On November 9th, 2023, NASPO facilitated a roundtable discussion with fleet vehicle procurement specialists and fleet managers to gather information about current market conditions, the challenges and obstacles they are facing, and potential strategies for meeting their fleet purchasing needs.

Five states and municipalities were represented in this initial roundtable.  The insights these experts shared were surprising and thought-provoking, and Pulse is here to share some of them with you!

As anyone who has explored purchasing a vehicle recently can tell you, it’s hard on the streets right now. Since 2020 and the worldwide pandemic, the global supply chains that feed auto manufacturing have been disrupted.  As auto manufacturers have tried to adjust their operations in response, they have also adjusted to the resulting new market conditions. According to a Procurement IQ category report, the average price of a new full-size passenger vehicle (across all major makes and models) has grown from $39,849 in 2019 to $46,130 in 2023, and this trend is expected to continue over the next several years.[i] These price increases are driven by many factors, including:

• the price of steel and computer components;
• military conflicts;
• labor wage gains;
• the types of vehicles and features popular with consumers; and
• volatility in the supply chain for essential parts and materials. [ii]

Generally speaking, car companies and dealerships have found it more lucrative to offer their limited stock of vehicles on the retail market than to take volume-based government contracts.

Our roundtable experts lamented the difficulties these market forces have created for their offices and states.

• A lack of suitable vehicles to purchase has led to incumbent contracts and orders going unfulfilled.
• Compressed buying windows for available models often leave officials with only a few hours’ notice to commit to purchases before funding and budgetary details can be finalized.
• Previous pricing models are no longer working, as suppliers request price increases on existing contracts, and some offices are forced to pay retail prices from local dealerships.

Ultimately, for many, the current costs of vehicles exceed their allotted budgets.  However, the experts also discussed the mitigation and survival strategies they have explored to meet their obligations, keep their agencies working, and keep their fleets on the road.

NASPO plans to hold more fleet procurement-focused discussions in 2024, so keep an eye out for more information on future opportunities to get involved.  In the meantime, NASPO’s Quarterly Inflation Reports, powered by Procurement IQ, provide market forecasts for passenger vehicles and several other common commodities based on the most recent factors impacting costs and supply. You can read the latest report and check out past reports in our Content Library.

 

Stay tuned to Pulse for part two where we discuss potential strategies for meeting government vehicle needs.

 

[i] “Price Environment,” Passenger Vehicle Report #21986684, Procurement IQ, accessed December 15, 2023, https://client.procurementiq.com/procurement/reports/us/proqnow/default.aspx?entid=1393.

[ii] “Price Environment,” Passenger Vehicle Report #21986684, Procurement IQ, accessed December 15, 2023, https://client.procurementiq.com/procurement/reports/us/proqnow/default.aspx?entid=1393.