The times they are a changin (faster) for LCVs

By Tim Cattlin

We’re all familiar with how car manufacturers refresh their models, either by facelift or an ‘all new’ replacement. The private buyer and company car user alike are keen to have the latest product from the design studios on their driveway, complete with the latest gadgets and gizmos. Before long, this latest fashion statement is overtaken by rivals launching their own ‘take’ on the current trend, and our driver is looking ahead to when he can change his car and not be left behind.

Cars are emotional and aspirational - how does this translate into the light commercial vehicle arena?

Cars can be sectorised. Super mini, medium, lower prestige, supercars etc  etc. . LCV’s are also categorised but fundamentally the criteria used is mostly based on load capacity – payload, cube, or both. Traditionally the only sector where we would see any sort of emotive influence in the purchase would be the 4x4 lifestyle vehicle. Typically used by a small business where the owner requires a vehicle that a) will transport him and a few materials to site, b) move his family around at the weekend, c) will look stylish on his drive, d) has car like comfort and equipment and e) gives him the ability to reclaim the VAT. Manufacturers such as Mitsubishi, Nissan, Toyota and Ford are fully aware of how these fall out of fashion quickly and that, as in the car world sales will fall away if their model is starting to show its age compared with its peers. To this end when forecasting future residual values in this sector we factor in product lifecycle as it has a significant bearing on the value realised at disposal time.

Other sectors are affected to a much lesser degree by lifecycle depreciation. A van is generally regarded as a tool, a means to an end and an asset intended to assist the business in its quest for profitability. Both a new and used buyer will often look for the vehicle at the lowest purchase price (or lease rate) that will perform the task in hand. Traditionally little thought is given to aesthetics and whether the vehicle is ‘up to date’ or fashionable. To this end, lifecycle has been a factor which has a much lesser bearing when we are calculating forecast residual values than compared with our colleagues in the car world. This can result in some healthy ‘debate’ with vehicle manufacturers who, sometimes more familiar with passenger car depreciation methodology are disappointed with the ‘uplift’ their new or facelifted model enjoys in our forecast data. What they may not have taken into account is that the forecasts for the previous model quite possibly have not been eroded to the same degree in the months or years leading up to the unveiling of the revised van.

There is an argument to say that this could be changing, particularly in the 1 tonne panel van market. Ford has spent the first 18 months of the life of the Transit Custom successfully cultivating the ‘artisan’ retail, SME sector. Looking at registration statistics there has been a high proportion of ‘Trend’ and ‘Limited’ relatively highly specified models sold, and, certainly up to recent weeks the vast majority of Custom vans seen on the road have been clearly operated by users in this target market. Only recently are we seeing the likes of rental companies using the vans who are only now, we suspect, enjoying supply terms which enables them to offer competitive rates. In addition, recognising the cult following that Volkswagen have cultivated in the leisure market with the Transporter, Ford have already unveiled a motorhome conversion based on the Custom which has been very well received in the industry. This can only enhance the product image and give potential for a future market for used vehicles as a basis for conversion.

Custom has two clear competitors who have strength in this niche sector – the Mercedes Vito and the Volkswagen Transporter and both of these vehicles are due for facelift or replacement. Whilst we envisage Custom to remain extremely strong in the used market we have to consider if it will be more susceptible in future to potentially eroding values as its target audience in the second user market sees even more up to date and fashionable vans appearing at his local used van outlet. Having said that, Transporter in particular, despite arguably looking one of the more dated vehicles on the block continues to perform extremely strongly in the used market, again, especially the higher specified models in metallic colours which are being snapped up by not only retail buyers wanting ‘image’, but also conversion companies who are adapting the vans for that lucrative leisure market.

It’s an area we are watching very carefully, but, as Bob Dylan said, times could be a changing...

Tim Cattlin is CAP's LCV forecasting editor.