LCV shortfall could impact economic recovery

A marked reduction in new LCV sales resulting in many fewer younger vehicles in LCV parcs may have untended consequences and could have a negative impact on the rate of economic recovery.

The current Eurozone recession has been pretty intense with no signs yet of sustainable recovery. Indeed, forecasts by independent consultants, like Capital Economics, are predicting further economic decline and, one may assume, sales of new LCVs may well continue to drop.

A logical result could be that the total LCV parc will shrink and the average age of LCVs will increase significantly.

The LCV, within the vehicle market is paradoxical in that new cars tend to be the most reported sector and used cars are mostly acquired by private buyers once they are returned to dealers or recycled through other routes.

Used LCVs have a different market in that they are commonly acquired by Small/Medium Enterprises – SMEs – for which the lower price of a used vehicle is highly attractive.

A new paper from the Automotive Team at The University of Buckingham, published by White Clarke Automotive Solutions argues that the shortfall in new LCV sales post 2007 will have serious implications for the used LCV market as the economy starts to recover.

The shortfall in LCVs entering the used vehicle market could be as many as two million units across Europe, at its most extreme in Spain, although other major markets will also have marked shortfalls of used LCVs.

White Clarke Automotive Solutions says many SMEs will not have sufficient funds to afford a new LCV and, given the role of the LCV, a quality used vehicle adequately fulfils the role.

While governments and economists may look for mega-projects to restart economic growth, in reality, it is often smaller companies, SMEs and new start-ups, which will kick start business before mega-projects will move off paper plans and into bricks and mortar.     

White Clarke Automotive Solutions suggests that there is no simple solution to the used LCV black hole.

Does the problem mean SMEs will be starved of LCVs? Will SMEs retain existing units longer? Will used LCV prices escalate so rationing their availability to the most affluent users? On the other hand, is this an issue which OEMs need to tackle before economic recovery gets under way?

To slow economic recovery because of a shortage of used LCVs would seem to be an unnecessary restriction. The White Clarke Automotive Solutions' sponsored paper offers a rigorous analysis of this looming problem.

The latest White Clarke Automotive Solutions article on strategic issues in fleet and LCV Management, 'The European LCV Market – A Looming Black Hole?', is free to download here

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