Don’t let your fleet get caught in the expectation vs. reality trap

Bill McCouch

Expectation – 1969 moon landing meant we were on our way to Mars in the not too distant future

Reality – More than half a century later and we can’t even get people back to the original destination

Expectation – Flying cars by 2015 (based on “Back to the Future, Part 2”)

Reality – Autonomous cars that keep crashing (on the road, not the sky)

Expectation – Y2k was going to create mayhem globally

Reality – Meh

Expectation – A college degree would ensure success and more money

Reality – You owe tens of thousands in loans and in deep debt with a job that doesn’t pay enough

Expectation – I’m going to be a cowboy when I grow up

Reality – I’m terrified of horses

That’s the ongoing story of expectations. Reality intrudes and can make things better or worse. In our industry, we have to plan ahead…way ahead. And that forces us to look at where things are presently, what the trends look like, and where most experts expect them to be in the near future.

But it’s important to recognize that those experts are providing us with expectations, not actual facts. In early 2020 business was booming and the expectation was it could only keep growing. Businesses planned for that…and then reality hit with COVID and everything had to change…on a dime. Failure to change meant failure…period.

Instead of wringing its hands, our industry responded to the reality spectacularly, showing how vital it is to make sure a business is agile enough to quickly adapt to any reality. But black swan events like COVID aren’t usually the way reality smashes an expectation. We can look at two major expectations we’ve all been concerned about and how reality stepped in.

Electric vehicles – The expectation was that we were on the verge of the BEV revolution, where the internal combustion engine was about to become a thing of the past. The reality was the complete opposite: far too few charging stations, a reduction in tonnage and the amount of carrying capacity because the batteries are so heavy. Add to that, the sudden realization that cold weather reduces the range that BEVs can be driven. Referring to cars, Consumer Reports noted that “cold weather saps about 25 percent of range when cruising at 70 mph.” Hertz is selling off 20,000 Teslas because they’re just too expensive to maintain. That’s why so many OEMs have pulled back on their “expectations” to retrofit factories from ICE to BEV capacity. The expectation that BEVs will one day be dominant is likely true but the reality is much farther in the future than anyone originally anticipated.

CARB emissions – Like the above topic, fleets have had to deal with California’s rules and regulations for years and the expectation was that, with the advent of BEVs, other states would start to have the same mandates. And up until recently, it certainly seemed to be the case. But as consumers and fleets continued to choose traditional internal combustion over battery-powered engines, states are reassessing both their commitment and timing.

Other expectation vs. reality issues

Inventory planning – This expectation vs. reality issue is a direct result of the pandemic. Prior to COVID, companies (including fleets) were following the just-in-time inventory strategy, having just enough but not too much on hand. With the supply chain disrupted, fleets found themselves struggling to find the components and parts needed to keep their vehicles properly maintained. Reality now means finding that sweet spot where you have enough inventory to address disruption but not too much.

Economic volatility – Expectation was that a recession would occur in 2023; reality, the economy proved remarkably resilient. So, does that mean the expectation is a strong economy in 2024? The past dictates that companies need to have plans in place for both a recession (hopefully with a soft landing) and a continuing strong economy. This is really testing the ways organizations plan: hiring (or not), CAPEX (or not), embracing new technology and new initiatives (or not).

Don’t get caught in the expectation vs. reality trap

Fleets’ acquisition plans are usually three years out so is it worth the cost to purchase or lease BEVs just to satisfy the requirements of two or three states? Do you reassess whether or not to do business in those states? Do you strategically attack this problem by working with a third-party provider to cover those areas that you don’t want to invest in? How do you better manage working capital and cash flow in an era where inflation and higher interest rates may soften more or harden again?

Contact Corcentric’s fleet experts to help you bridge that gap between reality and expectations.