Episode 162: Fleet Challenges Uncovered: EV Costs, CARB Regulations, and the Technician Shortage

This is the Fleet Success Show dedicated to helping you and your fleet succeed using the experience of fleet professionals and Hall of Fame fleet legends. The show that explores how the pillars of stakeholder satisfaction, intentional culture, resource efficiency, and risk management all combine to lead your fleet to success. We're glad you're here. Now let's get into the show. Hey, welcome back for another episode of the Fleet Success Show with your hosts, Josh Turley, Mark Canton.

Hey, Josh.

Good to have you back in studio again.

Good to be back.

I'm the CEO over at RTA Fleet. If you're a longtime listener, you know who I am. But for new-time listeners, I'm the— we've been here 20 years. I've been here 20 years. Company's been around for almost 50. And we— my big focus is on technology management and obviously serving the largest number of public fleets of pretty much any FMIS provider out there.

That's right.

So my big focus is on government fleets, you know, with a little dabble of K-12, higher ed, trucking. And how do we take the lessons we know as running a business, leadership, culture, as well as just the general best practices of fleet and applying that to fleet?

Yeah.

You, on the other hand, you have been in fleets for 30 years.

Almost, yeah, right around.

Yeah. As an analyst, as a fleet manager, as a consultant, and you have gotten your hands dirty with many, many, many fleets, and you've seen the good, the bad, the ugly, a lot of ugly. As a consultant, they usually don't call you when things are going well.

Generally speaking.

Yeah. And so as somebody who's definitely been around and seen a lot of good fleet information. Yeah. And I love that you're really focused on the data.

Yes.

Show me the data and I will go through a wall, right?

Yeah, absolutely.

Because the data is going to set you free.

Yes, it will. Amen. Amen. That is absolutely the focus.

So you just got back from, you know, the nice little whirlwind of trade shows in November with both Fleet Forward and NAFSA over at the LA Auto Mobility Show.

Super cool.

Short as LA Auto Show. But you had a lot of really great conversations with people there. For our listeners who maybe weren't able to attend, what did they miss? What were some of the things that really stood out to you from that event?

Yeah, sure. So there are obviously a couple of pieces here. Obviously, at a show like Fleet Forward, which is going to be what it sounds like, right? It's technology. It's trying to be what's coming up in fleet. A lot of the talk is certainly EV. What are the challenges, but also what's coming around the corner. And so I'd say one of the highlights of it— they have a few, but, you know, probably the one that jumps out to me the most was this great conversation. A couple of folks from CARB and some other representatives, you know, gave a talk about regulation. And after that, Bradley Northrop and Chris Brown and I— Bradley's the fleet manager over in Carlsbad, California, which is near San Diego. Chris Brown is— I forget his exact title. I know he's an editor. I'm not sure if he's editor-in-chief. Over at Bobbitt, which is Automotive Fleet and many of the other fleet industry magazines. And he's involved with the events. And a gentleman— and hopefully I pronounce his name right, but I believe it's Bruce Tudor, who's actually a car rep. He's fairly well known in California. And he, to his credit, he goes to these shows and he meets with fleet managers and he listens. I mean, he gives a lot of time to folks to hear what their concerns and their questions and frankly, their grievances are. Um, and so I got to sit in on a talk after a talk, right? Some of the— we've talked before about how at some of these shows, the best part of the show is not necessarily the session, or the— it's, it's that water cooler talk. It's those conversations that are happening after the session. It's the session after the session kind of a thing.

The trade show floor.

Yeah. And man, it was, it was really neat. It was really neat. And a few topics we hit, and we'll maybe we'll deep dive these in another show, but You know, one is some of the unintended consequences and challenges that come out of regulations like CARB, right? So you have things like dealers or OEMs not wanting to sell certain kinds of vehicles because it offsets what their carbon emission requirements are. And so they just don't wanna sell it. So for example, folks in California, we've heard from several fleet managers are having a really tough time getting, you know, medium and heavy-duty trucks, diesel trucks that require air brakes and things like that. They don't make those in gas. Like, what's the solution? In the meantime, they have a use case. They may have a completely legit exemption case even within CARB, but they can't get the truck because the, you know, they can't meet the numbers essentially, right, by selling that vehicle.

And we're hearing that both from public fleet. I know, you know, like Bradley mentioned this, but then like we've heard this from private fleets as well.

Yeah.

You know, one company they were trying to buy from Freightliner And Freightliner was like, "Well, I can't sell you that unless you also commit to buying at least one EV." Right. He's like, "I don't need an EV." He's like, "Well, I'm sorry." And essentially he would have to, let's say he wanted to buy one truck, he would have to buy a second EV, park it.

Right.

So he'd have to pay basically double the cost. And that was just if the EV was double the cost.

And it's not.

It's not. It's more. It's probably anywhere from 20 to 30% more expensive than the CFB. So he had to buy two trucks, one more expensive than the one he wanted to buy, just so he could use the one that he wanted to offset his, you know, it's basically a carbon credit, right? To offset his carbon footprint. And for the dealer to be able to sell that without having a fee.

Yeah, yeah.

That was news to me. I didn't know that.

Yeah, yeah. And that's exactly it. And again, you know, unintended consequence, I think, is there, you know, another piece that I think is key. And I've seen this now in the industry for years, but it's never really been brought well to light, which is, okay, we have this regulation. Necessarily, the nature of new technology is you're going to be dealing with startups, right? We've seen that, right? We've seen some big companies backed by major companies go out of business, right? And failing to promise to deliver.

Especially in the EV space, you know, right? Right. We've definitely seen some EVs go belly up or they just pull out of business, you know.

Correct. Um, or the conversion companies too, right?

You were like when Nikola was all the rage and that company, you know, they had some fraud and all that stuff that went on.

Yep.

There was a lot of companies that got caught up in that. Lordstown.

Lordstown, thank you.

Yeah, that was a big one.

Yeah, you know.

You're seeing it less because what happens is the industry matures. But we saw the same thing with the ELD mandate in trucking.

Yes.

You know, we had all these pops, you know, they were starting up and what ended up happening is it's a lot like rain in the desert, right? It rains in the desert and what happens? Weeds everywhere.

Right.

And then the summer hits and what happens? Well, they all die because there's no more rain. Exactly. And the same thing was happening with the ELD mandate is all of a sudden they couldn't sustain operations. Operations, they grew too fast, they didn't have the backing, whatever. Economic hardship hit, the demand wasn't there anymore, and now they were having to go steal companies from others. They withered up and died, right? And now all of a sudden you're left without your ELD company, you're out of compliance, and you've got to go switch, paying double the cost if you had just gone with this other provider in the first place, right? And so there is an actual risk there, especially in an environment like this which is promoting risky behavior. It's promoting, it's water in the desert. Weeds are popping up and you have companies that aren't necessarily going to last.

Right.

Now it's just, again, this is a part of a market cycle. There's an infancy of the market cycle, there's a maturation, and then there's a consolidation.

Right.

And we're probably about that mid—

Somewhere in there.

Somewhere, right, exactly. Rivian looks like they're a solid contender.

Yeah, they seem solid.

I wouldn't be surprised if in 5 years they're not here anymore.

Would not shock me. Right?

Tesla has made it through. It's very difficult for them to make it through. And they made it through in spite of themselves sometimes because like they don't really make a good car. They make a decent car, but the manufacturing process and all that stuff, like the repair side of it, they didn't make a car like that. Not like a traditional OEM.

It's different, right? They made a car the way computer companies make computers.

Amen. Yeah, that's a great way to say that. Yeah. But yeah, some of these other players that are in the market, it's gonna be interesting. Lucid Air.

Lucid's a good one. Yep.

Oh, who are some of the other big, like BYD probably isn't going anywhere 'cause the Chinese government's behind them.

Yep.

But you have several others that could make it or they could flop. But you don't really know. There's some risk.

Right.

And that's not even talking about the heavy duty and the medium duty.

Correct.

Right. That's all light duty sedans that we're primarily—

Right.

And then you've got the OEMs, which aren't going anywhere. But they decide all of a sudden, hey, we're not making that EV anymore.

Right. And then you're done.

You're done.

And that's just the vehicle itself, right? What about the chargers, right? Yeah. You know, I mean, we've seen that. Like, that's the wild— well, obviously ChargePoint is starting to— I would argue, kind of solid name, right?

Yeah.

Becoming sort of the, you know, every industry needs a the name and they're probably out in front, let's say, for becoming that. But, you know, nonetheless, it's that same piece. And the point that came up that I think is fair is who's protecting the fleet? And I've seen this play out in just in my lifetime, in my career, where everything was about upfitting. Right. And it was we're going to make this truck into a hybrid. Yep. We're going to strip the engine out and make this chassis into a BEV. And there's a few of them that are still going strong. Lightning Motors, you know, Motors, they're doing great. But, you know, you could understand a fleet's hesitancy to want to work with an organization that either A, they're not sure is going to last, or B, you know, like they have one, you know, building here on, let's say, North Carolina. And how do they service the guy in Wisconsin? You know, like, so there's challenges and those are legitimate challenges and nobody's accounting for that. And, you know, obviously I'm not knocking CAR, but, you know, that's— they, you know, I don't think they see that as their role. I'm putting— I don't think I'm putting words in Bruce's mouth there, but it's got to be somebody's role, right? And whose is it? And is there coordination there? Right. Because if not, then the fleet folks are the ones who are left holding the bag on that.

Well, and they've got to do all the due diligence. Right. And in an industry that they're not familiar with yet. Yes. And they've got to get familiar with not only the regulations, but then who are the players that can meet those regulations? And by the way, you know, the regulations companies typically, when we've done regulations in the past, you'll see them not necessarily pick winners, but they will absolutely kind of like funnel you. Like, by the way, go talk to these people. And then all of a sudden that windfall dries up. Federal government changes hands. Now you've got a different administration in there and the winds of the economy shift and then they go away.

Yeah.

So the consumer protection bureaus typically are supposed to do this. But these aren't consumers, they're fleets. They're public fleets, they're government entities, or they're private fleets, they're businesses. So yeah, who's making sure that we're doing these government regulations, but the regulations themselves aren't creating a windfall for criminals? We saw that with PPP, we saw that with the CARES Act. There was a lot of stuff that went on there. Heck, man, you see this with the insurance companies and the ACA. The ACA created a massive windfall for insurance companies, and yet rates keep going up.

Yeah. How does that work?

So who's, who's out there trying to protect the businesses? Right. So that's a good question.

That's a fair— I think that's a pretty legit one, right? That, that there should probably be more talk around. And, and I think that fleets, people managing fleets, whether it's private or government, need to be pushing back on their representatives, on their government representatives and within their local and state governments as well as, you know, I know NAFTA is very active and some of your other—

Phil Stafford is a good one.

Yeah. You know, We need to— I think as an industry, we need to wisen up there a little bit and maybe say, okay, fine, you're going to give us the mandate, we'll work with it. Give us the protection too, right? Or something. Something's got to give.

As long as we don't create a moral hazard where, oh, I can just do whatever I want because the government's going to bail me out.

And that's right. That's a fair point.

I saw that movie in 2008. We don't want to do that again.

Yeah, that's a fair point too. But somewhere there needs to be balance there.

Because no one goes to school for fleet management, chances are you were never formally trained on how to successfully lead a fleet. That's where the Fleet Success playbook comes in. The Fleet Success Playbook is your guide to building a safe, reliable, and efficient fleet that provides exceptional service. Learn all about the 4 pillars of fleet success: stakeholder satisfaction, intentional culture, resource efficiency, and risk management. Get nearly 100 years of combined advice on common challenges, practical solutions, actionable tips, and real examples from fleet industry experts who have been there and done that. Visit www.fleetsuccessplaybook.com to request your free copy today.

So as you might imagine, there was a, there was a lot about that. One of the, the, the numbers that kind of blew my mind, and again, I, I'm not trying to take shots, but I'm just kind of thinking through it with you here, is, um, the thought on the panel was that like 80 or 90% of the use cases are accounted for with an OEM-provided EV. Meaning not the aftermarket upfitter folks, right? Who are turning things into EVs.

From the factory, you get 80 to 90% of your use cases taken care of.

And that just, I mean, that's not true. That made my head explode.

Like, not when you talk about fleet. It's not true.

It's not true. We know that. Yeah. You know, I mean, this is something that frankly I do for a living. Our team does for a living. It's one of the work that we do is EV transition modeling, EV transition planning. And to do that properly, you need to literally line by line, every single class, every use case, every utilization level, identify what is the EV asset that is going to replace the existing asset. And you're literally checking off the boxes. Okay, it can pull enough weight. Okay, it can move enough people. Okay, the range is long enough. Okay, I can build my aerial without riggers on it. You know, the whole nine yards. I got to tell you, the average government fleet is somewhere between 110 and 155 classes. There's no way 80 or 90% are covered. Maybe like on a good day, 20% are covered, you know?

So maybe volume, like if you think about it, maybe from a volume—

and I haven't done that research—

or city fleet, yes, maybe 50/50, maybe a little more than that, maybe, maybe, you know, 70/30. I mean, light fleet versus heavy fleet.

Yeah. Yes.

Well, but it depends on the mix.

The mix is certainly if you have a vocational fleet, there's a much better chance. Do all-electric school buses exist? Yes. Do all-electric transit buses exist? Yes. Step vans?

Okay, no problem.

But But think about even that light-duty space, right? Like how many large SUVs— I mean, there's no EV to like, I mean, let's say a Chevy Tahoe, one of the most common vehicles you see in government fleets. There is no EV for a Chevy Tahoe. Now there's workarounds. You get a pickup truck, you put a cap on it and you do—

put a camper shell on a Silverado EV.

Yeah, right, exactly. And that's what we do. So don't— so that's included in my 20%, you know, the tire that I can reasonably give an EV for because we figure out, okay, that build works. Maybe it's not ideal, but it works, right? There's just no way. There's just no way from a, from a use case count perspective. And I get you should— we should wait that. But that strikes me as, you know, what I hear when I hear that is there's a disconnect here. Yeah, right. And again, I want to give this gentleman Bruce a ton of credit because like I said, he's clearly putting in the time and he's trying to gather information and feedback. But so far The dots not quite connected is the way I think I would like to leave it, right?

And we could make the assumption, I think the only thing we could come up with for how somebody could think 90% of the use cases are covered is if they were considering the consumer market.

Yeah.

That's the only way from a volume perspective.

It's gotta be a volume play. Yes. Yeah, exactly right. You know, because certainly Amazon now, right? If you go into your neighborhood, right? Probably most of us have seen an Amazon electric van at this point.

Yeah, the Rivian electric vans are all over the place.

No problem. And it's certainly possible that because of the quantity sold, like you said, we're hitting it on volume. It's not my intuition. It's now kind of piquing my interest. Maybe that's a future project for us to do internally and do some math around that. But nonetheless, when we're talking about what fleet managers have to deal with, they have to build for those use cases and they got to meet the requirements, the CARB requirements. When they go to order a vehicle, if there's no EV there, now what? Now they got to apply for exemption. And again, I want to be clear, CARB does have exemption, but you got to apply vehicle at a time. For those exceptions.

And I don't know if they have economic exemption. So maybe there is a vehicle, but it's 4x the cost. We saw that talking to the gentleman up at Fairfield was, hey, I could go buy that vehicle, but it was going to cost me $100 as a CFV, and now it costs me $400 as an EV. Yes, there's an option. It's 4 times the cost. Now what?

Exactly. I don't think that's part of the—

I don't think so either.

I think it's got to be— you have to be able to prove that there is not an EV. My, my understanding of it when I read it is, you know, you have to be able to prove that there is not an EV available for you to buy that can do the work that the vehicle you're replacing is doing. Right. Right. Now, more fallout. We talk— I talk, you know, I'm very passionate about replacement. You talk about replacement, how it mitigates so many issues. Well, think about some of the behavior that this is going to trigger. Because the CARB is written— well, the part we're talking about anyway is written around acquiring a new vehicle. So it's about replacing vehicles. And now I can't get my truck that I need air brakes on. Yeah. What do I do? You're going to extend the life of that asset and now M&R is going to go up way up and downtime is going to go and you're going to rent vehicles and you're going to—

availability is going to go down. Yep.

Everything, everything suffers. And you're basically throwing your best practices out the window. Not necessarily because you want to, but because you feel like you don't have another choice, right?

So, like, kind of bringing this home, one of the best things about going to the show was at least being able to have that conversation. So some of the things that you miss out on if you're not going to, like, Fleet Forward— in this case, you missed an opportunity to have a really great conversation with Bruce and Chris and, uh, and Bradley. Uh, but that was— I would have loved to have been on the fly on the wall. Yeah, we'll definitely want to get Bradley on here, and ideally if we could get Chris and Bruce on. That would be amazing too.

Yeah, they're great guys. I, I'd like to think that they'd be willing to come and we could have—

maybe they wouldn't go publicly on record. Think about that. But, um, let me hit you with a couple of other quick ones.

Yeah, so this one was interesting to me. Um, well, I think I got like 2 or 3 here. One is that there was a gentleman there who was an expert, and forgive me, I, I lost his name, but he was an expert on reselling EVs. And it was some— he had some fascinating stuff. And let's just see if this plays out, OK? But what he claims is that the battery health data and the diagnostic data that they're seeing as these vehicles turn are much better than what was predicted for them to be. And so he believes that there's reason to think that powertrains in the EV world are going to last like 500,000 miles consistently.

They're going to last a lot longer than they originally thought.

Correct. That's good. Yeah, that's good. So let's see if that plays out because obviously the focus of that conversation was, hey, we can't make the math work. They cost more and they sell for less. What gives? How are we going to fix that problem? So we'll see if that prediction plays out. Another one that I— that was really kind of neat is I had a great conversation with Bill Shankle, who most folks know as the president of NFA. And this again, we're just having lunch and we're talking and some of the awesome work he's doing and NFA is doing around, you know, trying to help fleets find and attract and retain good talent, especially around technicians. And one of the interesting things that's popped up is because there's been such a shortage of technicians and just such a demand for them is, as in the early days when he began to, and others began the efforts of connecting them to technical schools and trade schools.

Like the WyoTechs and the UTIs.

Exactly right. You know, what started to happen is, hey, you know, you're pretty good. I have an open job now. Why are you going to school? I can just pay you. And essentially they start poaching students. Well, if you're an educational organization, having worked 20 years in one, I can tell you it's all about graduation rates. And these schools need these, these guys and gals to graduate.

Well, and they need the tuition for the following years.

Well, that's fair too, right? Otherwise they fall apart and then the whole thing falls apart. So it's fascinating some of the work that Bill is doing around, you know, trying to kind of bridge that gap and saying to folks, hey fleets, we know you need them, but either, you know, let them finish school or incentivize them to finish school or figure it out, right? You know, with your shifts. But I thought that that was a pretty, a pretty neat conversation that, you know, the industry needs there because we need more folks. We need more folks in skilled labor. We need more folks in the trades. And, and, and so that's certainly, you know, kind of a big piece there that, you know, I just thought I'd call that part out. Um, so yeah, those are a couple of the few ones. There's a few more.

I know you mentioned like the EV Consortium got up there.

Oh yeah, thanks. That was, that's a big one.

So I mean, it's interesting you talk about the batteries lasting longer, which we thought was going to be a big piece of the M&R pie. Even if you take that piece of the M&R pie out, this was fascinating what they shared, which is something we've talked about on this podcast. And we've had people beat us up on LinkedIn about. But the EV Consortium, these are as EV hardcore fans as you get.

Right. Yeah. So what they have found is EVs cost more to maintain. No. No way.

Stop.

No. Certainly, you know, I don't believe— I'm trying— I'm going to try to caveat the same way, you know, that's early. Here's the asterisk. There's early in the data, and, and EVs are newer, and, you know, they're older, and all this other jazz. And it, you know, I'm not saying any of that is untrue, but nonetheless, as, as we predicted here on the show, I said— we— I know we said EVs are going to cost more before they cost less. We believe in the theory why they should ultimately cost less, but that hasn't played out yet. Right? And we need to see that happen. We've seen them, you know, we, we showed some math, we showed some hard data, I think from KBB or Edmunds, right? That, you know, in the subcompact world, you're going to see like 22-25% savings over, over the life. But assuming you drive it more, the more you drive, you have to drive it more, right? And so that's where the biggest concern is in the data. It's from what I can tell, and I have pictures of these slides, so when people go ahead and challenge me, we'll see if I can get permission to post them. I don't know, but I will go to my grave if I have to. Um, what's concerning to me is not only are EVs costing more, but they're costing more per mile. And that's really interesting because the major driver of M&R is utilization, right? And that's true across any asset, frankly. But the whole value point of an EV is you need more utilization because you're trying to— that reduced operational cost from paying less in M&R and less in fuel is what's necessary to offset the increase in capital costs. So if you're seeing higher cost per miles, that's a concern, right? Yeah.

Because then you're not going to be able to make that money back.

Correct. Now, I want to be clear. I also think it will begin to even out and peter out. That's— I'm not— I'm not one of these folks who are saying, no, EVs are going to cost more than ICE vehicles. I don't actually believe that. I believe this part of this is early data and we're figuring out technologies and so forth and so on. But what I will stand by is something we believe firmly is for these folks who are out there telling the world your M&R costs are going to be zero and you're going to make up all your capital costs and all your infrastructure and all— it's all just going to go away because you got an EV. That's baloney. Okay. As an EV owner, that is baloney. Right. So the early returns are showing that our predictions are right. And again, you can, you can check them out.

You know, and the fuel savings are not offsetting the M&R increase by enough.

Exactly. You still got higher TCOs. Right. And again, there are factors in this. You know, I'm not You know, but nonetheless, you can normalize for some of that stuff, right? And, you know, the reality is, is that's what the early returns are. So we're on— we're not so dumb after all, I guess.

Yes, maybe, maybe they'll keep us around.

I don't know.

It just— it must have felt good though.

Yes.

Based on what we've talked about, to have the EV Consortium come up and say this on stage. Yes. Preach.

Yes. And I give them credit. I want to give them a lot of credit too, because they were honest, yeah, they were transparent with the data. Now again, we tried to explain why that's happening because it doesn't match the theory. Did they do that? Yes, they did, and that's okay. But they were honest and they showed the data right on screen as it was.

As we said at the beginning, yeah, the data will set you free. Exactly.

So, you know, give them all the credit in the world.

All right.

Yeah.

Well, any, uh, anything else stand out to you before we wrap?

I mean, I think those are the big ones. I think that was pretty neat. You know, it's a— it's definitely, if you're like us and you're kind of tech geeks and you also like Fleet, it's I got to say, I think it's a good match for maybe guys like you and I. So yeah, I thought it was a, I thought it was a really good show. Hope to get back there again.

All right.

Yeah.

Well, as always, hopefully you guys got something out of that and just, you know, enjoy the discussion.

Yep.

You're always a pleasure to talk to. But if you guys have any questions, feedback, we'd love to hear from you at podcast@rtfeed.com. Until next time.

Take care, everyone.

We hope you enjoyed the show. If you'd like to help support the podcast, please share it with others, post about it on LinkedIn, or leave a review. Want to learn more about our fleet management software Fleet 360? Check us out at rtafleet.com. If you want to learn more about having your fleet evaluated by our consulting team, go to fleetconsulting.com.