Vans, not glamorous, but key as EU weighs autos mega-merger

By Giulio Piovaccari and Gilles Guillaume
MILAN / PARIS (Reuters) - Their silhouettes don't evoke adventure dreams like a sports car or a trendy SUV, but vans are a rare source of profit for European automakers, which is why EU regulators are focusing on deciding to back an industry mega-fusion.
European competition regulators fear that the proposed merger of Fiat Chrysler and Peugeot manufacturer PSA could affect competition in vans.
With a total of 755,000 vans sold in Europe last year, the combined Fiat Chrysler (FCA) and PSA would have a market share of around 34% based on industry data, more than double that of Renault and Ford, with around 16% . everyone.
Volkswagen and Daimler follow with market shares of 12% and 10%, respectively.
"Commercial vehicles are important for individuals, SMEs and large companies when it comes to delivering goods or providing services to customers," said Margrethe Vestager, European Union competition director, in a statement announcing an in-depth investigation into the proposed transaction.
"They are a growing market and are becoming increasingly important in a digital economy in which private consumers rely more than ever on delivery services."
Dario Duse, managing director of consulting firm AlixPartners, said that the demand for vans is not based on people's disposable income, but rather on GDP and industrial trends, especially in the logistics sector, in which large companies such as Amazon or DHL operate.
"Logistics is a business that is growing significantly for several reasons, including e-commerce. You need efficient and agile vans for overland and city deliveries," he said.
"LCVs (light commercial vehicles) can recover faster in the post-COVID 19 phase than passenger cars."
According to the European Auto Industry Association (ACEA), sales of vans weighing up to 3.5 tonnes in Europe totaled 2.2 million vehicles last year, compared to 15.8 million in passenger cars.
The market for light commercial vehicles (LCVs) may be secondary in terms of volume, but remains highly profitable in an industry where margins are under constant pressure.
According to AlixPartners, the margins are generally higher than for passenger cars and amount to up to 5-10 additional percentage points.
"With LCVs, you don't have to meet a number of consumer expectations that add complexity and cost, such as indoors. LCV customers are more rational and business-oriented," said Duse.
And while electrification in heavy trucks is complicated, it could come earlier for vans.
"When we look at the total cost of ownership, which is critical for businesses, electric battery vans are already competitive with those with traditional engines," he added.
The prices in the van business are borne by a smaller number of competitors and by the lifespan of a product that is marketed as a long-term investment for professionals.
Pricing is also supported by tailor-made offers for vans. The Renault large car plant in Batilly, for example, offers no fewer than 350 versions of its master model.
Profitability also comes from widespread platforms: Renaults brings vehicles for brands such as Fiat, Nissan, Opel and Daimler onto the market. For decades, FCA and PSA have been producing LCVs through Sevel, a 50:50 joint venture whose plant in Atessa, central Italy, is Europe's largest van assembly.
(Written by Giulio Piovaccari. Edited by Jane Merriman)

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