Don’t Let the New GHG 2 Regulations Change Your Vehicle Purchase Strategy

Fleet Planning - GHG Regulations

The GHG 2 regulations are out…don’t panic! A long-term plan is still the way to go.

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have released their proposed Greenhouse Gas Emissions and fuel economy standards. Dubbed GHG Phase 2, the proposed standards would go into effect in 2018 for trailers, 2021 for tractors, and for diesel engines, beginning with model year 2021.

The regulations are designed to improve fuel efficiency and reduce carbon dioxide emissions. Technology used to meet current GHG standards will continue to be employed, but additional technology will be required to achieve the stated goals.

The cost of all this to the fleet is an additional $10,000 to $12,000 per Class 8 tractor by EPA and NHTSA estimates. The agencies claim that the upfront cost will be recouped over the first two years with the anticipated fuel savings.

These new regulations present an interesting dilemma for fleet owners. Do you pre-buy to avoid the monstrous increase in the cost of the new technology? Or should you wait and purchase all new trucks because of the enhanced fuel efficiency?

The answer to both questions is a resounding “no.

The best advice when it comes to vehicle purchases is to put together a long-term plan and stick with it. By establishing a regular process and an asset-by-asset run cost analysis, you can make minor course corrections and reap big savings. With this type of review process, you will also be able to determine if the new technology will in fact save you money, and you will also be able to determine your ROI on the increased cost.

If you’ve been in this business a while, you know only too well that not all technological investments live up to their initial billing. And if the technology you spent all that extra money for doesn’t perform “as advertised,” you’re still stuck with your costly decision.

The best approach is to blend new technology slowly into your fleet, whether it be a brand new vehicle or some add-on like an aerodynamic device for your trailers, and base the decision on your pre-determined replacement plan. This is a minor course correction.

Specifically with the new GHG Phase 2 standards, there is no mandate on what the truck makers have to do to meet the standards. Each manufacturer can choose a different path to achieve compliance.

Slow-and-steady is the better way to go, with periodic check-ins to assess how the technology is performing, while keeping an eye on new technology on the horizon.
This more thoughtful approach can help you avoid lifecycle management problems as well. Replacing large quantities of assets all at once will lead to big swings in your variable costs, and will make your capex requests all that much more difficult with upper management.

Big “one time” asset replacement plans will also have an effect on your human resource planning. With all new equipment you will not need as many technicians, and then as the equipment ages you will find that you are short staffed. By becoming more consistent in your approach, you will find that you can plan personnel adjustments well in advance.

It’s hard not to jump wholeheartedly into exciting new technology, or to resist the temptation to pre-buy to avoid the steep price increase these technologies command. But the most efficient fleet operation relies on discipline and a plan to maintain a slow-and-steady replacement cycle that introduces new technology gradually.

Learn more about strategic fleet planning.

Patrick Gaskins

About Patrick Gaskins

Patrick Gaskins is Senior Vice President Financial Services, CTP, of Financial Services with AmeriQuest Transportation Services. He has nearly 20 years’ experience as a financial services professional in the transportation industry. Prior to joining AmeriQuest, he held financial services positions with First Fleet and GE Capital.

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