Historically, fleet demand, has run around 20% for the industry, some makes have turned heavy to fleet to unload excess production during tough product times. As recently as 2010 Chrysler was thought to be selling 40% of its weak car lineup to fleets, and there was a point in the last decade when Mitsubishi was said to be selling near 50% of their volume to fleet.
On the good side, fleets do give a good showcase for product if done strategically, with small allotments of new or interesting product. But you can’t make this argument when you’re flooding Hertz and National with Altimas, Malibus or Avengers. Proper fleet sales is a science and must be managed with discipline.
On the negative side, fleet purchases are bulk, and come back into the used market en masse. When you flood the resale market with thousands of two-year old product, your resale prices take a hit and you risk the residual valuation for the new version of that product. In short, if I flood a Malibu into fleet in 2011, I am giving up pricing on a 2013-14 Malibu, and at the same time, short-changing customers who bought a Malibu retail in 2011 that now has a lower resale or trade-in value.
In my opinion, before the crash, it was this crass sales technique combined with mass incentives that further drove down the value of an owners GM or Chrysler that drove off as many Big 3 buyers as did any perceived quality issue or lack of competitive lineup.
I’d give the Big 2 (+ Italian) the benefit of the doubt in a market growing at irregular pace, but their track record is not stellar. If we still see fleet sales in the 30% range at the half-year, I wouldn’t call it restocking, I’d call it a warning sign.
I’d keep a close eye on Toyota, Nissan and Hyundai as well. Traditionally, they have fleet sales of around 10%. Any given month might be higher as fleet sales are seasonal, and last year fleet inventory was run down due to the Japan quake shock. But on an annual run rate, I would not expect anything above 15% this year.
Overall, we’re in a dynamic phase of a market recovery, and replacement and fleet maintenance are going to drive higher than normal fleet demand. Once we hit a more normal pace, it should, I repeat, should come down to levels more like <20% that are healthy.
Bottom line: not to worry at the moment, private and short-term fleets need to restock, but by mid-year we better have this out of our system, or I would take a closer look. I took a look at Auto Observer at Edmunds and at this point, industry fleet look pretty stable, a bit high for my taste, but stable.