy consulting firm Stax (www.stax.com).

“It’s still nowhere near where it should be, but the lead times are gradually getting better,” he said. “There’s still a lot of inconsistency with the quotes, so it’s not a great time to buy vehicles for a fleet.”

The inflationary environment also influences how dealers uphold contracts and backorders. After a 12-month wait, the price for a vehicle is significantly higher than when the order was placed. Dealers will cancel a backorder and attempt to fill the order at the new price.

Bare chassis and work trucks such as vans and pickups of all types are still in very high demand, and supply continues to be constrained. Some dealers won’t provide quotes because they don’t know when a chassis may be available.

Upfitters are seeing delays mostly among second- and third-order equipment suppliers that supply the upfitter vendor, noted Matt Andrews, supervisor of ordering for Wheels (www.wheels.com), a fleet management service provider.

“The more complicated a fleet’s needs are, the more likely we’ll see some part of its equipment supply chain cause a delay,” he said. “People think supply chain disruption was a problem in 2022-2023, but it is still with us, just not as widespread across the automotive fleet industry.”

EV Update
As utilities move toward electrifying their fleets, EVs also remain in tight supply. Utilities may fall behind on local mandates for adding EVs to their fleets.

“The OEMs are pulling back on their ambitious capacity forecasts as they struggle with uncertainty in consumer demand and the regulatory environment,” Dunne said.

Behind the scenes, manufacturers face labor shortages, supply chain problems, and a lack of truck and rail transport options. At one point during the pandemic, Ford parked acres of vehicles waiting on new supplies of the iconic blue oval badges before they could be shipped.

Prior to COVID, the semiconductor industry invested in meeting demand for consumer electronics rather than vehicles. The Ukraine conflict disrupted wiring harness suppliers and adjusting that supply chain took the industry a while.

Transportation carriers face their own labor shortages and supply chain issues. About 75% of new vehicles move by rail, so congestion at ports and rail yards slows traffic across the nation.

Long lead times are disrupting the typical three-year vehicle life cycle. The good news is that newer vehicles are more durable, so stretching their useful life to four years or so may only require more servicing and maintenance, Dunne said. Depending on the vehicle, the cost of servicing major components could come close to the vehicle’s value, which won’t be recouped at auction.

Keeping vehicles in the fleet longer changes the cost equation for disposition. When the lead time shifts from three months to six, there’s less visibility into the residual value of outgoing vehicles that could partially fund new acquisitions and higher servicing costs.

“Fleet management is more complicated than ever by a lack of clarity about what’s going to actually happen when you need to buy vehicles,” Dunne said.

About the Author: Gary L. Wollenhaupt is a Colorado Springs-based freelance writer who covers the transportation, energy and technology sectors for a variety of publications and companies.

5 Strategies to Manage Vehicle Shortages
Many of the macro issues are out of the hands of fleet buyers and often local dealers as well. Manufacturers allocate product to dealers, who must decide who will get the limited supply of commercial vehicles. Here are some ways to manage shortages of the vehicles your fleet needs.

1. Get close to your dealer/OEM. Build a good relationship with your dealer so you’re at the top of the list when vehicles arrive. That may mean sending vehicles to the dealer for maintenance and repair and buying parts from the parts department. Dealers tend to work with customers who spend money with them.

2. Shop around. While it may contradict the message of getting close to the dealer, look for other sources when necessary for light commercial vehicles and bare chassis for upfitting.

3. Look at the used market. Used prices have leveled off after rising significantly over the past 12 months. Look for insights into how residual values develop for both acquisition and disposition. Consider short-term and long-term rentals for critical equipment.

4. Be flexible. If possible, think about changing the source of your vehicles and chassis to get what you need. However, some fleets like to focus on a specific chassis to simplify service, so changing sources could be disruptive to the maintenance plan.

5. Revise your fleet plan. Identify opportunities to move vehicles into different work profiles to manage life cycles. Return surplus vehicles to the fleet to fill gaps. Consider keeping vehicles active longer.