The wholesale LCV market has changed beyond recognition and will never return to pre-pandemic levels. That’s the view of Matthew Davock, director of commercial vehicles at Cox Automotive, as he reflects on three years of unpredictability and looks ahead to a very different landscape in 2023.
According to Davock, a perfect storm of tail-winds has changed the shape of the wholesale LCV market forever. Shutdowns in new vehicle production raised demand to record levels, pushing wholesale prices to new highs and creating a huge void between supply and demand. This, together with the industry’s move to electrification and an increase in low emission zones around the country, has fuelled the ongoing unpredictability which, he argues, is here to stay.
“Moving forward, we can expect that uncertainty and change will become the new normal in the automotive industry. We should accept those halcyon days of low prices, moderate demand, and predictable trends from pre-2019 are gone forever,” Davock states.
“While we can expect the LCV volumes in the wholesale market to increase in 2023, vans available in the wholesale market place will have record-breaking age and mileage dynamics, symptoms of the ongoing low supply and continuous vehicle extensions. We estimate that as much as three-quarters of catalogue entries will surpass 100,000 miles within the next year, a sizeable increase on the current figure of 52% today.”
The used LCV market enjoyed a strong Q3 period in 2022, with van prices outperforming the year’s first two quarters, 69% stronger than pre-pandemic 2019 levels. However, auction buyers are having to invest more to get ‘pandemic-worn’ vans back up to an acceptable retail standard. Of 100 van dealers surveyed, 88% commented that the average spend was in excess of £2,500 per unit to ensure units reached an acceptable retail standard. Despite this, 60% of dealers reported that profit per unit dropped to a two-year low as higher sold numbers and old stock reduction and stock turn became the main priority for many during Q3/4.
A sluggish move to EV
Davock believes the move towards electrification is already affecting the wholesale market – due to many manufacturers prioritising new EV production over internal combustion engine (ICE) vehicles. However, the wholesale market remains stuck in a ‘purgatory’ of sorts. While fleets are expressing an interest in EV, stock remains extremely rare in both the wholesale and new markets. As a result, Davock believes the LCV sector is up to three years behind passenger cars in the transition towards EV today.
“While fleets are aware of the 2030 deadline for new conventional petrol and diesel vans to be banned from sale in the UK, many are hedging their bets and investing in one more circuit of ICE vehicles from the wholesale market, before making large scale EV investments,” he suggests.
“Over the past 12 months we have sold 208 full electric used vans through our auction platform. The average age has been recorded at 48 months and an average mileage of 15,294 miles. These assets achieved an average selling price of £16,108 and achieved 95.5% on guide averages. The overall sample size is small but used numbers continue to grow in the wholesale sector and we are committed to supporting all LCV dealers with the confidence and knowledge to stock and build improved confidence moving forward in 2023.”
Davock concludes that the majority of new van registrations are still for diesel vehicles, and considering production delays, the sector may well attempt to squeeze in one or even two more circuits of diesel vans before 2030.
Davock commented: “There are circa 375,000 diesel vans that have been ordered today but not yet built. By the time they have been built, delivered and fallen out of traditional warranty periods, there will still be a window of a few years before 2030, which is the point at which the sale of vehicles powered solely by fossil fuels will be banned in the UK. Unless questions surrounding EV stock availability, range and cost can be answered by then, it’s likely fleets will opt for one or even two more circuits of what they know – diesel vans, taking them up to 2030.”
Van usage demand will become under pressure in 2023
Another contributing factor to a disrupted wholesale LCV market has been volatile demand, driven by a surge, and subsequent gentle fall, in demand for home delivery vehicle usage.
Davock explains: “We saw a boom in large panel van demand during Covid lockdowns, as many people turned to home deliveries to keep working and create a new income stream. However, once much of the world returned to business, a new norm was created, overall demand fell slightly – but not for long. Due to constraints in new LCV manufacturing, many buyers turned to the wholesale market looking for ‘nearly-new’ stock, signalling the end of seasonal norms.”
As the UK continues to face economic struggles, Davock predicts that the wholesale LCV market could be set for further challenges, although he insists it is currently in a relatively secure position. But could vehicle usage pressures mean more vans will hit the wholesale marketplace?
“Expect home delivery demand to drop to its lowest-levels post-pandemic as fleet utilisation softens. This is expected as the UK prepares for economic headwinds in the form of a reported medium-long recession period and prolonged cost-of-living crisis. The latter will impact overall vehicle usage levels for home delivery fleets, with large fleets’ volumes being particularly impacted.
“Fortunately, the UK’s resilience and significant growth in commercial vehicles during the past few years has meant the wholesale LCV market is in good shape, despite significant changes predicted. However, vehicle dynamics have likely changed for good, based on pandemic vehicle usage pressures and demands, with older, higher-mileage vans become increasingly commonplace and the adoption of electric vans advancing comparatively slowly. As an industry, we must all prepare for change and embrace the new and exciting marketplace that is being created.”