CommercialFleet

Volkswagen Commercial Vehicles: New models to appeal to fleets and drivers

The past couple of years have arguably marked the busiest ever period for new van launches: Transit, Trafic, Movano, Doblo Cargo, Vito, Vivaro and Daily are all among the new models that came to market. But one manufacturer was notably absent from the new-launch merry-go-round: Volkswagen Commercial Vehicles.

It didn’t affect the company too badly: sales rose almost 9% in 2014 to a record 40,238. However, this was slightly behind the overall van sector increase of 19%, partly due to supply shortages of Caddy and Transporter, which resulted in a one percentage point loss of market share (to 12.5%).

While rival manufacturers now settle down after their burst of activity, the spotlight turns to Volkswagen: over the next 18 months it will launch new Caddy, new T6 Transporter and, in late 2016, the new Crafter.

Both Caddy and Transporter are available to order, with the first models hitting the road later this month.

This year has seen the company enter the often delicate phase of winding down outgoing models, although it has been a relatively pain-free experience, according to Chris Black, Volkswagen Commercial Vehicles UK head of fleet.

“Both Caddy and Transporter have such a strong following; we will have customers queuing up to buy the last T5 ,” he says.

“Some of the residual values have actually gone up! So we’ve not needed to do special editions or discounting. We have forward-ordered vehicle stocks and will be able to satisfy customer demand until we run down and run-up .”

However, launching the company’s two best-selling vans in rapid succession is not without its challenges, particularly in such a robust market where decisions are already being taken by fleets about future partners.

“It would be challenging in a normal year to change the two biggest products but in a year like this it throws in a few more challenges,” says Black. “It is not easy to flick a switch to have the product and supply.”

Nevertheless, it presents a strong opportunity for Volks-wagen Commercial Vehicles over the next couple of years: both models have received positive coverage in the fleet press, including Commercial Fleet (June and July issues).

Black describes Caddy and Transporter as taking “evolutionary steps”, a deliberate decision by the company to avoid potentially alienating traditionally conservative van fleet customers who like to stick with what they know.

“We have focused on additional equipment, health and safety to support the driver and the fleet manager, and making the running cost proposition stronger,” he says.

“They can take confidence that the vehicle they know is still there; they don’t have to think about whether or not it does the job for them.”

Volkswagen Commercial Vehicles has been building towards the launches by putting in place a new structure and coherent message to improve its ability to win business in its chosen markets.

One key element has been to get a consistent level of service across the van centre network with retailers employing local business development managers with fleet knowledge to target local businesses.

“It was inconsistent previously; some invested, some did not,” says Black. “Now our footprint has increased.”

This has enabled his own fleet specialists to focus on serving the needs of larger fleet operators, a sector that is generally a “longer burn” when it comes to winning contracts, Black adds.

“We put the investment in now for the future. We are working hard to maintain our relationships and make it a partnership in fleet.

“This is the cornerstone of having a clear message.”

He has also strengthened Volkswagen’s resources into the contract hire and leasing sector, believing that this sector has the potential to do a lot more business for the company.

Black is talking from experience - he worked for Lombard Vehicle Management for 12 years – and he knows that leasing companies are aggressively targeting van fleets.

“They have got better at understanding the needs of commercial vehicle fleet operators but there is still a need for education and demystifying the myth of selling vans,” he says.

“It’s not just about money and access to funds; they have to be good at serving the needs of CV operators. But they are making the investment which is good for customers and I expect to grow our business with them.”

Black is confident that the market strength seen over the past couple of years will continue into 2016, although he acknowledges that at some point it will level off.

Both SME and corporate business is growing, which bodes well as production volume of Caddy and Transporter builds into the fourth quarter.

The main impact on Volkswagen’s performance will be seen in 2016, although Black cautions against letting the product run wild.

“We also have to continue to do the other elements to push our fleet proposition forward – it’s not just the new models, it all has to come together,” he says.

“The Volkswagen badge is less relevant for the mid-market where there has to be a valid business reason. Cost of ownership is key.

“The driver is also more influential in the vehicle decision than ever before. We have to take that into account and introduce equipment to make the van more accessible to an audience we’ve not accessed before.”

Volkswagen has introduced a combination of equipment and technology upgrades to appeal to both driver and fleet.

For drivers there are digital radio, infotainment touchscreen system, electric windows and Bluetooth; adding value for fleets are brake assist and automatic post collision braking, reverse parking sensors and camera, and adaptive cruise control.

Black concedes that improving the standard specification will increase the front end price, but adds: “Total cost of ownership through the residual value and running cost makes that impact minimal.”

Increasing the level of safety equipment also reduces the insurance cost; new Caddy, for example, sits several bands lower than the outgoing model.

The company points to impressive safety gains on the latest generation Golf and Passat thanks to emergency braking: figures from research organisation Thatcham show a 45% reduction in third party personal injury claims.

Supporting the programme to reduce cost of ownership, particularly for vans on longer replacement cycles, is a project considering extending the current three-year warranty.

“From my point of view, this is an area we can develop,” says Black.

In an ideal world he would like to see the warranty match the operating cycle, whether two, three, four or five years in length, although he concedes that this is “theoretical rather than aspirational”.

Nevertheless, he adds: “An additional warranty is an opportunity for the residual value and the evaluation of the vehicle. It’s about cost of ownership and, as a product, we are confident in it .”

Mid-market corporate fleets represent the biggest growth opportunity for Volkswagen Commercial Vehicles with the launch of its new products, although it is also mindful not to lose focus on the growing SME segment.

Black has increased resource to target the fleets with 100-1,000 vehicles and is keen to bring what he calls the “brand feeling” to the market by building solutions to meet their needs.

“We have to listen more and be less reliant on the emotional connection. It has to be more commercially compelling and more service-led than purely a product sale,” he explains.

Volkswagen’s network of 72 van specialist retailers will help it to build a case with potential customers. It is running a programme of extended hours servicing to identify the level of demand and is also working on an uptime programme (see panel, page 24).

However, business wins will be difficult without actual product to sell and, here, the company ran into problems last year with supply shortages affecting both Caddy and Transporter.

It had been caught short by the global rise in demand, leaving its manufacturing plants playing catch up. These issues have now been resolved.

Volkswagen Commercial Vehicles is confident that predicted demand will be matched by supply, with delivery times back to a “worst case” of 12 weeks, as managing director Carl zu Dohna told Commercial Fleet earlier this year.

A new production plant in Poland will be completed next year, further eliminating the risk of future production shortages. It will begin assembling the next generation Crafter in the second half of 2016.

Projects look at out-of-hours servicing and vehicle uptime

Volkswagen Commercial Vehicles is running two projects with its dedicated retail network as it looks to help fleets to better manage vehicle downtime.

One of them, extended hours, is being trialled with a handful of sites to identify the level of demand for out-of-hours servicing.

“This programme is underway now and will continue next year,” says Chris Black. “We have to take responsibility as a brand and support fleets in managing their downtime.”

He is also in talks with customers about uptime management. This project is likely to start later this year or early next and is intended to identify fleet concerns in order to implement a solution across the network.

The company has increased its support for larger fleets by appointing a dedicated team in its service centre, ensuring that each customer has a named contact they can call.

“Previously it wasn’t as easy to access,” says Black. “Now we can say we will fix things or answer queries as quickly as possible.”

The new national account team will support Volkswagen’s regional field force and are, says Black, “confidence builders that a corporate user will be interested in”.


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