Driving in tough conditions
The commercial vehicles market is taking a battering at the moment but its operators are holding their own in the face of adversity
11 November 2008 | 0
It has been a rough year for the car market – sales are down by approximately one third with many commentators describing the scenario as ‘blood on the forecourt’.
According to a recent article in The Irish Times a total of 18,712 hire drive vehicles – which are cars supplied for the rental market – were registered from the period of January to September 2008, and now is the time when these vehicles return to the market to be sold as used cars.
Opel has the largest hire drive fleet in the market with 3,221 vehicles; followed by Toyota with 2,562; Nissan with 2,352; Ford with 2,293; and Volkswagen with 1,571. Together, these five brands account for 64.2% of the hire drive market.
Now car dealers will be forced to add these returning vehicles to forecourts that are already full of unused stock.
No avoiding the downturn
Ger Canty of Ford said the market was down approximately 30% on last year. He said the major fleets and delivery companies are still buying but owner driver sales are down. “But what’s good about it for us is the owner driver is holding onto their van and still working. They’re not bringing it back and saying ‘I’m out of work’ so at some stage they will come back.”
Canty said Ford has about 21% of the market and had dropped just under 1% from 2007.
Probably one of Ford’s greatest workhorses, the Transit, is the big star of its medium commercial business vehicles, running at 50% of its commercial sales.
Canty said in tough economic times there was no magic wand to solve the problem. The only thing to do is what had been done before only on a bigger scale. “Someone asked me how I’m going to sell more Transits? I don’t know. What I do know is you have to do the same things you always do, except more of it. You have to contact customers, chase up leads, arrange a better display and clean the vehicles better. You just have to do lots of little things. It’s not rocket science; you just keep plugging away.
“But what is important is you must have a good product. Our cars and vans are great products and leaders in most of the market segments.”
Working cars to suit your measure
When choosing a commercial vehicle Canty advised that the work the car is to do needs to be taken into account and considerations such as load lengths and heights, ease of access to load and unload goods, the need for side loading doors and so on. “We have one side loading door as standard which is on the passenger side but people who do deliveries door to door often get another one fitted as an option so they don’t have to walk around the van when loading or unloading.”
In addition, the customer has to make sure that the vehicle is not under specified and is capable of doing what it is meant to. Canty said overloading was a huge problem. Furthermore, if the weight of the van and load exceeds 3.5 tonnes then a tachograph would need to be fitted.
Other things to deliberate on when selecting a commercial vehicle are who is driving it? Is it an owner operator? If so, according to Canty, they tend to go for extras such as a bigger engine, Bluetooth functionality and other add-ons. Whereas if it has been bought for a fleet the basic van is usually chosen. “Another thing to think about is the condition of operations. Is the work being performed in Dublin or Dingle? That would mean very different approaches and axle ratios for pulling power would come into effect as well,” said Canty.
Ford has launched a 50/50 promotion in an effort to fight back against the current market conditions. This scheme sees the customer paying 50 % of the vehicle cost with no more more to pay for 18 months and then the payments start and there is 0% finance for that time period. “The market is down 30%. And next year? You put your finger in the air…we really don’t know what will happen but we hope it will stay around the same level for 2009. Next year we don’t see any huge increase in the market but we hope it stays steady.”
Optimism prevales in spite of negative forecasts
Paul Burke of Volkswagen Commercial Vehicles said that his company’s range of vans would be classified under different segments. In the ‘light’ class for a van payload of half a tonne. According to Burke The VW caddy is the best selling vehicle in this segment.
Medium loads up to one tonne would best suit the VW Transporter and for bigger payloads from 1.5 to 2.5 tonnes there is the VW Crafter.
Burke agreed with Canty and said the market was very difficult at the moment with no sign of an immediate improvement for 2009.
According to Burke, Volkswagen tracks the market in tandem with GDP. “If you map them side by side it’s remarkable how close the graph trend is. And if you look at GDP at the moment it’s at minus 1.3 %, which spells a difficult market next year.
“Having said that we pride ourselves on having high residual value, good quality vehicles with modern technology and we hope to hold and indeed increase our market share in these tough times.
“VW has always been synonymous with good quality, dependability and a good place to put your money and we will market these strong points going forward.”
One of the sales tools VW will be able to push next year is its financial packaging. The VW Bank will be setting up shop in Ireland and according to Burke the company will be working hard on developing what he described as “leading financial solutions” in 2009.
“Our ambition and ultimate goal is to have leasing and finance options directly from our dealerships through VW Bank.”
So what are companies, such as Volkswagen, doing to combat the downturn in the commercial market? Burke said one thing not to get trapped into was continuously discounting. “Some manufacturers discount, discount, discount but that can cause problems down the road and can eat into residual value. You can’t have a short term measure damaging long term goals.
“What we will do is build in special finance deals such as payment protection and so on – leaving the customer less exposed financially.”
Burke is hoping the market next year will hold and not plunge any further. Even so, the company is still looking at determined targets. “We are planning for a market for around 3,500 vehicles next year which will give us market share of about 20%. That’s our target. If the market takes a further dip that might affect our aims.”