Automotive Fleet, July 2017

JULY 2017 I AUTOMOTIVE FLEET 17ter in Bloomfield Conn Similar feedback was provided by ThyssenKrupp Elevator when asked about their 2018 MY ordering forecast which will be smaller than its traditional annual ordering volume For us 2017 was a record year regarding volume purchased due to a number of reasons We put 1200 new units on road when our average is around 500 to 600 Therefore we will definitely be less around 500 vehicles said Tom Armstrong director of fleet for ThyssenKrupp Elevator While farm commodity prices remain flat exports remain strong The agribusiness industry like others has strong pent up demand to replace aging vehicle inventory We anticipate an increase in vehicle orders due to expansion and some conservative ordering for the past couple of years said Michael Gates fleet department manager for Crop Production Services CPS in Loveland Colo Likewise some pharmaceuticals are increasing fleet buy to accommodate business growth and to provide company vehicles to new hires We will be acquiring more vehicles in the 2018 model year due to increased headcount said Tracy McCann senior fleet manager for Mylan Inc in Pittsburgh Mylan is a global generic and specialty pharmaceuticals company Also experiencing growth in todays economy is Ingersoll Rand We will likely acquire more vehicles as our diversified businesses continue to gain market share and the organization continues to look for opportunities in M A activity said Jonathan Kamanns director supplier relationship manager for Ingersoll Rand in Davidson N C While merger and acquisition activity can lead to larger fleet buys in terms of overall industry sales it is often volume neutral We acquired a company last year and we are bringing both fleets together in the coming months As a result we will be acquiring more vehicles but only because the acquisition brought these new vehicles into MY compared to last model year Our hope is that as our market recovers a bit so that we will purchase more vehicles than we did for MY 2017 said Kimberly Fisher global manager fleet and travel services for National Oilwell Varco Our vehicles are getting quite a bit of age on them In the midstream sector there is similar pent up need to acquire new vehicles to compensate for reduced orders in prior model years We are looking at a higher number of units due to minimal purchases in 2016 Those units are extremely high in mileage and repair costs said Lisa Kneggs fleet specialist for EnLink Midstream in Dallas In the downstream market one indicator of future buying inclinations is illustrated by Valero Energy Corporation a Fortune 500 company which operates a total of 15 refineries and 11 ethanol plants We anticipate ordering about 5 more vehicles than 2017 said Randy Burwell lead buyer and fleet specialist for Valero in San Antonio Texas In addition to improving business environment in the oil and gas industry other segments of the economy are likewise experiencing an increase in business activity One example is the uptick in new construction both commercial and residential The increase in new commercial construction is creating additional demands for elevators which companies have been experiencing for the past several years Many of companies in this segment made significant new vehicle investments in the 2017 model year Although new vehicle orders will decrease in the 2018 MY they will still remain strong Last year was a banner year with almost 800 units ordered I do not know if we will get to that number however I think we will be at our regular number of 600 units or so said Phil Schreiber fleet manager North America for Otis Service Cenpressures and corporate reorganizations But on an aggregated basis the survey revealed the overwhelming majority of companies will either increase or maintain their traditional ordering levels for model year 2018 with volumes similar or greater to what was acquired in the 2017 MY The top factors driving 2018 model year buying decisions are similar to those that drove 2017 vehicle selections These include corporate initiatives to acquire the most fuel efficient models available for the specific fleet application downsizing when possible to smaller displacement engines or different classes of vehicles and the incorporation of additional safety features and equipment options into company provided vehicles Factors Driving Volume Increases in 2018 MY Vehicle Orders The primary reasons cited by companies reporting an increase in new vehicle ordering for 2018 MY are to accommodate business growth both organic and by acquisition and to replace aging fleet inventory A key example of pent up fleet vehicle demand is in the oil and energy sector After a long period of depressed fleet purchases the energy sector appears to be ramping up its orders for the 2018 MY Examples of the pent up demand to replace aging assets is occurring across the board in the upstream midstream and downstream segments of the energy sector The oil and gas industry is typically divided into three major sectors upstream the extraction of resources midstream the movement of resources to refineries such as pipelines and downstream refineries that create products for sale to end users In the upstream market one indicator of next model year buying inclinations is exemplified by National Oilwell Varco As a major multinational corporation headquartered in Houston Texas it is a provider of equipment and components used in oil and gas drilling and production operations oilfield services and supply chain integration services to the upstream industry National Oilwell Varco reports it is anticipating a larger fleet buy in 2018 FISHER National Oilwell Varco BURWELL Valero Energy Corporation KNEGGS Endlink Midstream SCHREIBER OTIS Service Center ARMSTRONG ThyssenKrupp Elevator GATES Crop Protection Services