Steve Banner accompanied LDV executives to the Moscow Auto Show and reports back on what lies ahead for the British manufacturer, as well as witnessing first hand the start of a Chinese invasion.
Now owned by Gaz, LDV is contemplating launching a modified version of the Russian manufacturer's Valdai 6.5-tonne chassis cab in the UK.
In styling terms it will resemble Maxus, with the necessary re-engineering work carried out by automotive consultancy UltraMotive.
“We'll have it on display at the Amsterdam Commercial Vehicle Show this autumn and almost certainly at the British Commercial Vehicle Show next year,” says LDV marketing director, Steve Miller. If the response is positive, then the project is likely to go ahead.
Before it does so, however, Valdai will need engine changes so that it meets mandatory Euro 4 exhaust emission standards. VM may provide the power. It already supplies the diesels used in Maxus.
Although it will be competitively priced, the newcomer will not be offered as a bargain-basement package, despite comparatively low Russian production costs. To do so could cut across Maxus's pricing structure; Valdai will have to be priced in relation to Maxus.
“And while Russia's cost base is low, it's not as low as China's,” Miller observes.
Maxus has just made its Russian debut, at the Moscow Auto Show. One was on display in the livery of the Royal Mail, LDV's biggest customer. “We'll send 1,000 vehicles to Russia this year, rising to 3,000 in 2008,” he says.
The Russians are getting the van and a window van that can be converted into a minibus locally, but not the new chassis cab. Some 300 window vans are being withheld until LDV has approved the conversion work.
In September 2008 local assembly of Maxus in Russia will start, initially with heavy reliance on kits exported from the UK but with rising Russian content from September 2009 onwards.
The ultimate aim is to sell up to 50,000 annually in Russia itself and in the other former member states of the old Soviet Union, Gaz International chief executive officer and LDV chairman, Martin Leach, told What Van? in Moscow. There are no plans to sell Russian-built Maxus vehicles in the UK, or to close LDV's Birmingham plant.
Leach is also vice chairman of Gaz Group and chairman of Magma Group. The latter acquired UltraMotive — formerly known as MEL — last autumn.
With a global brief, he believes there could be an opportunity for Maxus in China. “We'd have to produce it there though, and we'd have to work with a local partner,” he says. LDV is already shipping Maxus kits to Malaysia to be built up there at the rate of 50 a month.
As yet there is no word on the introduction of a van smaller than Maxus that will replace the old Pilot and compete with models such as Citroën's Dispatch, Fiat's Scudo and Peugeot's Expert.
“Gaz itself doesn't have a suitable product in its range, so to source such a van we will have to collaborate with a third party,” says Miller. “As a result we won't have anything available before next year at the very earliest,” says LDV chief executive, Steve Young.
He would not be drawn on which third party manufacturers might be in the frame. LDV executives say, however, that the project will not be influenced by recent reports that Russian billionaire, Oleg Deripaska — who controls Gaz — has acquired a stake of almost five per cent in General Motors, Vauxhall's parent.
Now profitable, there's no denying that LDV is faring well under its new owners after a rocky two-year ride. This year it aims to build from 12,000 to 13,000 vehicles. “We produced half that number in 2007,” says Miller.
Next year should see output rise to over 20,000 units, says Young. LDV executives suggest that the Birmingham plant could be assembling 55,000 vehicles annually by 2012, by which time the successor to Maxus should be in production. The successor may replace both Maxus and Gaz's Gazelle.
Maxus chassis cab went into volume production in August and an extra long-wheelbase chassis cab and van could appear at the 2008 UK show, possibly accompanied by cosmetic changes to Maxus's interior and exterior. The changes should certainly be in evidence at the Hanover Commercial Vehicle Show in Germany in the autumn of next year.
It is also possible that the company will increase the vehicle's gross weight to 4.1 tonnes or thereabouts, a move that would be of particular benefit to minibus operators.
LDV is returning to some of the market sectors that it competed in previously. “We've recently supplied 50 ambulances to M & L Ambulance and we've also sold a Maxus converted into an ambulance by Bolantti of Italy,” Miller says. “The Bollanti conversion is aimed at private ambulance operators.”
Maxus is now available as a minibus, but LDV isn't leaving it at that. “We're bringing in a luxury Maxus-based Turkish minibus for evaluation,” Miller says. “It's a six-seater with leather interior trim, a fridge and even a wardrobe.”
It's offering fridge vans in conjunction with temperature-controlled conversion specialist RVL and Healthcare Logistics has recently taken 16. “Working with RVL we can supply them in chilled or fully frozen guise, and with either single or dual compartments,” he says.
“We've got a Maxus-based fire engine out on trial with one of the fire services and we've recently built a prison van,” he continues. “We have, of course, supplied the police with vehicles for many years.” The fire engine is designed to tackle minor emergencies.
“All these niches are where the profit margins are,” he adds. “It's the niches that make the difference and it's worth noting that 70 to 80 per cent of the vehicles we supply are modified in some way to meet the operator's requirements.”
As a consequence LDV is busy recruiting skilled workers for its special conversions operation. “We're looking for up to 40 at present and we'll need a further 60 by the end of the year,” he says.
Even at 20,000 units annually, the manufacturer's Birmingham plant will be operating at well under its potential maximum capacity. As a consequence it is able to take on contract painting work from third parties without disrupting production of its own products.
“We spray Pinzgauer military vehicles, for example,” says Miller. “We run the paintshop four mornings a week, for five hours, and the people working in it spend the rest of their time refurbishing the used vehicles we supply.
“We sell around 3,000 used vehicles annually. They come back to us as a consequence of buy-back agreements.”
The assembly operation is operating on a single shift. “We've got a four-day flexi-shift arrangement that involves working from 7.30am to 5.00pm on the days concerned,” he says.
As a result LDV has plenty of scope to boost output should demand continue to rise. “We're now increasing production to 340 vehicles a week from 150 a year ago, and we can flex up to 400 if we need to,” says Young.
It also means that Maxus can be built and delivered in no more than four weeks from receipt of an order; a remarkably short lead time given the times being quoted by certain other manufacturers.
“We only build to order, not for stock, and we aim to maintain this lead time if we can,” says Miller. “That should be possible given that we're not running the plant at maximum capacity.”
As chassis cab production starts to grow output is likely to be split 20 per cent chassis cab and 15 per cent minibus, with vans making up the balance, says Young.
Might LDV consider disposing of its old Pilot and Convoy tooling so that production can be re-started in a Third World country? It's a possibility, says Young, but only if the company derives some sort of long-term benefit from it.
The sort of benefit he has in mind could involve eventually introducing Maxus to a market that's had some experience of older LDV products through local assembly and is ready for something more sophisticated.
LDV is making inroads into a number of fleets, some of which it has not supplied for several years.
“We've just taken an order from the AA for 12 high-roof vans — we haven't supplied them for eight years — we're doing business with Ryder and Argos, and we've got 50 vehicles going to East Midlands Hire,” Miller says.
“Sixty are going to Anglian because they like the van's payload capacity and the aftersales service we can provide,” he adds.
Anybody who tells you that the Chinese are coming is wrong. They've already arrived — in Russia at least — if their presence at the Moscow Auto Show is anything to go by.
What Van? lost count of the number of Chinese manufacturers, all virtually unknown in Britain, exhibiting double cab pick-ups, all sharing the same basic design and with many styling similarities. So let's hear it for S G Automotive Group with the Huanghai Plutus (pictured), Major and Antelope, Changfeng Yangzi with the Fine and Flying, Zhongxing with the Grand Tiger, Zhejiang Gonow Auto Co with the, er, Gonow, and their rivals.
It's likely to be sometime before Chinese marques become a major force in the UK double cab market, however, given that most of them seem to struggle to meet mandatory Euro 4 exhaust emission requirements; especially where diesel engines are concerned. The lack of a Euro 4 diesel has prompted Yuejin — the only Chinese manufacturer to enter the British market to date — to offer its petrol pick-up with a conversion that allows it to run on liquefied petroleum gas in a bid to broaden its appeal.
By contrast, Indian manufacturer Tata — present in force at Moscow — says that the 140hp 2.2-litre diesel used in its new Xenon double cab does comply with Euro 4. The distinctively styled newcomer is on offer as a single cab too, in both 4x2 and 4x4 guise, and with petrol power.
Far better put together than the old Tata Loadbeta, the 4x4 double cab on display boasted electric windows and air conditioning, and could handle a 1,000kg payload. “We're not as cheap as the Chinese, but we believe our quality is better,” says a spokesman. Xenon is likely to appear in Britain at some stage.
One Chinese vehicle that could appeal to a UK audience, if a suitable diesel can be found for it, is the Chery Karry. With a 1.6-litre petrol engine married to a five-speed manual gearbox, it was shown as a six/seven-seater people-carrier, with two of the seats fold-down ones mounted in the rear luggage area.
Looking vaguely like the old Renault Extra from some angles, it could easily be marketed as a high-cube Citroën Berlingo/Renault Kangoo-rivalling van — or as a crew van with a second row of seats plus a cargo bay at the back — if the manufacturer took out the rear side glazing and installed a load floor. It is equipped with a sliding cargo area door on what would be our offside, so a nearside one would have to be installed to maximise UK market appeal.
One neat-looking little vehicle that caught our attention at the Moscow Auto Show was the Ukrainian-built Zaz Sens van. In fact it's a pick-up, with a glass fibre van body.
China's Soyat — part of the Nanjing Automobile Corporation — was displaying a window van that reminded us a little of the old Ford Courier. It's powered by a 1.5-litre petrol engine married to a five-speed manual gearbox.
While Chinese light commercials may as yet be some way away from having a serious impact in Britain, it would be a mistake to underestimate their long-term potential, says LDV's Steve Young.
“I believe that three manufacturers will emerge as major global players over the next five to 10 years,” he states.
“Gaz will be one, there will be an Indian player too — possibly Tata — and a Chinese player created out of a merger of some of the existing manufacturers,” he states. It's only a matter of time.
One thing that could trip up the Chinese, however, is copyright. Being vaguely reminiscent of a Western manufacturer's vehicle is one thing. Being a blatant copy is quite another, especially if no licensing agreement is in place.
While enforcing intellectual property rights in China can be problematic, the law in Western countries is far more robust; as some Chinese manufacturers who attempt to sell their vehicles in the West may discover to their cost.
It's heartening to hear so much positive news from LDV, the ultimate survivor. The negative side of the Moscow Auto Show was the Chinese presence. It's no wonder that established manufacturers are reluctant to get into bed with the many new ones emerging from China. The phrase 'intellectual property' doesn't seem to translate very well.