Consumer demand for fresh produce is rising and this is opening up more opportunities for the commercial vehicle sector. Growing interest in locally grown or regionally sourced produce and expansion into different areas has led to a greater need for vans to deliver product.
But as the economic turmoil continues, thousands of businesses in every sector will be looking to cut budgets and make significant cost savings.
Transport is one area that is likely to take a hit. September, for one, was a disappointing month for the UK van sector, with registrations down 22.1 per cent for the month and down 4.6 per cent to 318,762 for the rolling year.
“September is a key month for registrations, but the credit crunch hit the figures,” says Paul Everitt, SMMT chief executive. “The summer’s spending cut meant a sharp drop in the month’s van registrations and we expect the van market will stay well below recent levels for some time.”
Rob Ingram, UK business development manager at Enterprise Rent-A-Car, anticipates that cash-strapped companies will look towards rental as a flexible and more cost-effective option. “Those businesses running commercial vehicles will be feeling the pinch in a big way, not just with soaring fuel costs but with consumer buying and spending at an all time low,” he says.
Ingram is forecasting an increase in new business from those companies that are finding running their privately owned vehicles far too costly. “Industries that require transportation seasonally are a key target for us,” he says. “Few companies want to purchase or lease vehicles in the current climate when they are unlikely to be fully utilised.”
Ingram argues that many businesses let the number of commercial vehicles they have available dictate their ability to supply their product.However, the better they understand that their fleet can be more flexible by renting during peakdemand, the more likely they are to continue taking orders.
“Businesses will need to fully utilise their vehicles in order to see a real difference to the bottom line,” Ingram says. “Rental enables them to respond immediately to any fluctuations in consumer demand.”
Enterprise is not the only rental company that is forecasting good opportunities. “We believe that vehicle rental is about to enjoy significant growth,” says Vincent St Claire, commercial director of 1car1 Car and Van Rental. “Vehicle costs for businesses and private motorists are rising rapidly and there is no likelihood of them reducing in the future. This means that an increasing number of people are likely to turn to vehicle hire in preference to ownership.”
Steve Smith, chief executive of Northgate, the UK and Spain’s largest van rental group, agrees. He says that customers should acknowledge the benefits of renting rather than owning vehicles. “We believe that at some stage in the year ahead, we will see this transition in our markets in the UK and Spain,” he adds.
But leasing vehicles for a few years is a big commitment andpurchasing them even more so. However, most companies viewrental as something that means only a few days at a time. To fill a gap in the market, Enterprise has developed its Month orMore service specifically to help companies work through seasonal demands or unpredictable growth cycles.
“In today’s economic environment, a growing company is cautiously optimistic,” says Ingram.“For example, a company may have current demand that requires two or more vehicles, but rather than making a long-term commitment and large financial outlayto lease or buy the vehicle, it can enjoy the flexibility of longer-term rentals.
“The prices are considerably lower than our daily rental rates and the rental can be ended at any time, without the worry of being stuck with extra vehicles in the fleet.”
This concept may throw up opportunities as the festive period approaches, as demand traditionally rises in the run up to the celebrations.
But the practicalities and costs of commercial vehicles are not the only issues faced by the sector. Concerns about the environment and carbon emissions are on the agenda. Vauxhall is adding more ecoFLEX models to its fleet range and its newest addition is the Astra Estate. The ecoFLEX range has CO2 emissions of only 119g/km and an estimated combined fuel consumption of 62.8mpg.
“There have been a lot of changes on the emission side and so we will see more customers replacing their vans in the next one or two years,” says Kevin Parmenter, from Harris Van Centre.
In addition, the growing emphasis on reducing the carbon footprint has meant that more customers are using rental as a solution for ‘greener grocery’ delivery. “Our modern, regularly serviced vehicles are a lot kinder to the environment than many older, privately owned vans,” Ingram says.
But while no company is immune to the credit crunch, Ford is hoping that its Transit van will continue to find favour. The Ford Transit has been the best-selling light commercial van in Europe for 40 years, and the UK remains its biggest customer. Some 50,700 vans were sold in Britain in the first six months of the year and, so far, sales are steady.
Ford has recently unveiled its van derivative of the new Fiesta hatchback that is expected to provide strong competition for the VW Corsavan and Peugeot 207 van. This new van is likely to be launched commercially in the first quarter of 2009 in Germany, says Bernhard Mattes, Ford of Europe’s customer service vice-president. It has CO2 emissions of 110g/km and a fuel economy of 67.3mpg. Mattes believes the new Fiesta will help Ford ride out tough European market conditions.
But Ford recently hit the headlines when it announced plans to cut production of its Transit light commercial van in Southampton, where the plant has been building the Transit since 1966. According to the latest proposals, production will be reduced from the current 75,000 units per year to 35,000 units.
In 2011, full-body van production will shift to Ford’s plant in Kocaeli, Turkey, which produced 128,000 vans last year. The changes will help keep the Transit competitive and profitable in the competitive European commercial vehicle market.
Elsewhere, recent concerns that bulk diesel prices are not falling in line with the world price decreases in oil provoked a reaction from the Freight Transport Association (FTA).
The association says that despite the slowing world economy, diesel and gas oil remain at a price premium compared to petrol and jet kerosene. The price premium has risen since mid-July, when world oil prices started to fall.
“UK road transport operators, consuming substantial quantities of diesel in the process of delivering, are getting the worst of all worlds at the moment when it comes to fuel prices,” says FTA’s chief economist Simon Chapman. “In addition to the price premium for diesel, sterling has lost value against the dollar, making UK fuel prices more expensive. World oil prices are see-sawing wildly, making budgeting and forward-buying difficult.”
The FTA met with Treasury minister Angela Eagle last month in a further call to the UK government to take action to decouple fuel duty charged on commercial vehicles from that for cars.According to the FTA, fuel currently constitutes up to 40 per cent of the operating costs of a heavy lorry.
These may be testing times, but insiders are optimistic about commercial vehicle opportunities within the fresh produce sector. “Over the next one or two years, we will see the commercial vehicle sector evolving and hopefully will see continuous growth,” Parmenter says.
HOT RECEPTION TO COOL LINER
Aldi has taken delivery of its first Krone Cool Liner trailer at its Darlington depot.
The Cool Liner trailer operates as both a chiller and freezer, depending on the needs of the load, and has been built with a lifting axle and rear steering.
Krone is the first trailer manufacturer to market a refrigerated trailer with GPR or Steel sandwich panels.
Alex Turner, fleet manger, says: “We put a spec sheet together of all the requirements that suit Aldi, and Krone has been able to build us a trailer to fit our needs. They worked very closely with us and have come up with a great product to add to our fleet.”
Aldi uses the Darlington site to test the specification and suitability of a range of vehicles and equipment. It operates a fleet of more than 330 delivery vehicles, with depots and stores all over the UK.
BEWARE OF CLONES
The Ford Transit van is the second most cloned vehicle in the UK.
Vehicle provenance expert HPI is warning sole traders shopping for a used van to be vigilant, especially if they are looking at ways to cut costs.
Criminals create a ‘clone’ of a van by stealing the identity from another similar vehicle. The number plates and vehicle identification number (VIN) are replaced with the stolen identity from an almost identical vehicle of the same make, model and colour.
Nick Lindsay, HPI director, says: “In the war against the unscrupulous, the motor industry has worked hard to improve the quality and accuracy of the data it holds on used vehicles. Inevitably, this has made selling a stolen vehicle without changing its identity all but impossible, hence the rise in cloning.”
HPI recommends that would-be buyers always check the provenance of a van and double check both the VIN and vehicle registration mark (VRM).
Knowing the van’s market value is vital.“If you are paying less than 70 per cent of the market price for a vehicle, it is probably a clone,” warns Lindsay. “There is rarely such a thing as a bargain.”
HPI also recommends that buyers do not pay with a substantial amount of cash, particularly if the van costs more than £3,000.“Some cloners will take a bankers’ draft as part payment, because the cash part is sufficient profit without ever cashing the bankers draft,” Lindsay says. “Most crooks selling cloned vans would rather walk away from a sale than take a payment that could be traced back to them.”
The HPI Check, which confirms a vehicle’s history, provides buyers with the HPI Guarantee.This provides up to £30,000 financial reimbursement in the event of the van not being everything it seems, including a clone.
EMERGING MARKETS BUOY SECTOR
Commercial vehicle manufacturers have reported a slowdown in UK and European sales, but the global picture is more optimistic.
Volkswagen reported a 9.3 per cent rise in sales in the first eight months of the year, against the same period in 2007, with eastern Europe and Latin America driving the rise.
Stephan Schaller, chief executive of VW Commercial Vehicles, says: “In the booming eastern European markets, we managed to grow our delivery numbers by nearly 30 per cent. In Russia alone, we sold 87 per cent more vehicles than in the previous year.”
In South America, deliveries of light and heavy commercial vehicles increased by around 25 per cent.
Roberto Cortes, president of VW truck and bus, says: “Considering the favourable economy in Latin America, we expect to end 2008 with a sales volume close to 60,000 trucks and buses, representing a new all-time record.”
Paolo Monferino, chief executive of Iveco, anticipates a contraction in western European demand during the second half of 2008, but this will be partially offset by the growth in other markets, in particular Latin America and eastern Europe.
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