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Sector Overview: Light Commercial Vehicles (LCVs)

The image and even the mythology of road transport is inextricably linked to the largest and heaviest vehicles on the road – hardly surprising given their size and visibility relative to other vehicles. But in terms of production and sales, large commercial vehicles (CVs) are far outnumbered by smaller vehicles, and consequently, their economic importance to the global motor industry is not as great as it is for smaller vehicles. John Kendall looks at the light commercial vehicle (LCV) sector.

These smaller vehicles are known by a series of names – vans, cargo vans and light commercial vehicles (LCVs), to pick out a few.

In itself, that causes a problem to start with. LCV means different things in different parts of the world, since there is no agreed global definition of size or weight. We focus on vehicles weighing less than 3,500kg (7,716lb) GVW (Gross Vehicle Weight), the loose definition adopted in the European Union. In EU terms, these vehicles are defined as licence category B, under Directive 91/439/EEC, Article 3. just-auto shall adopt this weight since it will cover the majority of vehicle types recognised as LCVs around the world.

Body types include microvans, car-derived vans (CDVs), which are effectively passenger cars converted to carry light loads, purpose-built vans, chassis and double-cab variants of these, designed to accommodate varying types of bodywork such as dropside, tipper, car transporter and box van, as well as pickup trucks.

As has been indicated, LCVs are to an extent, defined by national driver licensing requirements. Across the European Union for instance, the 3,500kg GVW limit is the maximum weight of vehicle that new drivers are permitted to drive.

They may also be defined in other ways by national and international trade bodies. France, as an example, tends to classify LCVs as those below 5,000kg (11,023lb) GVW in statistics compiled by the Comite des Constructeurs Francais d’Automobiles (CCFA). The same definition is used in some production statistics compiled by OICA (Organisation Internationale Des Constructeurs D’automobiles). Unfortunately, OICA is not consistent and some figures record LCVs as those below 6 tons (6,096kg) GVW.

While the EU-wide licence categories offer a fairly clear definition of an LCV, the current licence categories for vehicles were instituted in 1997 and many member states still permit drivers licensed before that date to drive vehicles in heavier weight categories (‘grandfather rights’). Consequently, it will be many years yet before all car licence holders are restricted from driving commercial vehicles without taking additional driving tests. This still influences vehicle-purchasing behaviour in those countries and is likely to do so for some time to come.

Generally, the US takes a more liberal attitude to car licence holders. In many US States, holders of category C licences – the licence held by many car drivers – permit them to drive vehicles up to 26,000lb (11,793kg) GVW. There is some degree of variation, State-to-State, but overall this is a widely agreed limit. Not surprisingly, US cargo vans can be heavier than our self-imposed 3,500kg GVW limit, so this report exercises some flexibility in the definition when dealing with the US. Sectors such as the low cab forward (LCF) market in the US could be seen in the same light as the LCV sector in other parts of the world. LCF models are generally heavier than 3,500kg GVW, but some discussion of them in this report is justified in the overall context of the US light vehicle market.

It is also true to say that many European models within the 3,500kg GVW limit are also produced at heavier weights, satisfying the limited demand for such vehicles that can still be driven by older passenger car licence holders.

Market overview

Since many LCV models share driveline and body components with volume passenger car models, it naturally follows that the dominant global passenger car manufacturers are also the leading LCV players. At one time, many more models were based on passenger cars than is the case today, but Europe has seen a reverse trend in recent years, where passenger car versions of LCV models have become more popular, as LCV chassis dynamics, comfort, and noise levels have made a marked improvement. Such models used to be popular primarily in France, Spain and Italy, where the family car also doubled as business transport, but now their market appeal has spread north across Europe as these models have moved upmarket.

Global market players include DaimlerChrysler, Fiat, Ford, General Motors, Hyundai/Kia, PSA, Renault/Nissan, Toyota and Volkswagen, who all produce LCV ranges. In addition to these, there are many other specialist manufacturers satisfying the needs of their local markets.

In the fast moving Chinese market, Zhanjiang Kingstar Vehicle Trading Co of Guangdong province is one of the leading producers, with a product range partly based on Toyota panel vans and pickups. Other co-operative ventures are also in place to produce European and Japanese models in China.

Hyundai/Kia is the dominant player in Korea and like some Japanese producers, builds a specific model for the European market. In India, the Tata Group is the leading LCV producer with a model range based partly on old Mercedes-Benz models. We will consider individual manufacturers in a later section.

In general terms, LCV products can be split into a number of categories by size and weight. Some are specific to certain markets, although continuing rationalisation and globalisation is producing a more uniform global pattern.

Key trends: 1. Japanese OEMs’ role in Europe to increase in importance

The European LCV market is relatively robust, and does not see the same cyclical demand patterns as witnessed with either passenger car or heavy commercial vehicles. This stability is of benefit to those suppliers with forward investment decisions to make, but, conversely, it renders the marketplace quite static in comparison with other sectors. just-auto regards the Japanese OEMs as likely to play an increasingly important role within Europe, and would point to Toyota as being the manufacturer most poised to benefit from this trend.

Key trends: 2. Consumer confidence will be key factor for NAFTA’s lifestyle sector

NAFTA has seen a marked substitution effect at work, with traditional car buyers now opting for one of the growing number of lifestyle-designed LCVs. The development of this lifestyle sector is – numerically – a good thing, but, at another level, it renders the genre liable to peaks and troughs in consumer as well as business demand. Whilst we accept that these two are linked, the increasing ‘consumerisation’ of the LCV market in NAFTA may prove to be a double-edged sword; rising interest rates and falling consumer confidence may well serve to take the shine off what is otherwise a buoyant market sector.

Key trends: 3. Diesel growth will be more significant than alternative fuels

NAFTA is also likely to witness a growing interest in diesel powered LCVs. The recently renewed CAFE requirements will make large capacity gasoline engines a difficult legislative pitch, and just-auto regards the growth of diesel as being of far greater significance than that of alternative fuels during the life of this report. This may well serve the interests of the Japanese OEMs – already a reckonable force in North America – and may well cause the indigenous OEMs to play a game of catch up.

Key trends: 4. China’s growth to slow but its – and India’s – exports to grow

just-auto’s views of the emerging markets are perhaps unfashionable. We view the Chinese market with some concern; on the one hand, IP and fiscal issues make China a difficult place in which to do business. On the other, it seems unlikely that the levels of growth witnessed to date can be sustained over the long term. The Indian market seems to have developed further than that in China, and we expect to see the development of a global player – in Tata – over the life of this report. Both China and India boast a domestic vehicle sector, and we regard an export driven approach from both markets as being a safe bet. Latin America is developing a regional self-sufficiency in terms of vehicle production, driven in part by long-term investments on the part of European OEMs. This is a trend that we expect to see remaining constant, although the sourcing of LCV components from Mercosur on the part of European OEMs would seem an entirely logical move.

Key trends 5: Quality of local fuel supplies may be key to emerging markets’ OEMs’ success

Perhaps key to the development of the emerging markets is the availability of a high quality fuel supply. There is little benefit to be gained by existing emerged market OEMs producing products that are inappropriate for the fuel supply available to the end user in the emerging markets. The costs implicit in desulphurising the global fuel supply are huge, and just-auto remains unconvinced that refinery capacity in high growth areas such as China will be sufficient to allow for this program to occur without hiccups. If the emerged markets-based OEMs continue to produce a variety of different engines for different markets, there will surely be a large strain placed upon their resources, resulting in a shift back to the existing OEMs – such as Tata and FAW – both of which may prove better placed to serve demand from the emerging markets.

Further information

This article was taken from just-auto’s recent study: Global market review of light commercial vehicles – forecasts to 2009. To find out more about this report, view the table of contents or download a sample go to