IVOTY Report: The only way is up

Date: Wednesday, July 26, 2023   |   Author: George Barrow

Like the economy as a whole, inflation has hit the light commercial vehicle sector. George Barrow assesses the impact on the UK market.

The sustained and relentless rise in inflation is making everything feel like it is costing the earth. 

Whether it’s the price of food and energy or the rent or your mortgage, prices have sky rocketed. But how have they affected the van market?  From rising energy costs brought on by the war in Ukraine to the semi-conductor chip shortage, there has been a perfect storm of reasons as to why the cost of a new vehicle has increased. 

Covid-induced vehicle shortages, brought on by closures in production facilities and the supply chain seem to have been the starting point for the position we now find ourselves in. Used vehicle prices were the first noticeable area to undergo significant rises largely due to the immediate impact it had on van sales in 2020. As a result, fewer used vans entered the market, and at the same time vans were playing an instrumental role in keeping us fed with more home deliveries from online shopping. 

New van registrations recovered quickly, rebounding to just 3% lower than in 2019 but the trend to buy online remained and so too did the demand for both new and used vans to help supply our insatiable online shopping habits. 

According to the Office of National Statistics (ONS) by the end of 2021 a massive 28% of all UK retail sales were being made online – more than trebling the figure of 9.2% of all sales in February 2012.

Always a good barometer for the state of the LCV market, data from British Car Auctions (BCA) shows that the average value of a used van sold at auction in December 2019 was £7,293 a slight decline from one year before but still considerably lower than prices seen in the market last year. Used values peaked in July 2022 last year with an average of £10,220 but have since surpassed that in April this year with an average of £10,325. But the price of a second hand van, even at just under five years and with around 60,000 miles under its belt, is not the only aspect of the industry to be affected. While many self-employed couriers aren’t shelling out for brand new vans to get themselves on the home delivery ladder, the price of a new van has also been creeping up. Manufacturers are quick to point out that they are not immune from the pressures we, as consumers face, and that energy costs, raw material prices and most notably (for the UK) foreign exchange rates have all been significant factors in the continual increases in prices the industry is experiencing. 

No single manufacturer is invulnerable to the reality that production cost bases are increasing. In fact, it becomes something of a self-fulfilling prophecy that wage increases needed by employees push up production costs, which increases purchase price – that’s the nature of inflation - however, the industry has seen some modest and some sizeable increases across a wide spectrum of vehicles. 

Using the list prices published by Glass’s Guide at the back of What Van? as the benchmark you can see that year-on-year from June 2021, June 2022 and June of this year, there have been incremental increases in prices, but it’s the scale of some of the 2022 to 2023 price rises which have taken consumers aback. The Citroen Berlingo, the UK’s most popular small van with 8,321 sold year-to-date up to June, is at the lower end of the spectrum with a modest increase from £20,509 to £20,915 for a Berlingo 1.5 Blue HDI 1000 Enterprise. Similarly, the Volkswagen Caddy Cargo 2.0TDi Commerce increased from £19,280 to £19,945 but looking back to 2021 where the list price was £18,540, the uplift seems entirely proportionate – even modest considering the circumstances. 

Yet, as vehicles increase in size, so too does the price increase where factors like materials, energy consumption in production and even shipping costs have added significantly to their cost.

Britain’s best-loved van, the Ford Transit Custom isn’t excused from the price hikes, despite the volumes that last year saw the Custom become the most purchased of all vehicles in the country. The entry-level 2.0 TDCi 280 L1H1 Leader has seen its price increase from £24,491 in June 2021 to £27,446 in 2022 and £29,546 this year – a 20.6% increase in two years albeit in two stages. By contrast, the Nissan’s NV300 priced at £25,290 in 2021 barely registered an increase in 2022 with its £25,990 price but then leapt up to £30,040 with a 15.6% increase. 

Although factors including Brexit will take some of the blame, even products partially insulated from component tariffs, foreign exchange rates and transport costs have seen rises in line with competitors. The Vauxhall Vivaro, with a significant proportion of home-sourced materials, saw the cost of an entry-level 2700 Edition L1H1 costing £24,058 in 2021 rise to £24,728 the year after. Now renamed the Vivaro Prime it costs £28,041 – that’s 16% more than two years ago. 

And the story continues with large vans, a L2H2 3.5-tonne Transit has increased by a staggering 32.7% in just two years, up from £31,730 to £32,785 and now £42,115. Renault’s Master has also increased from £31,830 to £36,333 – a 14% hike. Of course, with all of these comparisons there are changes and revisions to specification which makes direct comparisons almost impossible – due to semi-conductor shortages, manufacturers chopped and changed specification of some trim levels and prices were adjusted accordingly – but there’s a clear trend of significant double-digit price increases across the board. 

One area, however, where it has continually been talked about prices falling is amongst electric vehicles, as battery production becomes more efficient and cost effective, yet the price lists would show that we are far from being there yet. 

By no means the only brand to have significantly increased prices, a Peugeot e-Expert with 75kWh battery has jumped from £36,345 to £44,485 a 22.4% increase, while the price of the smaller 50kWh battery model has increased 64.8%. Although we often think that battery costs play a significant part of the purchase price of an EV there are clearly other factors at play here, not least the lowering of government grants which has adversely affected the price of electric vans, adding to the pain felt by consumers.  

It’s not just the price of new vehicles either, fuel prices remain high and are still 28% higher than in June 2020 – notwithstanding now significantly lower than the £2 per litre peak of 2022 – but the cost of insurance has risen rapidly too.

According to the most recent Consumer Intelligence report from February, van insurance prices have increased by 15.5% in the previous year. As well as inflation, the Financial Conduct Authority ban on “price walking” introduced a year ago which prevents insurers quoting higher renewal prices to existing customers than to prospective new customers has led to higher renewal prices for all van drivers. 

Ultimately, vans are working tools, there to earn people a living, and while not all industries are able to increase their prices to reflect the greater costs, there’s a general belief that we are reaching the peak and further price rises (for new vehicles at least) may be unlikely. Let’s hope that is true and that given time prices may even fall. 

A code of conduct

At the peak of the semi-conductor shortage manufacturers were struggling to source all manner of components, so much so that some models were leaving the factory without a few key bits of equipment. Of course, it was nothing that would compromise the safety or ability of the vehicle but some may have been delivered lacking heated electric mirrors (often standard equipment on vans these days) or heated seats for example, leading to a small apology to the customer and a gesture of goodwill. 

The ramifications, I’m told, however stretch far beyond the new market and into the second life of the van where the codes applied to vans for their residual values will no longer tally with the van presented for resale. There’s potential for a real mess in years to come. Fortunately, I think manufacturers and dealers will be aware of this and I’m confident it will get resolved in the long run, but while researching this article a statement I received from VW gives me hope that even though prices are rising there’s still value in our vans.

“Model prices for Volkswagen Commercial Vehicles have increased because of ongoing inflationary costs. Volkswagen Group is doing everything possible to minimise the impact of these rising costs but it cannot fully offset them. We have also increased the standard specification of some of our vehicles. These changes have enhanced the standard levels of safety and driver assistance.”

George Barrow is the UK jury member for the International Van of the Year Award. Additional reporting by Liam Campbell.



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