Iveco — State of the Nation
Friday, February 23, 2007
Iveco's UK managing director, Chris Thorneycroft-Smith, takes a look back at the 2006 light commercial vehicle market to find out who were the winners and losers.
Sales of big vans boomed in Britain last year. Registrations of light commercials grossing at from 2.8 to 6.5 tonne hit a record 145,186, up 0.7 per cent on 2005's total of 144,164.
Winners & Losers
Not surprisingly, Ford was the winner. The Big Blue Oval's sales totalled a healthy 47,499 for a 32.7 per cent market share, a 2.6 per cent volume improvement on 2005's performance when it took 32.1 per cent of the cake with 46,306 units.
Number two, and a long, long way behind Ford, was Volkswagen with 18,794 registrations, an 8.8 per cent rise on the previous year's 17,274 sales. Its share rose from 12 to 12.9 per cent.
Not everybody boosted their performance. Still holding the number three slot, Mercedes-Benz saw registrations slide from 16,239 to 15,328, a 5.6 per cent dip when compared with its 2005 achievement. Its market share dipped from 11.3 to 10.6 per cent.
Both Vauxhall and Renault had reasons to be quietly pleased with what they achieved. The former saw sales rise from 12,627 in 2005 to 13,011 in 2006, a 3.0 per cent increase. Its slice of the action rose from 8.8 to 9.0 per cent. The latter enjoyed a 3.3 per cent volume hike, from 10,181 to 10,521. Share rose marginally, from 7.1 to 7.2 per cent.
Looking further down the league ladder, sales of Iveco's Daily tumbled by 10.3 per cent, from 9,406 to 8,433. Its share fell from 6.5 to 5.8 per cent, but it nonetheless managed to hold the number six slot.
Nor did Iveco do especially well at exactly 3.5 tonne, one of its strongest sectors. It still came in at number three, but registrations were off by 3.2 per cent, from 7,086 to 6,857, with market share down from 9.6 to 9.2 per cent. Overall demand for 3.5-tonners was up marginally by 1.2 per cent, from 73,535 to 74,381 units.
Iveco must be disappointed by its lack of achievement in the 3.51 to 6.5 tonnes sector too. Its sales plummeted by 23.5 per cent, from 1,757 in 2005 to 1,344 last year. To be fair, however, it's an area of the market that underwent a total shrinkage of 16.9 per cent, from 6,870 to 5,710, and all the key players saw volumes drop to a greater or lesser extent.
So how come demand for 2.8- to 6.5-tonners was so buoyant? Much of it was down to a generally healthy economy reckons Iveco UK managing director, Chris Thorneycroft-Smith.
“Consumer spending regained some of its momentum, spurred on by good weather early in the summer and the World Cup,” he says. “Other sectors contributed to growth too, with the result that GDP rose by 0.7 per cent for four consecutive quarters — from quarter 4 in 2005 to quarter 3 in 2006 — to finish the year at a full 2.75 per cent up, the fastest rate of expansion for two years.”
2006 also saw an almost bewildering number of van launches. Highlights included a new Ford Transit, a new Mercedes-Sprinter and a new Daily which helped keep demand healthy, although most of the newcomers were not available for the entire 12 months.
A further, underlying, factor is that vans have never been so easy to acquire says Thorneycroft-Smith, with manufacturers and retailers forcing product into the market like never before and contract hire playing an increasingly important role.
“It provides the kind of guaranteed costs and worry-free operating that we've all come to expect,” he says. “The 'pay-as-you-go' approach has become an intrinsic part of our culture these days, whatever you're talking about.
“Contract hire gives the operator more flexibility to invest in his core business activity and that's opened the market to sole traders and small business people who might never have considered a new van before.”
So why did Daily sales shrink? “New Daily took longer to come to the market than we might have wished, and that had an inevitable knock-on effect,” he replies. The key reason however says Thorneycroft-Smith is that Iveco was not prepared to do unprofitable deals with certain big fleets.
“Such deals don't pay the bills and we took the policy decision to prefer profitability to market performance,” he says. “If you're not in business to make a profit, then what are you there for?”
On the Attack
Daily registrations this year should be aided by the full availability of the new model and by a redoubled attack by Iveco on small to medium-sized firms running 25 vehicles or less highlighting the newcomer's merits
“We'll be promoting finance packages tailored to meet the needs of such businesses and we'll be concentrating on the cost per week,” says UK marketing director, Andrea Bucci. “One of the things we're looking at offering is a 'buy now, pay later' programme. Nor will we be ignoring fleet business; so long as it's profitable”
He believes Iveco will sell over 8,000 Dailys this year, which suggests that full-year registrations will remain short of 2005's total.
Last year saw total registrations of 7.5-tonners decline by 11.3 per cent, from 13,370 to 11,853. A key player at this weight, and just one rung behind market leader Daf, Iveco saw sales of its Eurocargo plummet by 25 per cent, from 3,419 to 2,565.
Daf saw demand drop by 16 per cent, while number three player Mercedes experienced a 17.8 per cent slide.
So far as the overall 7.5-tonne market was concerned the water was undoubtedly muddied by the arrival of the digital tachograph. To use it the driver has to insert a smartcard rather than the traditional paper chart.
Many customers were wary of it and wanted other operators to take the plunge and acquire vehicles fitted with it before they did.
The introduction of the new Euro 4 exhaust emission regulations — new vehicles have to comply — was another factor.
At 7.5-tonne and above, compliance can be achieved through the use of two different technologies; Exhaust Gas Recirculation (EGR) or Selective Catalytic Reduction (SCR). The latter requires operators to pour in a urea-based solution commonly known as AdBlue.
Some manufacturers favour EGR, others SCR, and the at times acrimonious debate over the relative merits of the two approaches left some buyers thoroughly confused; and confused buyers don't spend money.
Is it the case that the 7.5-tonner is about to be killed off by the long-term impact of driving licence changes — anybody who passed their car test during the past ten years has to pass a separate test if they want to drive a 7.5-tonner — and the introduction of speed limiters? Thorneycroft-Smith doesn't think so.
“The sector is under threat, but reports of its death are a little premature. We believe it's alive and well and set for a reasonably rosy future,” he observes.
“OK, volumes will reduce and some operators will move at least partially to other weights. Some will go to 18 tonne, while others will switch to vans at 3.5 tonne or above.
“But not everyone can do that and for those that can't the 7.5-tonner will remain a practical, known quantity that will continue to serve their needs in the growing delivery and distribution sector in the years to come.”