Light commercial vehicle and van market: why is it under strain?

In the first half of 2020, the first lockdown caused a slowdown in global auto production, a postponement of its investments, and the suspension of supply lines essential to the industry. In late 2020, the European market underwent an unexpected rebound, which was just as intense as the drop in activity three months earlier. Manufacturers who were previously worried about having to deal with excess inventory instead found themselves unable to respond to demand and forced to extend delivery times.

Moving stocks of “Euro 6D temp” vehicles, unsellable since January 2021

One initial dual point of tension for the light commercial vehicle market: a trend towards disengagement from diesel by motorists on the one hand, and the expiration of the regulation on 1 January 2021, after which such vehicles will have to comply with the “Euro 6D full” standard also known as “Euro 6d ISC-FCM”. In order to avoid building an inventory that would be unsellable after that date, in 2020 manufacturers voluntarily limited, and even discontinued the production of models built to the previous “Euro 6D temp” standard. The particular context of the first half of 2020 also encouraged not scheduling the production of certain “Euro 6D full” models until the second half of 2021. Vehicle deliveries are now pushed back. Secondly, motorists are no longer investing in diesel engines for light commercial vehicles and passenger cars. Diesel engines powered just 28% of new cars sold in Europe in 2020, while 92.4% of European light duty vehicles remained faithful to diesel.

The light duty vehicle market slowed by the semiconductor crisis

Microelectronics are becoming increasingly more strategic for auto manufacturers, because they represent an essential element in today’s vehicles. However, the same components have been experiencing increased demand on a global level since the start of the pandemic, because they are also used to make telephones and computers used in the generalized push toward work from home. Concentrated around a handful of players, including Infineon and TSMC, microcontroller production is maxed out and cannot keep up with skyrocketing demand. In terms of electronic components, the shortage may last until late 2021. Added to this is the shortage of quartz required to manufacture screens, at a time when many dashboards feature them. A consequence of the situation in the electronics industry, the delivery time for a vehicle is closely dependent on the options ordered if they include electronics.

Pooling of production is slowing the recovery

One final element weighing on the light commercial vehicle market: the growing pooling of equipment between light commercial vehicles and passenger cars. Sharing a great deal of technical sub-assemblies, the tough decisions made concerning resources in a time of heavy demand can be unfavourable to light commercial vehicles. All the more so since plants specialising in light commercial vehicles are relatively few. They can reach their capacity limit when the market gets jittery, as it did in the past year. Lastly, equipping a light commercial vehicle for a business application, e.g., a refrigerated insert, will also extend delivery times. In the first half of 2021, the best way to reduce the delivery item for a light commercial vehicle is to choose the vehicle with the fewest electronic bells and whistles. An optional charger for an electric light commercial vehicle, or a high-end audio system can push back delivery by several months. However, forecasts call for the market to get back on its feet in a few months, just like the leasing market, which has also suffered in the crisis.