Commercial vehicles remain steady business

Sales dropped by a modest
2 per cent in 2005 compared with 2004’s level – from 329,599 to 322,930 – and have remained healthy during the first half of this year, hitting just over 52 per cent of 2005’s full-year total.
“I think the full-year total for this year will be about the same as last year,” said Stephen Kimber, director of commercial vehicles
at Ford.
“There is no reason why sales should drop off dramatically.”
Demand for pick-ups and medium to large vans has helped keep the market buoyant, while smaller commercial vehicles have suffered slightly.
The fortunes of pick-ups – and of double cabs in particular – have been boosted by the arrival of attractive models such as Mitsubishi’s new L200 and Nissan’s Navara. As well as being versatile, double-cabs also remain a tax-efficient alternative to the company car and are
likely to remain so, despite forthcoming personal
tax changes.

Large van licence rules
As far as large vans are concerned, a 3.5-tonner is the biggest vehicle a company can operate without being subject to the driver’s hours and operating licence rules that affect companies running heavy trucks.
The desire of firms to avoid these legislative entanglements has continued to underpin the 3.5-tonner’s appeal. Anybody with a car licence can drive a van in this weight category.
Turning to smaller vans, their fortunes have been affected by some businesses wishing to trade upwards to medium-sized vans such as Volkswagen’s Transporter and Vauxhall’s recently revamped Vivaro.
Vauxhall remains the number two player in the market – it captured a 16.3 per cent share in the first half – with Ford yet again number one, with 28.4 per cent.
Some distance behind both players were Citroen and Volkswagen, level pegging with 7.6 per cent apiece.
Citroen captured the number three slot in 2005.

VW expansion plans
VW has made no secret of its desire to overtake its French rival, though not at the expense
of profitability.
More dots on the map may aid this ambition according to Robert Hazelwood, newly appointed director of Volkswagen Commercial Vehicles in the UK.
“At present we’ve got 67 dealerships selling vehicles plus 14 approved repairers but the country has got 80 to 90 major towns and cities,” he said.
“That means we need more sales points but I would envisage them being operated by our existing partners for the most part rather than new ones.”
He also wants to see more VW van dealers recruit dedicated
finance and insurance managers given that virtually all sales are made to business customers but he appreciates that this is not
always possible.
“You really need to be selling around 300 new units a year to justify such a step,” he said.
Vitally important to light commercial sales success is effective aftersales support.
“It’s absolutely critical,” said Kimber. “Your ability to look after the customer once he’s bought the vehicle is probably one-third of the purchasing influence.”
Support is likely to involve opening the workshop early, closing it late, and servicing vehicles on Saturday afternoons or on Sunday mornings.

Working tools
Van operators do not want to take their vehicles off the road during the working day if they can avoid it because vans are working tools. If they are sitting in a workshop, they are not earning money for their owners.
“Some of our 112 specialist Backbone of Britain Transit dealers are open round the clock, seven days a week,”
said Kimber.
“We’re also laying greater stress on technician training and around 18 months ago we introduced the commercial vehicle masters curriculum,”
he added.
“It enables the individual to increase his or her skill with the aim of becoming a commercial vehicle master technician. It is essential now that vans are becoming more sophisticated.”
It should also mean technicians will not take so long to pinpoint faults and fix them. Van owners want their vehicles back as quickly as possible.
Ford has a total of 240 van outlets.“I’d like to expand the number of sites that offer some form of commercial vehicle support but we have to be careful,” said Kimber.
“We expect a certain level of investment from our dealers and if we have too many they won’t be viable.”

Improved performance
With improved aftermarket performance in mind Vauxhall appointed 35 of its dealers as commercial vehicle specialist service centres under the Premier banner earlier this year and the car maker may add
10 more.
At the same time Fiat has been making it clear that less than satisfactory aftersales support can lead to a dealership losing its van franchise, with 20 of its dealers under threat at the
last count.
Its light commercial operation has been extending the franchise to sister company Iveco’s heavy truck dealers, with 20 sales and 25 aftersales outlets likely beneficiaries by the end of
the year.
Many truck dealer workshops already open 24/7.
Iveco dealers have been remarkably successful at selling the Daily 3.5-tonner, and Daily buyers may also be in the market for lighter vans such as Fiat’s revamped Doblo Cargo, which broke cover last autumn.

Recruiting dealers
One importer on the dealer recruitment trail is Perodua UK.
Part of European Motor Holdings since April, it has been sole UK distributor of the Piaggio Porter microvan under the Piaggio LTV (light transportation vehicles) banner. It took over distribution from the factory.
Built in Italy, the Porter range also includes pick-ups and tippers as well as a mini-MPV.
“We inherited 28 dealers and we’ve subsequently increased the total to 32,” said Perodua UK managing director, Tim Slaughter.
“We’re been running a dealer recruitment campaign and as a consequence we’ve got another ten about to join us.
“Two Perodua dealers have taken the franchise and there are probably another four or five who would be interested.
“I’d like to end up with a total of around 70 dealers longer term,” he continued.
“People who buy vans – especially vans with slightly unfamiliar names – like to buy from a dealership just down the road that is going to look
after them.
“As far as many dealers are concerned one of the attractions of Porter is that it doesn’t need showroom space,” Slaughter added. “It can be promoted with a nice prominent display on the forecourt.”
With just under 200 Porters sold in 2005, Piaggio has been deep in the doldrums but Slaughter is convinced the marque has good long-term potential.
Porter will soon be the only microvan on the market with the demise of Daihatsu’s Extol later this year.
“We’re aiming to sell 500 to 600 units in 2007 and build from there,” said Slaughter.

Showroom space
While Porters may not need showroom space, many Mercedes-Benz light commercial vehicles do.
Some 50 of its dealer sites now have them with an eye to pulling in retail customers who want to do business in a passenger car environment.
It is a reversal of the traditional wisdom that showrooms are not needed to sell vans.
Salesmen are nonetheless still expected to go out to approach customers directly rather than always wait for customers to come to them.

Profit margins
So how profitable are light commercials?
Mike Jones, a partner in specialist motor trade accountancy practice Trevor Jones, thinks profit levels are about the same as they are with volume cars.
He agrees that vans present dealers with more scope to sell extras than many cars do and all of these extras represent potential extra profit.
“A dealer can offer to do everything from ply-lining the load area to sign-writing the vehicle, although not all of them take advantage of these opportunities,” he said.

Big business
On the other hand light commercial vehicles are by definition sold to businesses, and businesses are going to demand bigger discounts than retail customers. They are also more likely to have already arranged finance.
That limits the scope for extra
finance and insurance income, although manufacturers such as VW clearly believe that business people can be persuaded to use the dealer’s finance instead if the offer is good enough.

LDV starts turnaround
LDV’s acquisition by Russian car, van and truck manufacturer Gaz is the best news the Birmingham-based firm has heard this year. It gives it a powerful parent that is likely to show long-term commitment to a business now in the hands of its fifth owner in 20 years, making the franchise a lot more appealing.
Last year started on a high note for LDV with the launch of the Maxus van, its long-awaited replacement for the ancient Convoy. The music stopped not long before Christmas, however, when the business went into administration.
Sun European Partners, an affiliate of US private equity finance group Sun Capital Partners, subsequently took control and the deal with Gaz took place a few months later.
It gave Gaz a foothold in the European Union – in one of the EU’s biggest light commercial markets too – and better access to western automotive technology.
While Gaz is not yet widely known in western Europe, it is well established in the countries of the former Soviet Union, eastern Europe and a variety of
export markets.
It plans to build Maxus at its plant in Nizhny Novgorod, in Russia, as well as in the UK, and the van’s relative lack of sophistication could be a plus in many of the countries where Gaz is strong. Up until now Maxus export sales have been modest to say the least.
LDV is also benefiting from a strengthened management team. Former president and chief operating officer of Ford of Europe, Martin Leach, is now chairman, while Steve Young becomes chief executive after a career that has included posts at BL and Ford and management consultancy
A T Kearney.
LDV’s new owner will hopefully help the company get Maxus chassis cab into production as soon as possible.
It is a potentially useful platform for the large numbers of tippers and dropsides used by local authorities. LDV has always done well with public sector fleets.
Longer-term the new owner may help it expand its range by introducing a replacement for the Pilot, possibly as part of a joint venture with another manufacturer.

Newcomers for 2006
Many van makers have elected to revamp their products – or launch completely new ones – at the same time as making the changes required by the Euro 4 exhaust emission regulations due to come into force this year.
The result has been a steady stream of new model unveilings over the past few months, including a new Ford Transit, a new Mercedes Sprinter and a replacement for Volkswagen’s LT under the Crafter banner (pictured right). That is in addition to a redesigned Citroen Relay, Peugeot Boxer and Fiat Ducato – all three have the same basic design in common thanks to a long-standing joint venture between Citroen and PSA – and re-jigged versions of Renault’s Trafic and Master.
They respectively share the same design as Vauxhall’s new Vivaro and Movano and Nissan’s new Primastar and Interstar, again thanks to another joint venture. There is a new Iveco Daily and, at the lighter end of the scale, a new Astravan too.
Diesel remains dominant, with more and more manufacturers standardising on six-speed manual gearboxes to improve fuel economy. Astravan is a case in point.
A growing number of light commercials are being fitted with ESP too. It may not be standard on everything – although it is on both Sprinter and Crafter – but it is increasingly likely to figure on the options list.
The adaptive ESP system installed in both Sprinter and Crafter takes into account the weight, height and position of any load being carried when making its calculations.
There is a swing towards increased power. While few customers outside the emergency services or those operating at gross weights above 3.5 tonnes are likely to opt for the 184bhp 3.0-litre V6 diesel now available in Sprinter, both the 129bhp and 150bhp versions look set to be strong sellers.
Equipment levels are rising, with air conditioning among the most popular options according to VW. Not surprisingly, drivers want to be as comfortable at work as they are in their own cars.
The existing Vivaro, Trafic and Primastar remain strong sellers in the used market according to George Alexander, chief commercial vehicle editor at EurotaxGlass’s. “The best examples reach, and even exceed, guide trade values,” he said.
“The best Mercedes Sprinters are also in demand too, although examples that have covered in excess of 100,000 miles will generally only attract private rather than
trade buyers.
“Across the board there is slightly more late-year stock on the open market than there was a while back and low mileage examples are performing particularly strongly,” he said. “Far fewer vans are now being offered for sale in a condition that will not attract buyer interest.”