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REMARKETING: A viable van alternative?

Date: 15 May 2017

After a few false starts, cynicism and apathy from the industry as a whole, the new car market is gradually accepting that the concept of alternative-fuel vehicles (AFVs) is viable and credible.

Vehicle manufacturers are investing in the technology and more and more vehicles, particularly electric hybrid, are appearing. Consumer acceptance is growing and there seems to be a relatively healthy market for cars in both the retail and fleet sectors.

But when it comes to light commercial vehicles, the outlook is slightly different.

In terms of electric power, both Renault and Nissan have made significant inroads, but registrations have still been modest, and Government 'plug-in' grants have failed to lure van operators who still have major concerns regarding range and reduced payloads.

Vans powered by compressed natural gas (CNG) are available from some brands, but the lack of a refuelling infrastructure has generally restricted sales to fleet operators with their own in-house facilities. On top of that, as Alex Wright, MD of Shoreham Vehicle Auctions, suggests there have been concerns about safety, and he would remind a potential buyer they would, for example, be prohibited from travelling in the Channel Tunnel.

Hybrid vans, meanwhile, have yet to be developed, although Ford is trialling a number of Transit Custom PHEVs (plug-in hybrid electric vehicles) in London.

So from a used perspective there is still very little choice for potential buyers, and AFVs are a rare sight either at auction or on the forecourt.

Despite that, James Davis, commercial vehicle director at Manheim Remarketing, is positive about the outlook: "We have sold more than 30 electric vans since they started appearing in the wholesale market, and also see LPG [liquefied petroleum gas] and CNG vehicles occasionally.

"While buyers at large still prefer technology with which they are familiar, more end-users are now considering electric vans, not only because of running costs, but due to the increased focus on - particularly diesel - emissions."

BCA's commercial vehicles operations director Duncan Ward, however, takes a less rosy view: "Our experience suggests that while there are benefits for the first owner who wants to be seen to be green, these don't necessarily translate so well into the used market. What incentives are there for the average self-employed tradesman or small business to choose electric?

"Diesel or petrol vans are reliable, efficient, available in large numbers and have a heritage for 'doing the job'," he continues. "Electric vans are perceived as being 'complicated', with lots of unknowns in terms of servicing, battery life, range and reliability. Generally, the used buyer wants a reliable cost-effective transport solution for their business, not to make statements about their green credentials."

Battery history is key

When considering an electric vehicle, our industry experts unanimously agree that a battery history is paramount.

Martin Potter, group operations director of Aston Barclay, says it is vital that documentation is available for inspection and that clarification is sought as to whether the batteries are subject to a separate lease agreement (often the case with the Renault Kangoo). Manheim's Davis concurs, adding buyers should check for the presence of a charging cable, but he also makes an important observation regarding vehicle warranty. "Depending on whether the van has a manufacturer-approved conversion will dictate if the balance of the warranty will still be in place or whether an alternative warranty is available," he says.

Meanwhile, Andy Picton, chief commercial vehicle editor at Glass's, adds that used vans without any sort of battery 'health check' do not perform well in the used market, as essentially they are being "sold as seen".

He also thinks manufacturers need to be proactive in protecting the residual value of the products: "The ideal scenario would be for the used buyer to purchase from a main dealer franchise where the vehicle would have been properly prepped and will have the backing of the remainder of the manufacturer's warranty, supported with a 'health check' listing battery usage and life remaining. There are a few used examples floating around on the open market, but these don't tend to perform strongly as these will be 'bought as seen' with no guarantees attached, and to many it is still seen as an unknown technology."

For trade buyers to become more involved in the market, they will need a more robust level of interest from the retail buyer, says Aston Barclay's Potter.

"Any investment in EVs by the trade will be driven by retail buyer confidence in the technology and the potential to save money (particularly in cities)," he says. "As this increases, the trade will become more receptive to purchasing EVs for stock."

Andy Brown, managing director of CD Auction Group, says that initially the trade were prepared to take a risk, but some had their fingers burnt.

"The subsequent experience of longer-than-usual days to sell, due to limited interest, has made them far more wary, and buying for specific customer requirements is much more prevalent now," he explains.

BCA's Ward takes a similar view, saying that although attitudes vary, with some larger retailers buying for stock, most vehicles are bought to fulfil a customer order.

Electric future

As for the long-term future of AFVs, Davis is looking on the bright side: "We are very positive about the future for alternatively fuelled vans, particularly electric vans.

"Many European cities are introducing ever more stringent emissions limits. The London Congestion Charging zone is already based on emissions levels, and the mayor of London will be introducing an Ultra-Low Emission Zone (ULEZ) in the city soon. The charges alone could make electric vans a no-brainer, and diesel vans could even be banned from certain areas at certain times, giving an electric van operator far more flexibility."

Potter believes, too, that  the tightening of emission regulations in cities makes hybrid technology in particular a viable proposition, while Ward says that the current trend of passenger car hybrid pricing being similar to diesel vehicles is an encouraging sign.

Shoreham Vehicles' Wright thinks future success is size dependent. "Currently, smaller panel vans work well with hybrid and electric vehicle technology" he states, adding "they can compensate for any additional weight of the hybrid powertrain, although buyers will need to be careful that any additional weight does not push the gross weight above 3.5t, for which you need an operator's licence".

So there are grounds for cautious optimism for the future of alternatively fuelled vehicles, with concerns regarding range likely to dissipate as battery technology advances. However, buyers in the future should beware that such a development will clearly have a negative consequence on the value of vans currently on the market, which could rapidly become obsolete.

Values fall in March but outlook remains strong

Overall LCV values fell slightly in March but remain at near-record levels.  The March figure of £6,526 represented a small fall of £23 against February and was the second-highest value on record. Year-on-year, average values are up by £647, equivalent to an 11.0% uplift, with the significant falls in average age and mileage continuing to be a factor.

BCA's commercial vehicles operations director Duncan Ward comments: "Average selling price data might suggest a buoyant market, but the reality is the market has weakened and conversion rates have been under pressure. BCA's profile of stock is becoming younger and lower mileage and this is a significant driver of the increasing values we report."

The fleet and lease LCV sector saw average values fall by £86 (1.1%) to £7,093 in March.  Despite this, average values for fleet and lease LCV stock have been consistent since rising above the £7,000 mark in October 2016, and the past six months have seen the highest average values on record. 

"As often is the case when demand softens, a two-tier market begins to develop.  Well-specified commercials in retail-ready condition are making exceptional values, while vehicles with an unusual configuration or special equipment will always attract attention from buyers," Ward adds. "In contrast, any LCV available in high volumes, perhaps with damage and a basic specification, will have an uphill battle to attract interest."