At the start of May, the SMMT revised its outlook for new van registrations downwards from 363,000 units to 328,000 in 2022. As a result, this year’s market is anticipated to fall by 7.7% compared to 2021.
The well-publicised and ongoing supply chain challenges are at the core of the decline in new LCV sales. These could soon be joined by demand issues in the face of rising inflation, with the Federation of Small Business (FSB)highlighting that “producer price inflation has been surging ahead of consumer price inflation for some time now.”
While new LCV sales are set to fall, what is the outlook for used van sales?
Demand for vans which saw Manheim reporting its strongest ever year for used vans in 2021, started well in 2022, with January seeing a new record average selling price and a new record for volumes sold. Since then, things have not been quite so rosy, with the auction business reporting noticeably lighter wholesale volumes and reduced first-time conversions. The net result was that Q1 ended up 17% weaker than in 2021.
Unlike cars, LCVs are predominantly workhorses and used vans tend to be purchased by small businesses and sole traders, who are likely to be a barometer for the changing economic conditions, which is why the FSB’s concerns could be telling. However, this is to overlook the growth in new business start-ups.
After an initial decline in small business numbers at the start of the pandemic, the UK saw the most substantial start-up boom in a decade. According to Government data, the number of business incorporations in the first quarter of 2021 increased by 41,546 (24.5%), the largest quarter one year on year increase since 2012, when quarterly breakdowns were first recorded and this excludes any growth in sole traders.
Into the supply/demand mix, there is one final supply issue that needs to be considered; delayed fleet cycle changes seen during the pandemic.
The lockdown meant that many business vehicles were, in essence, mothballed. In July 2020, it was reported that 42% of fleets planned to extend their leases or stop ordering. The result was that fleet management and leasing firms stepped in to offer car and van contract extensions.
Recent data from Autorola reveals that wholesale prices are starting to be impacted by the increased age and mileage profiles of freshly de-fleeted vehicles and an influx of stock as new 22 vehicles hit the road in March. In short,
The net result of the whole equation is that in the wholesale market, we see more stock but of lower quality. On the demand side, there has been a softening due to falling confidence, but this is likely to have been tempered to an extent by the increase in business numbers, notably smaller businesses who classically perceive the value of a used van.
On balance, a continuing fall in LCV values looks likely. Still, much of this can be attributed to the reality that the overall wholesale parc for LCVs is older and of higher mileage and as always, ‘buying right’ is still possible.