12 Jul 22

Analysis: Europe’s Light Commercial Vehicle Market - boom or bust?

The market for commercial vehicles across Europe took a nosedive in May and June 2022, even as last-mile delivery continued to climb.

Earlier this month, ACEA (the European Automobile Manufacturers’ Association) reported that van sales across the EU in May 2022 had slumped for the 11th consecutive month.

At the same time, a new Courier Express & Parcels study from the Germany-based association of parcel and express logistics (BIEK) highlighted a demand for LCVs and predicted that sales would continue to be buoyant. The study found that the shipment volume of items in 2021 rose by 11.2% (460 million units to a total of 4.51 billion units).

So, with all this potential, why are van sales slumping?

Registrations for new commercial vehicles declined across Europe by almost 20%, January to May 2022. ACEA said the shrinkage was largely down to a fall in van sales. In May, the drop was 17.7% (136,410 units).

The market for light commercial vehicles has thrived on increased business activities in Europe's e-commerce sector. However, it’s also suffered, like every other business, from the slump in demand from other sectors during the pandemic lockdowns. This resulted in a dip in LCV sales of around 18% between 2019 and 2020.

While sales began to recover in 2021 because of the upturn in e-commerce business, they did not exceed pre-pandemic levels. The market for LCVs, particularly vans, experienced a strong surge in demand during the COVID-19 lockdowns where retailers were forced to close and customers got used to buying online and having the goods delivered to their homes but it wasn’t enough to correct the balance.

2019 was the best year for van sales

The thing is, demand for LCVs was already strong and peaked before pandemic lockdowns really took hold. The assumption that it was only to do with the rise in online shopping is inaccurate.

The best year for van sales was 2019, in which the UK saw a spike in the van market of almost 380,000 new registrations (June 2019), compared with around 308,000 in June 2022. This was reflected across Europe with ACEA reporting eight consecutive months of growth in van sales across Europe in 2019. August 2019 registered solid growth in van sales of 17.5% compared to 2018.

In the EU, the LCV sector reported annual revenues of around €940.5 billion and a production value estimated at some €746 billion euros in 2020. Light commercial vehicles, typically up to 3.5 metric tons, were the EU industry's most produced commercial vehicle type. However, van production dropped to under 1.7 million units in 2021. France was the largest light commercial vehicle producer in Europe, while French brands Renault and Peugeot were the second and third best-selling van brands in the EU in 2021. Data from the UK’s Society of Motor Manufacturers and Traders (SMMT) highlights that 2021 was a bumper year, as the number of vans on the road was up by 4.3% to around 4.8 million.

Europe's zero-emissions goal

The primary reason behind the drop in LCV sales in Europe in 2022 is more likely to do with Europe’s zero-emission goals. As automakers commit to phasing out the production and sale of ICE vehicles, the commercial vehicle market is still behind the trend. European manufacturers recorded the highest average greenhouse gas emissions across van producers in 2020. Fully electric LCVs only represented 3.5% of the van shares in the EU, far outweighed by diesel vehicles. Driving around in diesel vans is costing van fleet owners and operators, not only in higher taxes and Carbon offsetting but in having to pay charges to enter low emission zones in towns and cities, in which a high percentage of last-mile customers are based.

It could also be that van buyers are waiting for lead times to improve when ordering new electric vans. Like cars, new van supplies are greatly affected by supply chain shortages, which is having a detrimental effect on delivery time. That said, operators may be willing to wait the extra time and hold onto existing petrol or diesel vans because eLCVs are cheeper to run.

Total cost of ownership of eLCVs wins

Pan-European organisation Transport & Environment carried out research recently to compare Total Cost of Ownership of eLCVs and ICE LCVs and found that eLCVs are at least as much as 25% cheaper to run per km than ICE vans for all users. Over one-third (36%) of van fleets surveyed already have at least one electric van while almost another third (32%) plan to buy an e-van this year, according to the poll of 745 fleets across Europe by Dataforce for T&E. A further 16% are considering buying an e-van in the next five years.

Range anxiety is also no longer an issue as most commercial eLCVs have a range capability well over 100 miles a day. Delivery drivers, who of all van drivers cover the most miles per day (on average) cover 60-80 miles as day. So, they can do this without having to charge during the working day and thus disrupt productivity.

Innovations, such as Parcel lockers, cargo bikes and drones, in last-mile delivery has also had an effect, albeit a small one, on the demand for delivery vans. For more on this you can download our recently published magazine: FEU129 - Moving Goods, Moving People.

Image: Sutterstock

Authored by: Alison Pittaway