Traditional ‘buy British’ loyalty in the LCV market has gone by the board as customers – especially in the public utilities sector – focus on whole-life costs. For manufacturers, this brings added pressure to speed up model development if they are to remain competitive. Report by Arthur Way.

After recording a modest 4% increase in sales last year to 231,447 units, growth in the UK market for light commercial vehicles (up to 3.5 tonnes GVW) has started to soften slightly. Figures from the SMMT show that demand during the seven months to the end of July amounted to 140,033 units, an increase of just 3% compared with the corresponding period in 2000. Almost all of this advance has occurred in the heavier 1.8-3.5 tonnes segment, where sales increased by 4% to 92,554, whereas demand in the up to 1.8 tonnes category more or less held steady (see accompanying tables).


This tilt towards heavier vehicles has been evident for some years. Figures from the industry indicate that light vans have declined from 37% to 33% of the total market during the past six years, while the medium sector (comprising models like the Mercedes-Benz Vito, Toyota Hiace and Volkswagen Transporter) has grown






Strategic Review-

Ford




from 22% to 26% and the heavy sector (Ford Transit, Mercedes-Benz Sprinter and Vauxhall Movano) has increased from 30% to 34%. The balance comprises niche segments of which perhaps the most interesting is pick-ups which has almost doubled from 3% to 5% since the mid-1990s.

Another notable feature of recent years has been the growing proportion of fleet sales which now account for around 60% of the UK market for light commercial vehicles, with small businesses – including one-man operators – taking the balance. In part, this stems from the tendency of small traders – especially those starting up after receiving a redundancy or early retirement package – to purchase a used van.

However, it is also the case that acquisition methods have had an influence since many smaller businesses are now sourcing through a leasing or contract hire company with the result that their vehicles are classified as fleet sales. An extremely significant trend concerns the rising tide of imports, notably in the heavier sector. Taking the market as a whole, imports have outnumbered domestic production since 1998 and, crucially, have been widening the gap ever since. Last year imported content totalled a hefty 64% but subsequently has powered ahead even more. To the end of July imports accounted for no less than 69% of the market, a marked advance compared with the 62% share that they enjoyed in the corresponding period of the previous year.

Importers’ performance has been especially impressive in the 1.8-3.5 tonnes sector where their share rocketed from 58% in 1999 to 69% in 2000 and to 76% in the first seven months of the present year. As always, delving into the overall numbers reveals both winners and losers among the suppliers. In the lighter segment perhaps the most significant feature is the continuing success of the French marques, with Citroën, Peugeot and Renault all notching up substantial growth this year Domestic makes Ford and Vauxhall have both seen falls, but the real losers are those in the lower half of the suppliers’ list with all, apart from Suzuki, experiencing large double digit percentage declines in unit sales. The pattern is less clearcut in the heavier category.


Table 1: Development of the UK Light Commercial Vehicle Market, 1996-2000




































































Units % change over previous year Imported content (%)
Up to 1.8 tonnes GVW
1996 71,983 5 49
1997 80,540 12 50
1998 81,564 1 54
1999 78,542 -4 55
2000 78,512 54
1.8-3.5 tonnes GVW    
1996 116,681 4 46
1997 130,484 12 48
1998 143,250 10 55
1999 143,027 58
2000 152,935 7 69

Source: SMMT; GVW=Gross Vehicle Weight




Ford, Mercedes-Benz and Volkswagen, the market’s three current leaders, have all secured above average rises this year but LDV has fallen seriously and, as a consequence, has been nudged out of third place by Volkswagen. The French are rather less convincing performers in this sector with Citroën and Renault/RVI rising by 8% and 13% respectively but Peugeot dipping by 13%. Like LDV, Vauxhall has seen a sharp fall in unit sales and now languishes in eleventh place compared with eighth last year. In percentage terms, Iveco has performed extremely well by recording a 76% gain, but the most impressive performer has been Mitsubishi which has notched up an 80% increase thanks to its growing credentials in pick-ups.







Corporate
profile

VW





The company’s L200 is the best selling pick-up and has widened its appeal through the introduction of new variants. Overall, the marque enjoys a 29% share of the UK pick-up market, ahead of Ford with 27% and Toyota with 25%. There is growing evidence that major fleets are becoming far less parochial over their choice of marque and are scrutinising total life costs more than ever when placing orders. This is particularly so when examining van procurement policies among the privatised utilities where the emphasis now is on maximising profits rather than supporting British manufacturing.

It follows that manufacturers need to speed up new model development to ensure that their light commercial vehicle ranges have a competitive advantage in the marketplace. A good example is provided by Vauxhall which, as noted earlier, has suffered an erosion in market share recently. However, this is likely to change soon following the introduction of new models in the light and medium sectors.

Vauxhall’s position at the lighter end of the market should receive a fillip when the revised Combo is launched later in the year. However, the major development occurs this month (September) when an important new mid-range van in the shape of Vivaro is launched in a move which signals the company’s re-entry into the crucial medium weight sector. This model has been developed in a joint venture between General Motors and Renault, whose share of output will be marketed as the new Trafic. UK sales of Vivaro are expected to reach 1,700 units during the remaining months of the present year, while the target for next year is 4,250.

Low running costs have been to the forefront in the development of Vivaro. Aside from the 3-year/100,000 mile warranty, the model qualifies for Group 4 insurance and has an 18,000 mile servicing interval. The low insurance rating is a result of good low speed crash results, low replacement parts pricing and approved original equipment security features. Interestingly, the new model promises to increase noticeably the UK’s position as one of Europe’s principal van producers since all Vivaros and Trafics will be produced in Luton.







Strategic Review-

Renault





The 50/50 joint venture represents an investment of £430m. Annual output is expected to build up to the 86,000 level of which around 75% will be exported. Looking ahead, there is little doubt that the medium to long commercial trends are favourable for continued buoyancy in the light commercial vehicle market. In particular, the opportunities for home delivery presented by e-commerce are substantial and are likely to underpin a further boost to van demand. An indication of the possibilities is provided by Tesco.Com which has been one of the most successful internet shopping enterprises. Starting in 1996 as a pilot scheme with just 24 vans, by mid-2001 the concept had been rolled out to 237 stores, each with an average of four vans.

Further strong growth is anticipated and meanwhile other food retailers are replicating the formula as seen, for example, in the ‘Sainsbury‘s to you’ home delivery service. Tesco confirms the absolute imperative of achieving lowest total life costs and states that its loyalties have moved from Ford, which provided the initial vans for Tesco.com, to Volkswagen and now Mercedes-Benz. In the shorter term, the outlook for van demand looks more uncertain.

There is a high degree of confidence within the industry that sales in the current year will hold steady at around, or marginally above, last year’s outturn to reach the 238,000 marker. However, positive developments like the trend towards lower interest rates are being countered by general concern that the worrying consequences for the raft of businesses in the service sector which are major purchasers of light commercial vehicles. With regard to technology, it is clear that van specifications of today will be radically different in the future. Engines are becoming more powerful and will soon receive a further clean-up through the introduction of Euro 3 emission regulations.


LPG is becoming more widely used and van producers have noted a strong preference among local authorities and other public organisations for this fuel. Much depends on the grants for conversion remaining in place together with the favourable taxation regime.

In addition, there is an increasing priority on safety and security issues. However, the principal technological changes are likely to occur in terms of equipping the van with an array of high-tech gadgetry which makes the vehicle an extension of the operating organisation’s nerve centre. This means that drivers will be connected constantly through telematics to their employer (which may not be a welcome development for them). More and more, ‘infotainment’ will be an important feature, with satellite navigation becoming standard in vehicles which are involved in multiple drop or servicing work. Indeed, logic points to these aids having far greater utility in commercial functions than in private cars. As operators exploit to the full those features which provide the optimum in lowest total life costs, the emphasis will move towards ensuring that every ounce of productivity is extracted from the people who actually drive the vehicles.


Table 2: Main Suppliers of Light Commercial Vehicles in the UK






























































































































































Up to 1.8 tonnes GVW January-July 2000 January-July 2001 % change
Ford 14,233 13,310 -5
Vauxhall 12,685 11,310 -11
Citroën 6,128 8,022 31
Renault 4,516 6,118 35
Peugeot 3,559 4,013 13
Volkswagen 2,254 1,655 -27
Suzuki 1,214 1,255 3
Daihatsu 840 631 -25
Fiat 647 390 -40
Seat 525 432 -18
Skoda 647 37 -94
Others 70
TOTAL 47,248 47,479 1
1.8-3.5 tonnes GVW
Ford 29,508 32,245 9
Mercedes-Benz 11,207 11,949 7
Volkswagen 6,439 6,964 8
LDV 8,635 6,739 -22
Fiat 4,244 4,799 13
Citroën 4,272 4,606 8
Peugeot 4,806 4,185 -13
Toyota 3,466 3,861 11
Iveco 2,017 3,557 76
Renault/RVI 3,054 3,464 13
Vauxhall 4,094 3,007 -27
Nissan 2,653 2,541 -4
Mitsubishi 1,042 1,880 80
Others 3,557 2,757 -22
TOTAL 88,994 92,554 4

Source: SMMT

 









To view related research reports, please follow the links below:-

Commercial Vehicles

LDV Ltd Corporate Profile

Review of the UK Automotive Industry 2000

Renault S.A. Company Profile (download)

Ford Motor Company Company Profile (download)

Volkswagen AG Company Profile (download)