Cautious optimism as LCV sector takes initial recovery steps

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As the country tentatively starts the gradual process of opening up businesses post the COVID-19 pandemic, there’s much speculation about what is greeting us on the other side. Will this be just a blip to our economies before business resumes as before, or are we facing into a prolonged recession, the likes of which the modern world has never seen?

The reality is probably somewhere in between. Certainly every day and week that businesses remain closed is increasingly the likelihood of an extended and more severe downturn, but equally moving too fast in re-opening is likely to be a benefit in the short term only.

One barometer of gauging the state of Ireland’s economy is to look at what is happening in the motor industry, specifically the light commercial vehicle (LCV) sector. As the wheels that keep goods, products and services moving, if businesses are having the confidence to invest in new vehicles it bodes well for the economy as a whole.

Fleet Van & Utility in speaking to representatives of Irish distributors of LCVs, there’s undoubtedly a lot of caution about the immediate and longer term prospects, and it’s clear that 2020 will only be setting the wrong kinds of records for sales. That said, there’s also a degree of optimism based on what the distributors and dealers have been seeing since businesses started reopening from 18 May.

“There is reasonable confidence out there at the moment,” stated Fergus Conheady, Commercial Vehicle Sales Manager at Mercedes-Benz Ireland. “We are waiting for the flush through on the July plate to see where we’re at, but there is a lot of action in terms of a lot of quotations, a lot of talking about doing business, so we’re hopeful we can just get a few of them to push over the line. We’re not going to have a year similar to last year or others, nor are we going to have a year like we planned, but I think that maybe the light end of the commercial vehicle industry could really help to keep things buzzing. As long as there is a strong amount of online shopping and online deliveries there is a good opportunity for us there.

Nissan’s Commercial Vehicle Sales Manager, Dermot McDermott is also reasonably confident that the market will bounce back fairly quickly. “The COVID-19 crisis has had a substantial impact on the LCV market in Ireland with new LCV sales back 30% year on year. We do however feel that whilst the overall market for the total year is unlikely to recover in full, the second half of 2020 should stabilise with possibly even a small increase from now until the end of the year in comparison to the same period last year. We feel that the LCV market should then resume to a more natural level again for 2021 – assuming there are no further global shocks in store.”

Cathal Kealey, Head of Marketing for Citroën Ireland said that interest in light commercial vehicles is remaining stronger than for passenger cars. “Over the past number of weeks we have seen a significant drop in our leads and enquiries for our passenger car range which was reflected in our website traffic being down 15% YOY since March 1st but despite this drop in passenger car numbers, our LCV traffic has shown a 30% increase in the same period as the requirement for LCV vehicles increases during this pandemic. On this basis, we expect our LCV sales to pick up a little quicker compared to passenger sales as a result of logistics and supply chain requirement on companies post lockdown.”

A fall in the market of about 22% to around 16,800 units is what Alan Bateson, Managing Director of Volkswagen Commercial Vehicles Ireland is predicting, down from the normal 21-23,000 units sold here in a full year. Nor does he see a significant improvement on that figure for next year. That’s going to present a lot of challenges he said. “Retailers will struggle to break even with a 16,800 market. The volumes are not there to meet the costs of the business and the profits above that. With investments that have been put in this business due to COVID-19 and due to plans such as electrification and digitalisation, this will be a very difficult year for retailers and we have to be very mindful of that”. On the positive side he noted that there are positive signals that crucial industries such as construction can move back close to full employment in the coming months, crucial if the economy is to recover quickly from the current setback.

“The LCV market is looking much better than expected,” says Colin Sheridan, Sales and Marketing Director at Gowan Distributors Limited, Peugeot Importer in Ireland. “As the first 10-day registrations for this month show, the usually small June LCV market is currently up by 45% whilst acknowledging it’s all about July and customer orders for the new ‘202’ plate now. There is positive feedback from dealers regarding customer enquiry levels and we are a lot more positive that sales will be higher than we would have expected some weeks ago, in the midst of the lock-down. Our LCV performance year to date 2020 has been very strong, ranked as the third bestselling LCV brand in the market with 10.7% market share and we are thrilled to see demand continue to grow for the award-winning Partner (Ireland’s best-selling van to date in 2020), Expert and Boxer vans, as well as the 308 and 3008 car derived vans. Later this year we also look forward to adding the new all-electric e-Expert van and the new e-Boxer to our LCV range. That said, of course, the LCV market will not be on par with last year due to COVID-19 pandemic but, enticing consumer offers including scrappage of up to €4,000, low rate finance coupled with a strong product line up, means we remain positive on what is yet to come.”

While grateful that the Government allowed the motor industry to re-start on 18 May, Patrick Magee, Country Operations Director for Renault Group Ireland feels the industry needs a further helping hand it there aren’t to be significant job losses in the sector. “It’s hard to forecast how the recovery will go because we don’t yet know all the variables.  So much is dependent on factors outside our control, such as the developments of COVID-19 and related restrictions in Ireland’s key export markets.  So while we are back open for business it is hard to forecast how demand will evolve in the coming months. While we are not able to quantify it, we’re pretty sure it will not be enough just to re-open and hope for the best”.

Calling on the Government to provide assistance to the motor sector is Ford of Ireland’s John Manning. “It will be a very challenging environment for the foreseeable future and there is no doubt that the sector will need a level of support from our legislators in the form of a stimulus package that will help both customers looking to buy and dealers eager to close business deals. Ensuring the wide availability of new reliable, fuel efficient, capable commercial vehicles is the cornerstone of any economy and we hope the Government will recognise that and provide the supports that are needed.”

Commercial Vehicles will be the backbone of the economic recovery, especially as construction activity restarts and as goods deliveries to homes take increasing shares of the market from physical shops, according to Opel Ireland’s Fleet Sales Manager Fergal Marron. “Undoubtedly our sales forecasts have been reduced for the remainder of 2020, but we remain optimistic that van sales will begin to recover quite quickly and indeed we have seen a growing number of enquiries since Dealers reopened post-Lockdown. The arrival of the new Vivaro-e 100% electric van has certainly piqued interest and whilst production schedules have been slightly delayed, we are confident this important new product will be with us in late 2020, to satisfy growing demand.”

Fergal also feels that there is a need for the Government to assist in helping the industry restore business confidence. “One low-cost Government measure that would allow businesses acquire the vans they need would be to ring-fence low-interest credit availability tied to new, lower-emission vans without impacting on businesses’ abilities to borrow for other reasons. This would mean they would not have to choose between a more efficient van or another asset they might need, while ensuring our overall emissions remain low. A risk both to our industry’s recovery and the public’s desire to reduce emissions is the dumping of older, higher-emissions vehicles into this market which would undermine these aims.”

“The industry has gone through a number of challenging years since the recession,” commented Toyota Ireland’s Fleet Sales Manager, Cathal Ryan. “Finance will be one way how the industry can recover, as it offers very good value for customers, and helps make new vehicles more affordable. Early indications suggest there will be pockets of activity within the LCV segment for example, grocery trade, delivery services, medical industry, DIY etc.”

2020 was set to be a momentous year for Maxus, the brand formerly known as LDV that is distributed here and in the UK by the Harris Group. “We had planned to officially introduce the new Maxus branding at the 2020 CV Show, which had been scheduled to take place in April at the NEC in Birmingham, explained Mark Barrett, GM of Harris Automotive Distributors. “But we also had very exciting, large-scale plans for the launch of our first Maxus new platform vehicles, the eDELIVER 3 and our new DELIVER 9 at the show”. Instead the brand will be holding a virtual online experience this week to launch the new products – a sign of how business will be done for some time going forward perhaps.

Tim Cronin of MAN Importers Ireland believes that, with many businesses having returned to work from 8 June, the future is optimistic for the market. “With the MAN TGE, we have a premium product that works for our customers business needs. Up until week starting 08/06/20 it was really only certain industries back to work over the past couple of weeks. The level of enquiries have slowly began to increase, which has been encouraging, but some customers are somewhat cautious with regards to investment in new assets, at this time. Many have spent the last period figuring out how to conduct their everyday work practices under the setting of social distancing. The same goes for those returning to business now. The sentiment from customers we have made contact with, is to allow them to “bed” into the new way of business and they can revisit their purchasing requirements.”

From MAN’s perspective Tim said that the brand is well placed to meet any demands. “Thankfully from a production point of view we are experiencing no delay to product supply, the factory returned to work in May with split shifts and are experiencing better than expected production output. Demand for the MAN TGE is high for the European market. We constantly work with our customers in order to supply the right product for their business application, with the added benefit of manufacturer backed finance from MAN Financial Services we have the right financial offering for customers.”

Joe Ryan, Business Development Manager, Emerald Truck & Van is pleased how business developed for the Ivecobrand over the slowdown period. “We are surprised how the last three months have gone, having a lot of enquires which we have turned in to sales. We also had positivity from working with the dealer network around the country saying footfall is up and the phone is ringing again as the country is coming out of hibernation.” Some significant fleet sales with the Daily range were achieved in recent weeks.

Emerald Truck & Van stayed open throughout the period servicing and maintaining Blue-Light service vehicles and home delivery vans. “We were delighted to be able to do our part in keeping the country going and while doing so, put in place strict Health & Safety guidelines to keep all our team safe as well as their families. Most of the Iveco dealer network stayed open to support the front-line workers and responders also. We got some fantastic help and support from the SIMI and their webinars hosted were very informative,” he added. On the financial packages available, Emerald is currently working with Bank of Ireland and looking at putting some special offers in place for July.

Delayed New Arrivals

As well as the new Maxus vans, the pandemic has also delayed the arrival of some other new products into the Irish market as a result of factory closures. Citroën’s new e-Dispatch is a few months behind schedule, while Toyota’s new Proace City should be here in the next couple of months, having originally been expected earlier this year. Volkswagen’s new Caddy 5 will now arrive in early 2021 instead of towards the end of this year.

Special Offers

Mindful that potential customers are likely to be uncertain themselves about the future, a number of the LCV brands have been putting special offers in place in time for the July 202 registration plate, with many offering deferrals on loan payments.

Volkswagen Commercial Vehicles’ Restart strategy includes possible three-month deferral in payments, deposit contributions of up to €3,500 and low rate finance at 2.9%. It also has a three-month deferral option with no deposit required with its lease product as well as a commercial PCP product. With the all-new Caddy 5 on the way and the pending arrival of a range of Alternative Powered Vehicles including the fully electric Transporter T6.1 ABT-e which arrives in August, followed by electric eCaddy and eCrafter vans next year, Alan Bateson is confident the brand has the product to meet all customer needs.

“Rather than just focusing on price cutting, our plans for, e.g. the 202 registration sales promotion, are about bringing better value to our customers,” added Ford’s John Manning.  “The key elements of our offer are: a three month ‘peace of mind’ deferral of payments; a five year warranty; 3.9 percent low finance rate; and savings of up €6,500 on selected models.”

Mercedes-Benz Vans has also just announced a new ‘Back to Business’ offer that includes a 3 years Manufacturer’s Warranty, 3 month payment break, 1 year road tax and a fullService Contract.

Mark Barrett at Harris said that now is the right time for customers to be going electric. “The cost-saving potential is incredible for company owners when you consider the lifespan of the vehicle and corresponding residuals. Prices for the eDELIVER 3 start from €34,843 ex-VAT or €31,043 ex. VAT with the approval of a Government electric vehicle grant. Another key selling point is that all Maxus vehicles come with five years warranty or 125,000 miles (200,000 KM) and include five years roadside assistance cover as standard (8 year battery warranty on the eDELIVER 3).”

Toyota will be introducing a new lease product later this year. Current incentives on its Procace include a choice of 3.9% APR on Hire Purchase, a €2,500 Trade-in Booster, or €3,500 Scrappage Bonus, and 3.9% APR on Hire Purchase or up to €2,500 Scrappage Bonus on the Hilux / Land Cruiser.

Nissan has confirmed it is continuing its business lease offer for the LCV market that provides customers with the opportunity to drive a new fully taxed and serviced Nissan van every 3 years from just €64 per week. Additionally its scrappage scheme for LCVs guarantees €3,000 off the price of a new NV300, €4,000 off an NV400 or Qashqai van and €5,000 off an X-Trail or Navara.

Based on their customers’ needs and feedback, Renault has tailored a new 202 Buy Now, Pay Later offer for LCVs. For 202, on Renault’s Kangoo, New Master and New Trafic award-winning vans, Renault Pro+ customers can benefit from savings of €3,000 or more in interest payments through Renault Bank: 3 Months Deferred Payments; 3.9 % APR HP over 5 years (savings of €3,000 or more compared to the high street banks); 5 Years Warranty + 5 Years Roadside Assistance;This offer applies to all orders taken until 31st July and registered on or before the 31st July 2020 and is available on current stock.

Buy Now, Pay Later with 3 months deferred payments is a market leading offer which allows LCV customers the potential to earn revenue for 3 months whilst not having any payments on their vans. This will give companies the opportunity to claw back earnings lost over the past few months due to COVID-19 restrictions. It is a real payment deferral with no increase in the monthly payments after the 3-month period, to support small businesses to get back up and running. The low rate APR means more savings in interest and lower monthly payment for customers, helping with the cost of change on new models and getting customers back on the road.

A different trading environment

One thing is for sure – anyone looking to purchase a new LCV this summer is in for a very different shopping experience. Across the board, all the brands we spoke to have implemented stringent safety procedures including sanity and hygiene measures, barriers within the business, new ways of communicating and special test drive procedures. The days of rocking up to a showroom to browse, for now at least, are over.

Conclusion

For all the damage wrought by COVID-19, there is an underlying if cautious optimism within the LCV sector that provided we can continue to gradually open up businesses, the fallout may be manageable. Certainly the impact has already been severe – Volkswagen’s Alan Bateson has calculated that the Exchequer has already lost in excess of €50 million from the LCV sector alone – €28 million in VAT losses due to the collapse of sales, and around €24 million in loss of fuel taxation takings due to vehicles being parked up. A succinct reminder of just how important this industry is to the country as a whole.