Tougher emissions rules threaten to slow LCV growth in Europe

European light-commercial vehicle sales outgained the passenger car market in 2018, buoyed by a healthy economy and new launches. But the sector will face challenges this year, led by uncertainties surrounding a 1 September deadline for emissions certification under the new Worldwide harmonized Light vehicle Test Procedure, or WLTP.

Sales of light commercial vehicles (under 3.5 metric tons) increased by 3.5% in the European Union and European Free Trade Association countries, surpassing the 2 million mark for the first time since 2007, according to industry association ACEA. Several of Europe's biggest markets recorded healthy gains, including Spain (+7.8%); Germany (+5.4%) and France (+4.6%). Those gains offset a slight decrease in Britain (-1.3%) and a larger drop in economically troubled Italy (-6%). JATO Dynamics recorded similar figures, showing an increase of 2.5% in EU countries to total sales of 1.94m units.

The van market is heavily influenced by economic trends, especially in sectors such as housing and retail. "The overall economy was great in 2018, with all indicators green," said Julien Gamundi, sales forecast analyst at IHS Markit who specializes in light-commercial vehicles. "It was really a pull on sales." The medium and small commercial segments are likely to continue to gain in 2019, while the car-derived van may have topped out, Gamundi said.

Medium commercial vans such as the Ford Transit are the favored means of "last mile" delivery with the growth of online commerce, he said. "There's a lot of deliveries to be made and a lot of volume to be carried in Western Europe," he said, adding that demand for campers -- which are normally converted by third parties -- was also growing. Gamundi said the car-derived van segment, which get its name because the models are built on passenger-vehicle architectures -- has less room for growth because it has been so highly competitive in recent years.

Europe's best-selling brands last year were Ford, which gained 6.9% for a total of 321,334 sales to keep the No. 1 spot, followed by Renault, up 1.1% to 280,439 sales, and Volkswagen, at No. 3 with 233,600 sales, an increase of 3.2%. However, by group, PSA dominated with a 25% share of the European market after integrating Opel/Vauxhall into its portfolio in the middle of 2017.

Hot-selling models last year included the Peugeot Expert, Ford Transit, Citroen Jumpy and Renault Master. By volume, the Transit Custom held the top spot, with 120,285 units sold, followed by the Mercedes-Benz Sprinter and Citroen Berlingo (see tables, Page 19). Significant launches last year included, toward the end of the year, PSA Group's new family of car-derived vans, the Peugeot Partner, Citroen Berlingo and Opel/Vauxhall Combo. Other new entrants included the third-generation Sprinter.

There are few all-new models expected this year. Toyota has just announced the Proace City, which will share parts with PSA siblings from Peugeot, Citroen and Opel/Vauxhall. The Proace City will give Toyota a presence in a segment that accounts for more than one-third of all commercial vans in Europe. It's not Toyota's only collaboration with PSA Group -- the Proace small commercial van was introduced in 2016. "The Proace City will give Toyota a more complete portfolio to sell to fleet buyers," Gamundi said, adding that it would benefit PSA indirectly with sales in some countries, such as Scandinavia, where Toyota is strong.

Opel's van portfolio will get a boost from the next-generation Vivaro, which will use PSA's underpinnings. The Vivaro is expected to be a strong seller in the UK, where it will be sold under the Vauxhall brand.

Nissan will roll out the NV250, which will be built on the current Renault Kangoo platform, and produced in Renault's factory in Maubeuge, France -- which also makes the similar Mercedes Citan. Renault said last autumn, in announcing the NV250 production plans, that it had reaffirmed its partnership with Daimler to produce the Citan.

Such production alliances are critical for efficiency in the commercial van world, where sales are heavily country- and brand-dependent. The big news on the collaboration front this year is an impending tie-up between Volkswagen and Ford for pickups and vans, though the first products are not expected for several years, probably about 2022, Gamundi noted. PSA Group and Fiat Chrysler Automobiles also have extended their Sevelsud joint venture in Italy, which produces medium commercial vans.

Testing times

Gamundi said that IHS sales forecasts indicate that European van sales will be essentially flat this year -- but with one wildcard factor: A September 1 deadline for certifying all models and variants under the EU's new WLTP protocol. WLTP went into effect last September for passenger cars, and some automakers were underprepared for the difficulties of getting their vehicles through the certification process, which is longer than the previous NEDC tests and more closely mimics real-world conditions. Many models that were not ready by the deadline were temporarily off the market and sales slumped after September, following a spring and summer rush to move noncompliant vehicles from dealer lots.

"We are seeing some really good numbers" in the first quarter of 2019, Gamundi said, "but are they 'anticipation' numbers, or is the market really growing?" While automakers have learned lessons from passenger-car certification, the van market presents challenges of its own, he said.

Vans come in many different silhouettes, such as high-roof models, many of which are produced only sporadically, so it will be hard to time the certification process, he said. For example, a manufacturer might opt to take certain variants off the market rather than interrupt a large production run for a valued fleet customer.
Prices are also expected to go up after September, to pay for revisions and new technologies needed to meet the testing standards, which could add to a summer buying rush. "It's going to be a bit tricky even if they know what they have to achieve," Gamundi said.

Slow EV uptake

Ford, Mercedes and VW are leading a new push to electrify the LCV market, which has been led by the full-electric Renault Kangoo. Ford is introducing a plug-in hybrid version of its Transit Custom, and Mercedes is adding a battery-electric Vito, to be followed by an electric Sprinter and Citan. VW said it will roll out electric versions of the Caddy, Transporter and Crafter this year.

Those vans will draw some fleet customers such as municipal agencies, Gamundi said, but the real push into electrification won't come until the mid-2020s, when the next set of emissions standards (after Euro 6) take effect. "Until then we will have a stable market in terms of powertrain," he said, which means diesels.