21 October 2020

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The van market had a strong sales month in September. Does this mean UK business is picking up, and what will happen to the sector in the future? We analyse recently released Government data.

It is often said that the van market reflects the health, or otherwise, of the UK economy. When van sales are strong, the economy is strong, because it means companies are investing and expanding.

As Society of Motor Manufacturers and Traders (SMMT) chief executive Mike Hawes says: “The UK’s van fleet is the backbone of our society, driving our economy and allowing millions of workers to carry out jobs that our country relies on.” 

Just how important vans are to the nation’s work was laid out in a 2019 study of van usage by the SMMT, in which it found a total of 3.4 million British workers could not do their jobs without one, meaning 11 percent of UK GDP comes from workers who rely on a van. More than half a million employees are driving one as their main job – contributing a £56 billion boost to the UK economy from wages alone. 

There are currently around 4.5 million vans in use in the UK [1], and the fleet has grown 50 per cent since 2009, twice the growth-rate of the car market, and the new light commercial vehicle sector is now worth £10 billion a year in the UK, with 900,000 used vans also sold annually.

Unsurprisingly perhaps, sales in 2020 have been depressed, with Brexit and Covid-19 being the two main factors. Performance year-to-date remains down 27.4%, a shortfall of almost 80,000 units, but the new light commercial vehicle (LCV) market grew by more than a quarter (+26.4%) in September, according to the latest figures released by the SMMT [2]

In total, 52,096 vans, pickups and 4x4s were registered in the month, up some 10,880 units on a weak September 2019, when regulatory changes distorted the market.

Mike Hawes, SMMT Chief Executive, said: “The sector has shown incredible resilience throughout the ongoing crisis and September’s numbers indicate some confidence is returning as operators seek flexibility and lower operating costs. 

“However, the context of these figures is important as the headline growth belies a very weak September 2019 and is still short of the rolling average. From new social distancing restrictions, to job losses as the furlough scheme comes to an end next month, and the ticking clock that is the end of the Brexit transition period, the next quarter holds myriad challenges for the industry.”

A spokesperson for the CV Show, the major annual exhibition of van suppliers, added: “From discussions with some of our members recently, order books appear to be strong with a few going into first quarter 2021, but the main view is this is down to businesses trying to avoid potential tariffs. This continuing uncertainty is not good for markets and investment. 

“The possibility of a ‘no deal’ Brexit at the end of the transition period, coupled with the end of the furlough scheme at the end of this month, leaves a lot of open questions for the future. It also remains to be seen how stricter social distancing measures will affect business as we prepare for the quarter ahead.”

Andy Picton, Chief Commercial Vehicle Editor, Glass’s agrees: “Some fleets have delayed decisions on new vehicle purchasing until the end of the furlough scheme, some until the UK’s Brexit strategy is clearer. This combined with extended lead times on the majority of factory orders, has meant a lower level of demand for new registrations.”

Despite the headwinds of Brexit and Covid-19, there is one sector in which growth is clear: home delivery. Supermarkets are expanding their delivery fleets and additional chains are working to introduce their own networks, according to data and insight company, Kantar [3]. Currently 12% of all grocery shopping is currently completed online – down from a lockdown peak of 13.5%, but up on 2019’s 7-8% figure.

In the wider courier sector, over the five years through 2019-20, industry revenue is estimated to have increases at a compound annual rate of 7.6%, reaching £11.1 billion [4].

Van usage and ownership

With companies reliant on vans facing both threats and opportunities, who exactly is using them, and for what? The Department for Transport has released findings into the operation of vans in the UK, and also future trends in procurement [5].

More than half (58%) are owned by businesses, and the DfT research [1] found that the primary usage of licensed vans was for ‘carrying equipment, tools and materials’ (41%), followed by ‘delivery/ collection of goods’ (16%). Over half (55%) of business-owned vans were new, with 34% owned outright and 21% owned via a hire purchase agreement. Most privately owned vans (81%) were second-hand.

Half of all vans (50%) operate locally, within 15 miles of their base on a typical day, reflecting ownership of sole traders and micro businesses, while fewer vans used dual carriageways and motorways regularly, with only 40% and 22% of vehicles using these roads four or more days per week, respectively. Annual mileage has remained stable, at an average of 13,000 miles per year. 


The future of ULEVs

According to the DfT study, diesel continues to be by a significant margin the pre-eminent fuel, powering 96% of vans. The proportion of vans that were considered to be ultra-low emission (with emissions of 75g/km or less) was 0.3%: 10,400 were operating on UK roads at the end of 2019, of which more than three-quarters were owned by businesses, illustrating that even though sole traders might stay more local and therefore journeys might be more suited to ULEVs, these new vehicles are yet to penetrate that market in any significant volume.

For that small number of ultra low emission vans, it is perhaps not surprising to find they make more than twice the number of stops per day on average when compared to non-ULEV vans (22 compared to eight stops), mainly because 26% of ULEVs’ primary use was for delivery or collection of goods. 

Its research found that purchase/lease costs and running costs were still the two most important factors in sourcing vans, while environmental concerns were only seventh most important. Price, suitability and availability of charging points were the three major issues counting against ULEVs, operators cited.

It seems that while the UK is experiencing a shift in working practices and routines, the cost and practicality of ULEVs is not yet at a level to see widespread adoption, and that for the foreseeable future, diesel will remain the key fuel for this sector, even as it expands post-Brexit and Covid.

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Sources:

[1] https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Motor-Industry-Facts-JUNE-2020-FINAL.pdf

[2] https://www.smmt.co.uk/vehicle-data/lcv-registrations/

[3] https://www.kantarworldpanel.com/global/News/Online-grocery-growth-clicks-up-as-lockdown-continues

[4] https://www.ibisworld.com/united-kingdom/market-research-reports/courier-activities-industry/

[5] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/916508/provisional-van-statistics-2019-20.pdf

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