overview of the uk commercial vehicle … of the uk commercial vehicle industry 1 2014 edition table...

OVERVIEW OF THE UK

COMMERCIAL VEHICLE INDUSTRY

2014 Edition

PRODUCED ON BEHALF OF:

IN PARTNERSHIP WITH:

©2010-2014 Road Transport Media Ltd – all rights reserved. No part of this document may be

copied, distributed, circulated, licensed or resold without the express permission of Road Transport

Media.

INTRODUCTION

This report offers an in-depth analysis of the UK commercial vehicle and road freight transport

industry. We analyse the statistics, the trends and, crucially, the attitudes and issues which inform

the buying process. While the report is targeted at anyone involved in this crucial sector of the UK

economy, suppliers and investors in the sector will find it particularly valuable as it investigates some

of the key challenges facing this market as the economy emerges from recession.

The changing shape of the industry is explored as the research uncovers some important changes in

the mix of operators active in the UK; we consider the shifting make-up of the fleet as truck buyers

begin to re-fleet, with important ramifications for the new and used truck sector; while the impact of

the recent Euro-6 and Driver CPC regulatory changes are explored and their impacts analysed.

As the UK economy emerges from recession, there will be an increase in freight movements and, as

the dominant mode of freight transport, the carriage of goods by road will carry the products of

economic growth. Be it construction materials for new housing, finished goods for export or white

goods delivered to home as part of the continuing home shopping boom, commercial vehicles will

have an important role to play. This research document offers an exclusive insight into the

challenges this industry, and the wider economy, must be aware of.

In compiling this report we have, in the first section, drawn on all available public data, much of

which is available from government, while the second section is based on the findings of the annual

Texaco Operator Research Programme, an exclusive survey of 500 UK-based commercial vehicle

operators. The reader should be aware, due to the installation of a new computer system at the

Department for Transport (DfT), the official government statistics are valid up to and including Q1

2011.

In compiling the report, our researchers have also noticed a reduction in the available data

forthcoming from government departments and agencies, no doubt a sign of the austere times,

though we would hope this under-investment in data is not a continuing trend. Without it, policy

and planning will become little more than a ‘finger in the air’.

Road Transport Media has an unparalleled ability to take the pulse of the UK commercial vehicle

industry and explain its implications for the health of the UK road freight sector. Our titles Motor

Transport, Commercial Motor and Truck and Driver, which have, for decades, been flagship

publications for the very largest 3PL fleet to the owner-driver, give us the resources to couple

objective research with an intimate understanding of our market. We would also like to thank our

main sponsor Texaco Lubricants for its continued support in this activity, and for the associated

sponsorship from Continental Tyres.

Andy Salter

Managing Director

Road Transport Media

TEXACO LUBRICANTS

This research into the UK CV marketplace is sponsored by Texaco Lubricants. Texaco Lubricants are

sold in the UK by Chevron which is one of the world's leading integrated energy companies, with

subsidiaries that conduct business worldwide. The company's success is driven by the ingenuity and

commitment of its employees, their understanding of the sectors in which it operates and their

application of the most innovative technologies available.

Chevron is involved in virtually every facet of the energy industry. The company surveys for,

produces and transports crude oil and natural gas; refines, markets and distributes transportation

fuels and other energy products; manufactures and sells petrochemical products; generates power

and produces geothermal energy; provides energy efficiency solutions; and develops the energy

resources of the future, including biofuels.

Chevron is unique as a fully integrated supplier of lubricants. It has invested heavily in its additive

business and its base oil capability with base oil, additives, and coolant research and development all

conducted in-house. This gives Chevron a wealth of knowledge and experience as suppliers in the

market. The base oil plant at Pascagoula on the US Gulf coast is a high-profile example of Chevron’s

commitment to the lubricants business. The plant will have a huge impact on the global base oil

market and will be responsible for a significant volume of premium base oil being transported into

storage hubs throughout Europe.

The commercial vehicle sector is a key focus for Chevron and we are delighted to have been involved

in the Operator Research Programme for the past four years through our Texaco brand. Chevron has

a range of Texaco-branded products and services that are designed to provide round the clock

reliability, safety and operational performance within the commercial vehicle sector. They are

supported by our technical and R&D teams in both Europe and the US.

The Texaco Ursa range of low viscosity engine oils give comprehensive fuel economy performance,

something which the research has highlighted as being of continued importance to the transport

industry. Texaco is now undertaking an extensive real-world testing programme with British fleet

operators to demonstrate the effectiveness in reducing fuel consumption further with a new range

of fuel system cleaner products it is developing.

Alastair Lodge

Manager Sales UK

Chevron Products UK

OVERVIEW OF THE UK COMMERCIAL VEHICLE INDUSTRY

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TABLE OF CONTENTS

RESEARCH OBJECTIVES 4

SUMMARY OF KEY FINDINGS 6

PART I: UK COMMERCIAL VEHICLE MARKET 10

1 FLEET OPERATION 10

1.1 FLEET OPERATORS 10

1.2 OPERATOR FLEET SIZE 13

1.3 KEY POINTS: LICENCES BROKEN DOWN BY NUMBER OF VEHICLES

(SEPTEMBER 2012) 17

1.4 LEADING OPERATORS 17

1.5 MERGER & ACQUISITION HIGHLIGHTS 19

2 CURRENT COMPOSITION OF THE VEHICLE PARC 20

2.1 INTRODUCTION 20

2.2 NUMBERS OF VEHICLES ON THE ROAD 20

2.3 LICENSED HEAVY GOODS VEHICLES BY WEIGHT (TONNES), GREAT BRITAIN,

ANNUALLY: 2009 TO 2012 22

2.4 HEAVY GOODS VEHICLES REGISTERED FOR THE FIRST TIME BY WEIGHT

(TONNES): 2007-2011 22

2.5 BREAKDOWN OF UK VEHICLE PARC BY VEHICLE TYPE 2010-12 23

2.6 BREAKDOWN OF UK VEHICLE PARC BY AXLE CONFIGURATION 2010-13 25

2.7 BREAKDOWN OF UK VEHICLE PARC BY BODY TYPE 2012 26

2.8 ANALYSIS OF THE TRAILER SECTOR 27

2.9 THE DEMAND FOR LONGER TRAILERS 28

2.10 AVERAGE VEHICLE AGE BY YEAR 29

3 THE CURRENT MARKET 32

3.1 NEW COMMERCIAL VEHICLE REGISTRATIONS 32

3.2 COMMERCIAL VEHICLE SALES BY MAKE, OVER 3.5T AND LESS THAN 6T, AT

END OF DECEMBER 2012 35

3.3 SALES OF VEHICLES > 6.0 TONNES AT END OF DECEMBER 2012 36

3.4 SALES FOR VEHICLES OVER 6.0 TONNES FOR SEPTEMBER 2013 37

3.5 FORECASTS FOR 2014 39

3.6 TRENDS IN THE SECOND HAND MARKET 39

3.7 SUPPLIER DEALER NETWORK 41


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3.8 SERVICE AND AFTER SALES 43

3.9 REPLACEMENT PARTS 44

3.10 FINANCIAL SERVICES 44

3.11 MERGERS AND ACQUISITIONS IN THE CV MARKETPLACE 50

4 OPERATIONAL CHALLENGES 51

4.1 INTRODUCTION 51

4.2 TRANSPORT RATES 52

4.3 SECTORAL BREAKDOWN 52

4.4 THE DOMESTIC ACTIVITY IN FREIGHT MARKET 56

4.5 EVIDENCE OF EFFICIENCIES 60

4.6 FINANCIAL STABILITY 62

4.7 FINANCIAL SUPPORT 63

4.8 OPERATING COSTS 64

4.9 FUEL MANAGEMENT 64

5 ADDITIONAL ISSUES 66

5.1 ALTERNATIVE DRIVELINES 66

5.2 DRIVERS 66

PART II: UK COMMERCIAL VEHICLE OPERATOR REPORT 2014 70

1 INTRODUCTION 70

2 THE VEHICLE PARC 70

2.1 MAKE BY FLEET SIZE 73

3 EMISSIONS LEVELS BY FLEET SIZE 75

4 VEHICLE PURCHASING 76

4.1 PURCHASING TRENDS BY FLEET SIZE 76

4.2 VEHICLE MARQUE MOST LIKELY TO BE PURCHASED IN THE NEXT 12

MONTHS 77

4.3 EURO-6 77

4.4 SOURCING NEW AND USED VEHICLES 79

4.5 FACTORS IN VEHICLE PURCHASING 80

5 VEHICLE MAINTENANCE 83

6 FUEL EFFICIENCY 85

6.1 MEASURES TAKEN BY FLEET SIZE 87

7 DRIVER CPC 89

8 CONCLUSION 93


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APPENDIX 94

1 RESEARCH METHODOLOGY 94

2 COMPOSITION OF THE SAMPLE 95

ACKNOWLEDGEMENTS 98

GLOSSARY 99


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RESEARCH OBJECTIVES

Part I

The main objectives of this research is to understand and profile the structure and operation of the

UK commercial vehicle sector (specifically in relation to trucks over 3.5 tonnes GVW) and understand

recent trends affecting the structure and operation of the freight transport market. The research

aims to provide analysis of the following:

Current composition of road transport fleets:

Operator licensing statistics

The breakdown of licence types, and vehicle distribution

The growth of the own-account sector

Analysis of profitability in the Top 100

Current composition of the vehicle parc:

Number of vehicles on the road

Analysed by vehicle type

Analysed by vehicle make

Analysed by vehicle model

Trends in how this has changed over the past five years

Average vehicle age by year

Insight into commercial vehicle sales:

New vehicle sales analysis

Sales of vehicle types

Sales of vehicle models

Trends in the second-hand market

Insight into commercial vehicle suppliers:

How has their after sales network developed?

How many main dealers?

How many service dealers?

How has that changed over the past five years?

Insight into operating conditions:

Recessionary impact/recovery on sectors

Domestic activity in the freight market

Financial stability

Financial support

Operating costs

Fuel management


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How has the service offering of the manufacturers changed?

Parts

Servicing

Financial services

Rental

Additional information such as:

Alternative drivelines

Major fleet operators, scale and ownership

Driver shortages: licence acquisition, Driver CPC and retirement rates

Part II

Fleet acquisition prospects

2012 buying patterns compared to expectation

Acquisition forecasts

Purchasing criteria

Breakdown of factors influencing purchase

The shifting role of fuel economy as a purchasing factor

Effects of Euro-6 emissions legislation

Analysis of attitudes to Euro-6 and its effect on purchasing

Vehicle maintenance

Breakdown of vehicle breakdown methods

Correlations between maintenance methods and incidence of breakdown

Most common causes of breakdown

Driver CPC – the timebomb for the industry

Methodology

Overview of the sample vehicle parc

Overview of how vehicles are sourced

Overview by vehicle weight, marque and emissions


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SUMMARY OF KEY FINDINGS

KEY FINDINGS OF PART I

1. The total number of commercial vehicles (CVs) in the UK, according to Department for

Transport registration figures, is 460,600, reflecting slow but steady shrinkage. The number

of goods vehicles covered by Operator Licences is just 334,262. The discrepancy is the result

of differing time periods for measurement, O-license evasion, shifting tax classes,

exemptions and the proportion of vehicles in the used vehicle supply chain. The market is

considered by manufacturers to be primarily a replacement market with a significant portion

of revenue for the truck importers and dealers coming from the aftermarket sector – ie parts

and servicing.

2. Two manufacturers – DAF and Mercedes – account for almost half of new truck registrations

over 6.0 tonnes and another five, Volvo, Scania, Iveco, MAN and Renault Trucks, bring the

market share of the top seven players to over 93%, almost 2% lower than last year (SMMT

September 2013 truck and van registrations).

3. 29% of the vehicle parc overall is over 31 tonnes gross vehicle weight (GVW), fractionally

higher than last year. 43.4% of new registrations are over 31 tonnes; 32.8% are over 41

tonnes.

4. There is no statutory registration of trailers in the UK. However, it is estimated there are

over 220,000 in use in the UK, with annual sales growing. Forecasters expect 2014 trailer

sales to reach 17,000-18,000. Trailers are typically expected to have twice the lifespan of a

tractor unit.

5. The average age of HGVs is 7.4 years. This has climbed steadily since 2008 with many fleets

deferring capital expenditure on trucks during the recession, but seems to have plateaued

since last year, reflecting stronger vehicle sales. Vehicle manufacturers have now openly

moved from their previous admonitions that vehicles should be replaced every three to five

years, accepting that longer life cycles have proven cost-effective. Over half the vehicle parc

is still over six years old, and a fractionally increased 13.8% is more than 13 years old.

6. There are fewer reasons now for operators to continue to replace vehicles at the traditional

three to five year mark but one strong addition is the constant evolution in running costs –

later Euro-5 vehicles, benefitting from the R&D into Euro-6, are showing better fuel

economy than even two-year old Euro-5 models, with some Euro-6 models setting fuel

economy records.

7. 2013 sales have been dominated by the urgency to replace vehicles before operators are

obliged to pay the expected 10% cost penalty for new Euro-6 compliant trucks. This

legislation takes effect 01 January 2014 for all new vehicle registrations.

8. The second-hand truck market is likely to continue enjoying high residual values, with Euro-4

and Euro-5 vehicles offering good value against the relatively expensive Euro-6 models


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which will be the only new market offering in 2014. Furthermore, there will be a lack of used

stock coming into the market during 2014 and 2015, as a result of the lack of newly

registered vehicles in 2009 and 2010. This lack of available stock will probably continue until

2016 when the re-investment seen in 2012 and 2013 starts to filter into the second life

market.

9. The seven major truck brands have over 650 franchised dealer outlets between them (not all

of which are sales outlets). Manufacturers place more importance on having a good national

spread of servicing outlets than sales outlets as this is essential to maintaining an on-going

relationship with operators.

10. It is estimated that some 40%+ of CVs in use have a repair and maintenance (R&M) contract

associated with the vehicle. This may begin with 50% or 60% of new vehicles having an R&M

contract for two, three or five years, and then extensions of these.

11. Official figures suggest there are currently 80,894 CV O-licences in issue in 2013, continuing

the decline in licence numbers. The early decline (2008-9) can be attributed to Vosa’s refund

exercises for dormant licences; since the recession it has also been caused by consolidation

and business failures. In 2011, there were 43,420 own-account licences (1,000 less than in

2010-11); 31,738 standard licences (2,000 down); and 8,914 international licences (500

down), showing virtually the same contraction pattern as 2012. In 2013, the standard licence

market, while still contracting, was steadier, and the international market contracted most

strongly. Recent regulation has effectively removed zero-vehicle licences, and while this is an

ongoing process, their numbers have dropped from over 9,000 in 2012 to 3,500 at the end

of 2013. It is unknown how many of these licences have truly been rescinded as opposed to

operators now specifying a vehicle against them.

12. National standard licences constitute 37% and control 50.7% of the vehicle parc, slightly

down from 2010-11. These proportions have held steady throughout 2012 and 2013.

13. With an estimated 103,000 HGVs out with customers, the rental and leasing sector remains

the dominant primary purchaser for heavy vehicles.

14. Analysis of the number of operators by size of fleet reveals the extreme concentration

within the freight transport sector. 10% of the vehicles and 54% of the licences are held by

single-vehicle users. 29% of vehicles are controlled by 1% of the licence holders. Restricted

or own-account operators constitute 52.4% of licences and 27.5% of vehicles, which

underlines the fact that own-account operators are highly represented in the smallest fleets.

15. The average fleet size varies with each type of licence, but all have shown growth in the

previous two years. Restricted licence holders averaged 2.1 vehicles per fleet since 2005–06

until 2011, now 2.2; standard national have risen from 4.8 to 5.6 in 2013; while standard

international fleet sizes have risen from 7.7 vehicles to 8.7.

16. Fuel economy is continuing to improve. The R&D expended on Euro-6 paid dividends for the

latest crop of Euro-5 vehicles. The fuel consumption of a new truck running at 40 tonnes in

2005 could expect to be 7.5mpg-8mpg; now it is more likely to be 9mpg despite the more

fuel-intensive emissions technologies.


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17. Overall transport rates struggled to meet rising costs. Despite the Office for National

Statistics (ONS) Services Producers Index showing marginal rate rises, 73% of members

participating in the Freight Transport Association Manager’s Guide to Distribution Costs said

rates were static and 15% had seen falls.

KEY FINDINGS OF PART II

1. The operators questioned acquired almost twice as many vehicles in 2013 as they had

anticipated in 2012. Caution ruled in 2012 and operators said they planned to buy 12.8

vehicles on average over the next 12 months; they actually bought 22.3 vehicles in this

period.

2. This increased optimism is reflected in the size of the vehicle parc which, based on this

research (and quota sampling), has increased this year by 32% to 137 vehicles per operator.

3. The proportion of the parc bought outright from new has started to grow again – to 46% in

this research, compared to 44% at its lowest point in 2012. This figure was 69% in 2010.

4. The next 12 months vehicle purchasing predictions are marginally ahead on the last 12

months – the large fleet operators continue to drive the new vehicle market.

Rental/contract hire by comparison is also likely to be higher over the next 12 months.

5. Euro-5 vehicles continue to account for half of operator fleets (48% vs. 53% in 2012). 6%

now have Euro-6 vehicles.

6. DAF’s share of our sample declined in 2013 but remains the most popular brand (31%).

7. The largest fleets (51+ vehicles) remain the biggest users of technology but, of the

technologies available, telematics is by far the most established in the industry, embraced by

one third of even the smallest fleets, and two thirds of the largest.

8. Reliability, price and fuel consumption are the most important factors when purchasing

vehicles (these are consistent with previous research).


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9. Average fuel efficiency attained ranges from 23.4mpg in the smallest vehicles (2.5 tonnes)

down to 8.3mpg for the largest vehicles (44 tonnes). There is only marginal difference in

mpg by fleet size although the smallest fleets are typically slightly behind and the medium-

sized fleets (25-50) vehicles win in every category up to 44 tonnes. Average mpg:

Vehicles with a gross weight of 3.5 tonnes = 23.4mpg

Vehicles with a gross weight of 7.5 tonnes = 15.7mpg

Vehicles with a gross weight of 18 tonnes (rigid) = 11.4mpg

Vehicles with a gross weight of 44 tonnes (tri-axle combo) = 8.3mpg

These averages are consistent across different fleet sizes.

10. 51% claim to have improved fuel efficiency over the last 12 months.

11. 59% think that Driver CPC will lead to a driver shortage.


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PART I: UK COMMERCIAL VEHICLE MARKET

1 FLEET OPERATION

1.1 FLEET OPERATORS

All operators of goods vehicles over 3.5 tonnes must (with some exceptions) hold an O-licence that

has been issued to them by a traffic commissioner.

There are three types of licence:

Restricted - these authorise operators to carry their own goods in the course of their trade

or business in Great Britain and on international journeys.

Standard national - these authorise operators to carry their own goods in the course of their

trade and business and goods for other people for hire and reward in Great Britain.

Standard international - these are as standard national licences but operators are also

allowed to carry goods for themselves and other people to countries outside Great Britain.

Higher levels are set for the amount of available finance, professional repute and the need to prove

proper governance for standard licences than for restricted.


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TABLE 1: GOODS VEHICLE OPERATORS - LICENCES CONTINUED AND IN ISSUE, 2012-13 (2011-12)

Type of Licence Total number

of licences in issue

Restricted Standard National Standard International

Eastern Traffic Area 7,188 4,998 1,777 13,963

(7,322) (5,225) (1,870) (14,417)

North Eastern Traffic Area 6,350 4,854 1,202 12,406

(6,573) (5,134) (1,301) (13,008)

North Western Traffic Area 5,991 4,449 1,032 11,472

(6,155) (4,636) (1,107) (11,898)

South Eastern and Metropolitan Traffic Area

5,370 3,120 1,203 9,693

(5,460) (3,359) (1,300) (10,119)

West Midland Traffic Area 4,790 3,322 841 8,953

(4,924) (3,487) (905) (9,316)

Western Traffic Area 6,199 4,309 1,262 11,770

(6,321) (4,485) (1,345) (12,151)

Scotland 3,321 2,928 580 6,829

(3,404) (3,081) (625) (7,110)

Wales 3,173 2,216 419 5,808

(3,261) (2,331) (461) (6,053)

Total 42,382 30,196 8,316 80,894

(43,420) (31,738) (8,914) (84,072)

SOURCE: TRAFFIC COMMISSIONER'S REPORT, 2012-13

TABLE 2: TOTAL GOODS VEHICLE OPERATORS - LICENCES IN ISSUE, YEAR-TO-YEAR

Type of Licence Total number of licences in issue

Restricted Standard National Standard

International

2010-2011 (44,435) (33,863) (9,449) (87,747)

2011-2012 43,420 31,738 8,914 84,072

2012-2013 42,382 30,196 8,316 80,894



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TABLE 3: GOODS VEHICLE OPERATORS - NUMBERS OF SPECIFIED VEHICLES ON LICENCES, 2011-12 (2010-11)

Specified vehicles by type of licence Total number

of specified vehicles Restricted

Standard National

Standard International

Eastern 15,161 31,639 15,201 61,988

(15,402) (31,663) (15,924) (62,989)

N. Eastern 13,962 25,822 12,016 51,800

(14,084) (28,282) (12,256) (54,622)

N. Western 12,990 23,727 10,543 47,260

(13,353) (23,787) (11,277) (48,417)

S. Eastern & Metropolitan

13,162 20,018 8,636 41,816

(13,282) (20,614) (8,792) (42,688)

W. Midland 10,257 17,494 8,825 36,576

(10,447) (17,808) (8,885) (37,140)

Western 13,402 25,750 9,645 48,797

(13,658) (26,154) (9,847) (49,659)

Scotland 7,106 16,598 4,958 28,662

(7,174) (16,901) (5,073) (29,148)

Wales 5,956 8,496 2,911 17,363

(6,024) (8,725) (3,061) (17,810)

Total 91,996 169,544 72,735 334,262

(93,424) (173,934) (75,115) (342,473)


As the updates to this report since the 2012 edition cover more than one set of data from the traffic

Commissioner’s Office we have included some of last year’s data as well.

Although licence numbers have decreased, average fleet sizes have remained fairly constant.

1. Licence numbers have continued to decline for several years. The total number of licences in

2011-12 was down to 84,000, 4.2% down on 2010-11. In 2012-13 licence numbers dropped

even further, to 80,894. This is a 3.8% decline year-on-year, and an 18% decline against the

2007-08 figure of 98,300 licences. In other words, almost one in five licences has

disappeared in five years.

2. The licensed vehicle parc contracted by 6%, year-on-year, to just 342,473 vehicles in 2012

and again by 2.3% in 2013, to give a current total of licensed vehicles of 334,262.

3. Restricted or own-account licences represent more than half the total number of licences at

52.4% in 2013 (51.6% in 2012). However, these 52.4% of licences only account for 91,996 —

or 27.5% — of the licensed vehicle parc, almost the same proportion as the two previous


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years. Restricted licences are 2% down year-on-year in 2013 and dropped by 3.7% the year

before.

4. By comparison standard licences dropped by 6% to 31,738 in 2012 and a further 4.9% in

2013 to reach 30,196. The associated vehicle parc dropped 8.2%, or by 15,500 units in 2012

and then by 2.5% in 2013 to total 169,544, a drop of 4,390. This probably reflects the on-

going efficiencies and fleet consolidation in the hire and reward sector.

5. The international licences contracted by 5.7% in 2012, and their associated vehicle numbers

by 4.9%. In 2013 this contraction continued with a 6.7% drop in licences and a 3.2% drop in

vehicle numbers.

Domestic hire and reward has contracted slightly harder than other sectors in 2012, although

arguably the difference was more subtle than in previous years. In 2013 the contraction was most

pronounced in international licences as standard licences held their ground better. Vehicles

registered on national standard licences – ie national hire and reward – have stayed consistent

through 2013 at 50.7% of the vehicle parc, 1.3% down on the previous year.

1.2 OPERATOR FLEET SIZE

Analysis of the number of operators by size of fleet, based on 2009-10 data, reveals the extreme

concentration within the freight transport sector. Half the operators with licences have just one

truck, with just 0.4% of the fleets having more than 100 trucks. 0.4% of all licensed operators

equates to approximately 336 fleets, assuming that some of these fleets will be own-account – such

as large supermarket fleets. This means that about 40% of the vehicles are run by under 3% of the

operators and 40% of the customers run 90% of the vehicles.


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TABLE 4: GOODS VEHICLE OPERATOR FLEET SIZE: GREAT BRITAIN

2008/09 2008/09 Aug-11 Aug-11 Sep-12 Sep-12

Size of goods vehicle fleet (number)

No of Licences

No of vehicles

No of Licences

No of vehicles

No of Licences

No of vehicles

0 14,056 0 9,212 - 9,288 -

1 41,096 41,096 38,265 38,265 37,359 37,359

2 14,387 28,774 13,813 27,626 13,497 26,994

3 6,953 20,859 6,653 19,959 6,418 19,254

4 4,281 17,124 4,023 16,092 3,982 15,928

5 2,808 14,040 2,630 13,150 2,595 12,975

6-10 6,176 47,885 5,672 42,626 5640 42,468

11-20 3,153 46,610 3,127 45,093 3,120 44,973

21-50 1,808 56,624 1820 56,049 1,870 57,621

51-100 446 33,104 546 37,506 567 38,967

101-500 260 48,143 305 53,128 290 50,950

501+ 12 9,533 13 9,985 14 10,493

Total 96,436 363,792 86,079 359,479 84,640 357,982

SOURCE: VOSA

The total vehicle parc has dropped to 334,262 in 2013, (ie figures more recent than the above table)

lower than the Department for Transport’s (DfT) 383,900 assessed by tax class and substantially

lower than the 460,600 by registration figures. Some of this discrepancy may be accounted for by

the tax class shifting some HGVs into a private ownership class and a relatively low number will be

alternatively fuelled and therefore be VED exempt. Some vehicles may be running without an O-

licence.

DfT figures suggest that only 0.5% of the HGV class evades VED, which would represent 23,000

vehicles.

The total number of licences has decreased from 96,436 in 2008-09 to just 84,072 in 2012,

continuing a steady decline. In 2013 this contracted again to 80,894.

Although numbers of licences and vehicles have both continued to decline, the mean number of

vehicles per licence is creeping up. In 2008-09 the number of vehicles per licence was 3.8, in 2013 it

is 4.1. (Mean values are not useful for determining the numbers of vehicles in fleets as half the

market has a very small number of vehicles, and most of the vehicle parc is still controlled by the top

3% of players. However, it does illustrate the faster decline of licences compared to trucks.)

Only 2.2% of licences specify more than 30 trucks.


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In 2012 14 licences controlled 10,000 trucks between them.

871 licences control 100,410 trucks, or 29% of the market. This is effectively 1% of the licence

holders controlling almost one third of the vehicle parc. Many of these licences will be held by the

same parent companies with multiple depots or operating bases, so in reality this chunk of fleet is in

extremely concentrated ownership.

It is worth noting, with reference to the chart above, that ‘zero-vehicle licences’ were effectively

phased out through EC regulation EC1071/2009, article 5. This stated that licence holders must have

stable and effective establishment – which is impossible to demonstrate without vehicles. According

to the Office of the Traffic Commissioner, the 9,288 licences which show no vehicles against them in

Table 4 above, has diminished to just 3,510 licences without a specified vehicle as of November

2013.

Many of these licences will be reviewed at the point of renewal. However Traffic Commissioners are

taking a pragmatic and sympathetic line and can grant ‘grace’ periods to those who request time to

review their options.

TABLE 5: HGV USER DISTRIBUTION BY FLEET SIZE BAND

Fleet size 2012/13 2011/12 2010/11 2009/10 2008/09

1 54.3% 55.2% 50.0% 50.0% 50.5%

2-5 31.6% 31.2% 35.1% 35.1% 34.7%

6-10 6.9% 6.7% 7.4% 7.6% 7.6%

11-20 3.8% 3.7% 4.1% 4.0% 3.9%

21-30 1.3% 1.3% 1.3% 1.3% 1.3%

31-40 0.7% 0.6% 0.7% 0.7% 0.7%

41-50 0.4% 0.3% 0.4% 0.4% 0.3%

51-100 0.7% 0.7% 0.7% 0.6% 0.6%

>101 0.4% 0.4% 0.4% 0.4% 0.4%

SOURCE: VOSA (2013 DATA BY FREEDOM OF INFORMATION REQUEST)

The single-vehicle user

The Vosa-supplied table above shows a clear increase in the one-vehicle operation, which jumped by

five percentage points in 2011-12, and has settled slightly at 54.3% in 2013. Many of these single-

users are restricted licence holders, moving their own goods.

The other portion is hire and reward subcontractors. Without knowing fleet size banding against

types of licence, we cannot know what proportion of the market these one-man bands represent.

There has long been speculation that the owner-driver could not survive in the long term – that the


16 2014 Edition

weight of financial and regulatory burdens would render it too difficult for them to make a living

when rates tend to be suppressed.

Certain sectors are more reliant upon the owner-driver than others – such as quarry and aggregates

work. However, the average age of drivers in the sector is 50+ according to some aggregates

companies, and there are difficulties recruiting young drivers to the business. The number of HGV

tests passed since 2010 has been in decline, with numbers taking the tests dropping from 71,000 in

2008 to 46,000 in 2013, with approximately a 50% pass rate.

The resilience of this market sector will be tested further when the first qualification period for

Driver Certificate of Professional Competence falls due in September 2014. Owner-drivers have been

obliged to carry the cost of their own training and take a week away from work in order to comply,

and with the average age of drivers weighted towards retirement, some are expected to walk away

from the industry rather than comply.

Small fleets

86% of the truck market, by O-licence, runs fewer than five trucks. Despite the harsh economic

climate this sector has actually grown slightly as a proportion, even if numerically it is less well

represented. What we have seen, however, is a shifting away from the micro-fleet of 2-5 trucks back

toward owner-driver status, with the 2-5 truck sector decreasing from 35% to 31% since 2010.

The market between two and 50 trucks, which accounts for 45% of the licences, by September

2012’s figures also accounts for 220,000 trucks. This is the primary market for dealerships.

Part of this market is restricted licence holders shipping their own goods, and also local authorities

which have fleets for such functions as refuse collection, parks maintenance and street cleaning.

Only 13.1% of the marketplace, by licence, runs between six and 50 trucks, accounting for

approximately 145,000 of the market’s vehicles. It is the hardest size at which to make money it

seems. On one hand these operators face heavy operational and regulatory burdens, without having

the pull to command low prices from suppliers; the magnitude to allow economies of scale; the

national distribution network (outside of a pallet network) to compete in long distance work; or the

contract portfolio to allow optimal fleet utilisation. The figures would suggest that haulage business

models work best either for solo independents or those who run substantially more than 50 trucks.

In 2012 336 licences (0.4% of the 84,072 then in operation) accounted for 60,000 of the vehicles in

the parc – that is 17.5% of the total licensed parc of 342.473. Only 1.1% of the market by licence

runs the majority of trucks in the UK. Extrapolating from September 2012’s figures, some 29% of the

vehicles (just over 100,000) are held by the 1% of licences which account for fleets of 50 or more

vehicles.


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1.3 KEY POINTS: LICENCES BROKEN DOWN BY NUMBER OF VEHICLES

(SEPTEMBER 2012)

10% of the vehicles and 54% of the licences are held by single vehicle users.

220,000 trucks (by September 2012 figures) belong to firms with between six and 50 vehicles.

44% of trucks are run by just 3.5% of licence holders – that’s any operators with more than 30

trucks. As many of the top firms hold multiple licences these figures will likely be even more

concentrated.

1% of licence holders control 29% of the vehicle parc.

1.4 LEADING OPERATORS

TABLE 6

Turnover

£000s Pre-tax profit

£000s

DHL 4,481,145 67,592

Wincanton 1,086,800 24,800

Norbert Dentressangle Group 998,728 6,835

Kuehne + Nagel 937,367 26,959

TNT UK 782,865 13,843

SOURCE: MT TOP 100, 2013

The 2013 MT Top 100 shows a logistics industry surging in profit growth, improving its turnover and

producing a far better return on sales than it did a year ago. Overall, 72 of the Top 100 companies

saw a year-on-year increase in turnover, and 71 saw a year-on-year increase in profit.

The Top 10 companies are: DHL (incorporating Supply Chain, Tradeteam and Express divisions);

Wincanton; Norbert Dentressangle; Kuehne + Nagel; TNT UK; Home Delivery Network (which trades

as Yodel); Eddie Stobart (the transport activities of Stobart Group) and UK Mail Group. It is a list that

is dominated by 3PLs and parcel carriers.

Further down the Top 100, the list is dominated by sizable family firms that are often (but not

always) acquiring smaller, speciality hauliers – as well as the larger chilled networks, container and

automotive logistics specialists. Several of these have been involved in some serious acquisition

activity in the past 12 months. In 2012, Gregory Distribution acquired Philson Haulage, King Stag

(Transport), South West Delivery Services and Interoute Transport Services. The benefit, and cost of

the outlay, will be seen next year. It is a similar story at Turners (Soham) and CM Downton, for

example.


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In the sub-£50m turnover market, groupage hauliers become more prevalent – these are businesses

searching for improved economies of scale and improved margin. However, 35 of 53 operators in

this category saw year-on-year growth in profit, illustrating the robust nature of the sector.

The Top 100 covers financial reporting periods from the whole of calendar year 2012 and the first

three months of 2013. During this period many have felt the benefit of pruning unprofitable

divisions, networks and contracts during the leaner economic spell. Rigorous cost controls have also

led to improved profit levels, which average £4.06m (compared to £1.31m in 2011/12) and a far

better return on sales (which average 2.61%, compared to the previous year’s 0.86%).

If we look at the 31 companies with a £100m plus turnover, seven saw profit contract, while six

made a pre-tax loss. Wincanton, in particular, had made a radical turnaround, from a pre-tax loss of

£47.4m in the year-ending March 2012, to a pre-tax profit of £24.8m in the year-ending March 2013.

This is primarily the result of stringent controls, such as the disposal of its European interests and its

foodservice business. It is almost meaningless to translate this turnaround into percentage terms.

Parcel carriers Yodel and City Link more than halved substantial losses, but continue to be loss-

making. Fellow parcel carriers, including UK Mail Group, FedEx, DPD, UPS and Hermes also saw

double-digit profit growth, but started in the black. Overall, the sector is booming, and legacy costs

are being wiped out.

It illustrates the fractured market that road transport has become. Some sectors are performing

better than others but the evidence shows that the top players find themselves in a better and

stronger financial position.


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1.5 MERGER & ACQUISITION HIGHLIGHTS

The consolidation in the industry has not abated.

Acquisitions are continuing as the haulage industry consolidates. However, there has been a shift

from opportunistic purchase of failing companies to strategic acquisition in the past 12 months.

Aug 2012

Mansfield Group merges with Ontime Automotive

Sep 2012

Turners (Soham) buys Brown Chilled Distribution

Masterlink buys (Irish) Target Express

Oct 2012

Swain Group buys LV Transport

Dec 2012

Pall-Ex buys Intercounty

Feb 2013

Balleyvesey buys Birds Groupage

Mar 2013

AFS Transport buys Andover Transport

Apr 2013

EFS Group buys Logictrans UK

May 2013

Silvio Bertani Group buys Sucklings Transport

July 2013

Ballyvesey buys CFT Services

Aug 2013

Premier Logistics buys Cobley Transport


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2 CURRENT COMPOSITION OF THE VEHICLE PARC

2.1 INTRODUCTION

This report focuses on commercial vehicles over 3.5 tonnes – often referred to in government

statistics as Heavy Goods Vehicles (HGVs). In figures published by the Society of Motor

Manufacturers and Traders (SMMT) the data is often broken down into light trucks (over 3.5 tonnes)

and heavy trucks (over 6 tonnes).

2.2 NUMBERS OF VEHICLES ON THE ROAD

A review of the number of trucks on the road reveals a diminishing market, with assets sweated

more than ever before. The recession (2008-11) served to emphasise the drive for efficiency which

had already been instigated by soaring fuel costs and, to a much lesser extent, customers’ concern

with environmental sustainability.

As a result load factors have been steadily increasing; average mileage and working hours per truck

are increasing, with many double or triple-shifted. Q1 2011 saw increases in freight lifted (weight)

and moved (distance). Operators have worked hard to minimise empty running and to maximise fill

capacity (which we explore further under Trailers).

The overall vehicle parc is still shrinking, with registered vehicles now at 460,600 according to

Department for Transport (DfT) registration figures for 2012. This represents a 9.8% drop against the

parc’s 2007 height of 510,800 vehicles.

It is also a 1% drop against 2011. Since 2009 the vehicle parc has shrunk by just under 6,000 vehicles

a year on average, following a 2% drop in 2011 against 2010 figures. Much of this drop is probably

the result of efficiency increases, which reduce the number of vehicles required to fulfil contracts.

There are three broad classifications for the overall heavy goods vehicle parc. The first is DfT

registration figures, which captures any vehicle registered to be on the road. This suggests 460,600

vehicles, as above.

The second is by tax class. This shows which vehicles must pay vehicle excise duty (VED) at the heavy

goods vehicle rate.

The third way of defining and enumerating the heavy goods vehicle parc is by operator licensing

figures. Vehicles over 3.5 tonnes must be specified to an O-licence. There are currently 334,262

licensed vehicles.

The registration figures, the tax class figures and the O-licence figures do not agree for the following

reasons:

23,000 vehicles evade road tax or VED according to the DfT.

Some HGVs are running without an O-licence although it is harder to quantify this


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If we extrapolate from the numbers of vehicles in classified advertisements and an average

length of time they are for sale, some 100,000 vehicles are estimated to pass through the

second-hand supply chain during a given year, with some 20,000 in the supply chain at any

given point.

It is worth considering the implications of the 82,000 vehicles which 'disappear' from DfT

statistics for goods vehicles between the overall vehicle parc and the tax class figures. Some

50,000 of these are in the PLG class, which would not be expected to house HGVs as they are

vehicles in private ownership. It is entirely possible that, as well as enthusiasts, this class

includes sole traders. The tax class vehicles also exclude agricultural and showman’s

vehicles, and some crane and construction HGVs, although these latter two groups should

appear under ‘Special Vehicles’ which fails to show any figures.

Furthermore, government vehicle registration figures are not always consistent with figures

published by the SMMT. This is for a number of reasons such as timing of registrations, the SMMT

figures including vehicles in Northern Ireland and vehicles which are SORN or untaxed. Thus SMMT

figures hover slightly above DfT figures.

TABLE 7: TOTAL HGV REGISTRATIONS Licensed heavy goods vehicles by years since first registration, Great Britain, annually: 2000 to 2012

Total Avg yrs since 1st reg

2000 471.5 6.7

2001 477.5 6.6

2002 485.4 6.6

2003 491.1 6.6

2004 505.8 6.7

2005 508.2 6.6

2006 508.3 6.6

2007 510.8 6.7

2008 495.9 6.7

2009 477.8 6.9

2010 470.1 7.2

2011 465.5 7.4

2012 460.6 7.4

KEY: FIGURES IN THOUSANDS SOURCE: DFT, TABLE 'VEH0507'

The overall vehicle parc has shrunk by 10% in real terms from its 2007 height, but thanks to recent

investment levels picking up, the average age of vehicles has stopped growing.


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2.3 LICENSED HEAVY GOODS VEHICLES BY WEIGHT (TONNES), GREAT

BRITAIN, ANNUALLY: 2009 TO 2012

TABLE 8

3.5t - 7t >7t - 8t >8t - 18t >18t - 31t >31t - 41t >41t

TOTAL No.

(000s) %

No. (000s)

% No.

(000s) %

No. (000s)

% No.

(000s) %

No. (000s)

%

2009 51.0 10.7 141.1 29.5 94.3 19.7 60.3 12.6 51.8 10.8 79.3 16.6 477.8

2010 51.2 10.9 134.9 28.7 93.1 19.8 59.2 12.6 49.9 10.6 81.8 17.4 470.1

2011 51.9 11.2 129.9 27.9 92.2 19.8 58.9 12.7 48.1 10.3 84.5 18.1 465.5

2012 52.8 11.5 124.8 27.1 91.2 19.8 58.2 12.6 46.7 10.1 86.8 18.8 460.6

SOURCE: DFT VEHICLE STATISTICS TABLE 'VEH0506'

2.4 HEAVY GOODS VEHICLES REGISTERED FOR THE FIRST TIME BY WEIGHT

(TONNES): 2007-2011

TABLE 9

3.5t - 7t >7t - 8t >8t - 18t >18t - 31t >31t - 41t >41t TOTAL

No.

(000s) %

No. (000s)

% No.

(000s) %

No. (000s)

% No.

(000s) %

No. (000s)

%

2007 6 12 9 19 9 19 6 12 6 13 11 24 47

2008 6 12 9 18 10 19 6 12 7 13 14 26 53

2009 4 14 6 18 7 21 4 13 3 11 7 23 31

2010 3.6 11.9 4.4 14.6 5.9 19.5 3.4 11.1 3.2 10.6 9.8 32.3 30.3

2011 4.0 9.7 5.3 13.0 7.2 17.8 5.0 12.2 4.4 10.7 14.9 36.6 40.7

2012 4.2 10.2 6.6 15.7 7.9 19.0 4.9 11.8 4.4 10.6 13.7 32.8 41.7

NB: Figures prior to 2010 have been rounded for ease. SOURCE: DFT VEHICLE STATISTICS TABLE 'VEH0556'

Table 8 shows all the heavy goods vehicles registered with DfT by weight. In Table 9, however, we

are looking at those vehicles registered for the first time – ie new heavy goods vehicles – by weight.

While the heaviest vehicles on the road comprise slightly under 19% of the vehicle parc, they

comprise a little less than a third of new vehicle sales in 2012 – significantly down from 2011 in

terms of importance. Vehicles over 41 tonnes lost almost four percentage points, or 11% of their

market share – this was redistributed among the bottom end of the weight range with 7-tonners

recovering ground after their decline of recent years. Although there is still significant evidence of

polarisation between the two extremes of the weight range, smaller lighter vehicles are winning


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ground in urban delivery, and B2C sectors. Even sectors which would once have not considered

buying 3.5 tonne vehicles such as pallet network members are now using them to access rural or

restricted delivery points.

The 3.5 tonne to 6.0 tonne sector – as will be seen again when we examine the success of various

marques at different weights – has also seen strong growth in minibuses, as ‘stage five’ emissions

legislation has brought new products onto the market.

2.5 BREAKDOWN OF UK VEHICLE PARC BY VEHICLE TYPE 2010-12

A breakdown of HGVs registered shows that 71% of the market are rigids, continuing the slight

decline from 2010. Of artics, three-axle tractor/trailer combinations dominate, comprising 83% of

the artic marketplace.

TABLE 10

2012 2011 2010

Rigid Vehicles

All Rigids 263.1 268.4 274.7

2 Axle 195.9 201 207

3 Axle 40.2 40.5 40.6

4 Axle 27.0 27.2 27.5

Articulated Vehicles

All 2 Axle Tractor 23.3 24.7 26.0

2 Axle Tractor & 2 axle trailer 4.0 4.5 4.0


2 Axle Tractor & 4 or more axle trailer 4.3 5.6 7.9

All 3 Axle Tractor 82.7 81.1 79.2



3 Axle Tractor & 4 or more axle trailer 1.3 1.4 1.7

All Articulated Vehicles 106.0 105.8 105.2

All Goods Vehicles 369.1 374.2 379.9

Key: Figures in thousands SOURCE: DFT VEHICLE STATISTICS TABLE 'VEH0524'


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There has been much discussion of the demise, so far exaggerated, of the 7.5-tonne HGV.

Registrations did fall after the introduction of the 1997 law which said all newly qualified drivers

would have to take a separate Class 1 test in order to drive these vehicles. Already qualified drivers

kept their entitlement. However, although this argument is often cited to explain the fall in 7.5-

tonne vehicle sales, it seems likely that a) these claims are exaggerated; and b) the reasons lie

elsewhere.

Firstly, although 7.5-tonne sales dipped during the recession (along with everything else), they have

shown signs of rallying since their 2010 low of 4,400 to reach 6,000 by 2012, 15.7% of the market.

It is also inescapable that three of the 12 best-selling trucks in the UK are 7.5-tonners. The DAF LF

appears twice at different power ratings, along with the Iveco Eurocargo.

Secondly the more pressing issue for road transport operators is not finding drivers, but operational

cost-benefit. Smaller vehicles than the 7.5-tonner offer much better fuel economy and better access

to tight urban, or inaccessible rural, locations. Equally higher weights offer much better payload for

the price. So there has been judicious buying at the lower end of the market.

The argument that new drivers’ lack of qualification to drive 7.5-tonners has significantly deterred

sales is flawed. The industry complains constantly that young people are not attracted to the

industry, and indeed Skills for Logistics states that only 1% of the driver pool is under 25. In order not

to qualify for ‘grandfather rights’ which means you can drive a 7.5-tonner on a pre-1997 licence, a

driver would need to be 33 or older in 2013. That age bracket applies to 90% of the C+E

marketplace.

It is worth remembering that new drivers for any vehicle over 3.5 tonnes require a C1 licence – yet

the arguments concerning how the law has affected vehicle sales tend to be levelled purely at the

7.5-tonne vehicles.


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2.6 BREAKDOWN OF UK VEHICLE PARC BY AXLE CONFIGURATION 2010-13

TABLE 11: HGV MOTOR VEHICLE FLEET BY NUMBER OF AXLES AS PRESENTED FOR ANNUAL TEST

2012/13 2011/12 2010/11

No. % of total Number % Total No. % of total

2-axle 244,855 60.7 255,605 61.8 267,771 62.9%

3-axle 132,477 32.9 131,988 31.9 131,674 30.9%

4-axle 25,770 6.4 25,986 6.3 26,471 6.2%

5-axle 0 0.0 0 0.0 2 0.0%

Total 403,102 413,579 425,918

SOURCE: VOSA SEPTEMBER 2013

The Vosa figures above indicate a decline in total vehicle numbers, year-on-year subject to annual

testing. There has been a contraction of 5.35% in three years. However, three and four-axle vehicles

are holding their own in terms of market share.

There is a discrepancy between vehicles registered and those presented for annual test as newly

registered vehicles do not need to be tested for 12 months. As a result the numbers registered will

always be higher than those tested.


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2.7 BREAKDOWN OF UK VEHICLE PARC BY BODY TYPE 2012

Government statistics also provide a breakdown by body type.

TABLE 12: RIGID GOODS VEHICLES OVER 3.5 TONNES LICENSED BY GROSS WEIGHT AND BODY

TYPE, GREAT BRITAIN, ANNUALLY: 2012

Body Type Up to 7.5

tonnes > 7.5t <

15t > 15t < 18t >18t < 26t > 26t Total

Box Van 44.7 8.2 11.7 2.3 0.2 67.1

Tipper 16.1 1.2 3.8 4.1 14.4 39.6

Curtain Sided 11.0 2.5 10.6 6.0 0.2 30.3

Dropside Lorry 9.7 1.9 4.7 3.7 0.2 20.2

Flat Lorry 6.3 1.6 3.2 5.5 1.5 18.0

Refuse Disposal 1.0 1.3 1.4 11.1 1.5 16.4

Insulated Van 5.1 2.6 4.3 2.3 0.1 14.4

Skip Loader 1.0 0.6 5.4 1.2 3.4 11.6

Tanker 0.4 0.5 2.3 2.8 1.4 7.4

Panel Van 6.8 0.0 0.0 0.0 0.0 6.9

Goods 2.1 0.7 0.9 1.1 0.6 5.4

Street Cleansing 2.2 2.4 0.4 0.1 0.0 5.1

Livestock Carrier 3.5 0.3 0.1 0.2 0.0 4.2

Car Transporter 1.1 0.4 0.8 1.6 0.1 4.0

Concrete Mixer 0.0 0.1 0.4 1.8 1.4 3.7

Tractor 0.2 0.0 0.2 0.6 1.9 3.0

Tower Wagon 1.8 0.1 0.0 0.0 0.0 2.0

Skeletal Vehicle 0.4 0.3 0.4 0.3 0.3 1.7

Luton Van 1.1 0.1 0.1 0.0 0.0 1.3

Special Purpose 0.4 0.2 0.3 0.1 0.0 1.1

Specially Fitted Van

0.7 0.2 0.2 0.1 0.1 1.2

Other 3.9 1.2 1.6 1.0 0.6 8.2

Total 119.4 26.5 52.9 45.8 28.0 272.7

Key: Thousands SOURCE: DfT TABLE 'VEH0522'


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2.8 ANALYSIS OF THE TRAILER SECTOR

There is no statutory registration of trailers in the UK. Manufacturers tend to be more interested in

road mileage and road usage than in aspects like the number of trailers on the road. To estimate the

number of trailers in the market we need to rely on the number of Vosa annual tests of trailers.

TABLE 13: HGV TRAILER FLEET BY NUMBER OF AXLES

2012/13 2011/12

Number % of Total Number % of Total

1-axle 3,695 1.7% 3,766 1.7%

2-axle 32,561 14.8% 34,608 15.4%

3-axle 183,709 83.4% 186,042 82.8%

4-axle 280 0.1% 270 0.1%

5-axle 30 0.0% 28 0.0%

Total 220,275 224,714

SOURCE: VOSA EFFECTIVENESS REPORT 2013 TABLE 'A1.9'

Vosa states that it conducted annual tests on 220,227 trailers during 2012-13; this would suggest

that numbers have dropped considerably from the 240,000 tested by Vosa in 2008. However, this

may be somewhat off-set by the growing adoption of double-deck trailers — and to a lesser extent

the 500 longer semi-trailers currently on trial — and increasing focus on load fill. It is also worth

noting that new trailers (ie less than one year old) are not counted in Vosa’s figures, as commercial

vehicles (including trailers) are not required to be presented for annual test until one year after first

registration.

The overall drop from 2008 to 2013 is 8%.

However, this does not represent the current health of the market, which is buoyant, and more so in

the UK than mainland Europe. Trailer manufacturer SDC is reporting the highest volumes for years,

and suggests 2014 could be a strong year, driven by fleet replacement.

Don-Bur is anticipating a drop in rigid sales next year following Euro-6, but is enjoying high sales

across the board in 2013, having to expand production markedly.

Trends in the trailer market are towards operational efficiency and flexibility. Double-deckers and

urban trailers are three metres shorter than standard so require less manoeuvring space.

Aerodynamics are important to the sector, with various players, including the Centre for Sustainable

Road Freight, all investigating 360 degree airflows around vehicles.

The European Commission has made noises – which have currently subsided – about limiting UK

trailer heights to 4m, rather than the 4.8m common in the UK. Lowering the height of UK trailers


28 2014 Edition

would have a profound effect upon the development of higher capacity double-decks and

aerodynamics. It remains to be seen whether this issue will re-emerge.

It is worth noting that Ireland has recently introduced a maximum height for trailers to 4.65m.

Traditionally trailers sell best over the summer months and drop away during the Christmas

approach but commentators report there has been no seasonal slump for three years.

Trailers typically have twice the lifespan of tractor units, meaning much of the parc is ageing. CLEAR

International puts current annual sales at 15,500 (substantially up from the 14,000 of 2011). Director

Gary Beecroft believes that 2014 onwards could see a return to 17,000-18,000 units annually.

UK manufacturers include SDC, Montracon, Dennison, Don-Bur, Lawrence David and Cartwright.

Andover Trailers in Hants are another small but specialist supplier. Krone, Schmitz Cargobull and

Kögel are also main players in the European market.

Commentators put trailer price increases at 2.5% to 5% for 2013.

More detail on the trailer market is available from The West European Trailer Market Report from

CLEAR.

2.9 THE DEMAND FOR LONGER TRAILERS

The Department for Transport is conducting a trial of 1,800 longer semi-trailers, which started in

January 2012.

The 10-year trial involves 900 semi-trailers of 14.6m in length (ie one metre longer than the current

maximum), and a further 900 semi-trailers of 15.65m in length (ie 2.05 metres longer). This would

bring the total maximum length of the articulated vehicle to 17.5m for the first trial category and

18.55m for the second. The trial will provide the opportunity to establish the impacts of each length.

The longer semi-trailers are required to operate within the UK’s existing domestic weight limit (44

tonnes for vehicles of six axles).

In fact as of April 2013, one year after the first volume of longer semi-trailers hit the roads, the trial

participation stood at 72 operators with live Vehicle Special Orders (VSOs), representing 475 trailers

either on the road or in construction.

A DfT review of the trial, by Risk Solutions, published in May 2013, says:

“At the end of 2012, approximately 25% of the 175 companies holding allocations had taken up

some or all of their trailers. Individual operators hold allocations from 1 to 90 trailers. The early

uptake has been largely driven by medium (more than 50 drivers) or larger operators working in

general haulage/pallet or larger retail operations.


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“Based on survey responses to date, HVST [high volume semi-trailer] operations in 2012 involved

approximately 350 trailers running almost 70,000 journey legs, totalling 8.3 million km and

transporting more than 600,000 tonnes of cargo. The average single leg distance was 125km

although individual operator averages range from 35km to 358km.

“Of the trailers known to be on the road, only about 15% are the shorter length category, up to

14.6m.”

Operators had until the end of 2013 to use their allocation of longer semi-trailers; the DfT has

appealed for operators to surrender any unneeded permits.

A further review was being undertaken by Risk Solutions in Autumn 2013 and the report will be

published in Spring 2014.

Impacts of changes in trailer capacity

Longer trailers will potentially give far better vehicle utilisation for operators carrying high-cube, low

weight goods. However, early anecdotal evidence from operators suggests that the use of these

vehicles depends upon identifying exactly the right contract portfolio and this is difficult in practice.

While fully laden these trailers can indeed save money and vehicle time, running them part-loaded

or empty comes with a correspondingly large fuel penalty. Therefore the difficulty of optimising their

use is currently the biggest obstacle to their future.

In the long term, if the trial proves successful, the adoption of longer trailers could be expected to

reduce trailer unit sales, as double-decks have proven to do.

There are currently issues surrounding the safe loading of double-deck trailers which operators will

need to respond to in conjunction with the Health and Safety Executive. Netting and curtains are not

necessarily considered sufficient to keep top-deck loads in place but strapping can involve asking

drivers to work at height, which is also a health and safety risk. Anecdotally operators also report

that strapping each individual pallet slows operations unacceptably. Discussions are nearing a

solution.

2.10 AVERAGE VEHICLE AGE BY YEAR

The average age of a fleet vehicle has remained at 7.4 years since 2011 after increasing every year

from 2008, as the recession delayed capital investment. This reflects the higher levels of new vehicle

sales in 2011 and 2012, compared to 2009 and 2010.

As vehicles move into their second life they are commanding high prices; at the same time fewer

very old vehicles (13 years +) are being scrapped as previously, so their figure is inching upwards.

DfT figures in Table 11 show 13.8% (63,500) of the vehicle parc is over 13 years old; this is marginally

higher than last year. Vosa’s data in Table 12 puts 14.5% of the market at 12 years +, however, which

is lower by two percentage points than last year.


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Over half of the vehicle parc is more than six years old. Only 23% of the vehicle parc is less than

three years old, which can be extrapolated to 106,300 vehicles, some 2,700 vehicles or 2.5% less

than last year.

In 2009, by comparison, this breakdown showed that 25% of HGVs were under 3 years old (now

23%) and 28% were between three and six years. A further 32% were 6-13 years and some 12%,

representing about 56,400 vehicles, were 13 years old or more. This suggests that between 25% and

50% of the vehicles in the market have repair and maintenance contracts.

It is probably no coincidence that these 106,300 vehicles are almost equivalent to the 103,000 units

owned by the leasing organisations, (see table 19). The percentage of vehicles under three years old

also corresponds with the proportion maintained by franchised dealers in our Part II survey.

TABLE 14: LICENSED HEAVY GOODS VEHICLES BY AGE SINCE FIRST REGISTRATION 2000-2012

Ye

ar 0-1

years 1-2

years 2-3

years 3-4 years 4-6 years 6-13 years 13 years

+ Unknown

1 Total

Avg yrs since

1st reg

No. % No. % No. % No. % No. % No. % No. % No. % 00 51.1 11 47.4 10 47.3 10 37.6 8 73.5 16 151.0 32 58.0 12 5.7 1 471.5 6.7

01 51.5 11 49.7 10 45.8 10 43.8 9 69.9 15 146.0 31 64.8 14 6.0 1 477.5 6.6

02 48.8 10 50.7 10 48.5 10 43.5 9 75.1 15 141.5 29 71.1 15 6.4 1 485.4 6.6

03 51.9 11 47.4 10 48.7 10 44.6 9 79.3 16 142.0 29 70.4 14 6.8 1 491.1 6.6

04 52.9 10 51.0 10 46.9 9 46.4 9 81.5 16 152.4 30 67.2 13 7.4 1 505.8 6.7

05 55.2 11 51.7 10 49.9 10 43.2 9 80.8 16 156.6 31 63.1 12 7.6 1 508.2 6.6

06 52.5 10 54.1 11 50.8 10 45.9 9 78.1 15 167.8 33 51.3 10 7.8 2 508.3 6.6

07 45.2 9 51.6 10 53.2 10 48.3 9 80.8 16 173.9 34 49.6 10 8.3 2 510.8 6.7

08 50.7 10 43.8 9 49.7 10 48.9 10 80.9 16 154.8 31 58.6 12 8.5 2 495.9 6.7

09 29.5 6 49.9 10 43.2 9 47.4 10 85.4 18 154.7 32 58.6 12 9.1 2 477.8 6.9

10 28.8 6 29.0 6 49.2 10 41.8 9 88.8 19 163.6 35 59.2 13 9.7 2 470.1 7.2

11 38.8 8.3 28.2 6.1 28.7 6.2 47.3 10.2 81.9 17.6 167.9 36.1 62.3 13.4 10.4 2.2 465.5 7.4

12 40.4 8.8 38.3 8.3 27.6 6.0 27.6 6.0 82.2 17.8 170.5 37.0 63.5 13.8 10.5 2.3 460.6 7.4

Key: Figures in thousands

SOURCE: DfT TABLE 'VEH0507'


31 2014 Edition

TABLE 15: AGE DISTRIBUTION OF HGV VEHICLES LICENSED AT END OF YEAR

Age 2012 2011 2010 2009 2008

Up to 1 year 10.8% 8.6% 6.3% 6.3% 10.1%

1-2 years 6.9% 6.2% 6.5% 10.3% 8.7%

2-3 years 4.3% 6.4% 10.7% 9.0% 9.9%

3-4 years 12.0% 10.4% 9.1% 9.8% 9.8%

4-5 years 10.0% 8.9% 10.0% 9.7% 8.8%

5-6 years 8.7% 9.0% 9.2% 8.3% 7.8%

6-7 years 8.9% 8.4% 7.9% 7.2% 6.7%

7-8 years 6.4% 7.1% 6.7% 6.1% 6.1%

8 -9 years 5.7% 5.9% 5.6% 5.4% 5.2%

9-10 years 4.6% 4.9% 4.8% 4.7% 4.4%

10-11 years 3.8% 4.2% 4.1% 3.9% 4.0%

11-12 years 3.4% 3.5% 3.2% 3.4% 3.0%

Over 12 years 14.5% 16.4% 15.8% 15.9% 15.4%

Total 100.0% 100.0% 100.0% 100.0% 100.0%

SOURCE: VOSA FOI REQUEST OCT 2013

The small proportion of the 2012 market which is two or three years old will have an inescapable

knock-on effect on the used market in 2014 and 2015. Only 11% of vehicles are between one and

three years old. A proportion of these vehicles could be expected to emerge onto the second hand

market between 2014 and 2016. However their numbers are substantially lower than the vehicles

bought pre-2010, which are now at least three years old. The low numbers alone are enough to

suppress the availability of good quality LEZ-compliant vehicles coming into the used market –

however, additionally, since the recession operators are more likely to run vehicles for longer.


32 2014 Edition

3 THE CURRENT MARKET

3.1 NEW COMMERCIAL VEHICLE REGISTRATIONS

2012 saw stronger truck sales, 2.1% up on the previous year, with rolling year figures of 45,000, not

that far below the 50,000 mark witnessed during the market’s height. More than 28,000 rigids and

some 16,000 artics were sold during 2012.

This has been a necessary fillip for the industry after dire truck sales levels during the 2008-11

recession. Manufacturers need sales to pick up for their survival and operators needed the resources

and confidence to reinvest in fleet.

However, the end of year figures for 2012 were lower than those suggested by October 2012’s

rolling year, which placed truck sales at 47,350.

By comparison, October 2013 saw extremely strong sales, which have brought the year back on track

with a rolling year figure of 47,000.

The driving force behind 2013 sales is the 2014 switch to Euro-6 emissions standards. Although

vehicle manufacturers have worked hard to dispel the fears around the extra cost, weight and fuel

consumption of Euro-6, there has still been a push to buy late Euro-5 models ahead of the January

2014 legislative cut-off.

The picture of sales up until the end of September 2013 is complicated by the Euro-6 derogation

scheme. The derogation allows any Euro-5 vehicle bought and manufactured before the end of

September 2013 to be registered for up to one year after the Euro-6 emissions legislation has come

into effect on 1 January 2014. As these vehicles are not registered, they do not appear in the Society

of Motor Manufacturers and Traders (SMMT) registration figures – and so vehicle sales overall may

be higher than the SMMT figures suggest.

Conversely in 2014, some vehicles may be registered which are not reflective of that month’s sales

or manufacturing output.

It is unknown how much Euro-6 will suppress new vehicle sales. Last year the Texaco Operator

Research Programme into buying forecasts (as reflected in Part II of this report) suggested there

would be a 20% pull forward in buying schedules, leaving 2014 sales light. In fact 2013’s survey

shows that the pull-forward was even stronger than anticipated. However, it also shows that

operator purchasing forecasts as seen in Part II remain strong. Manufacturers, on the other hand,

are offering dispiriting predictions for 2014.

Many of the industry’s suspicions about the negatives of Euro-6 are now successfully disproved.

Manufacturers pushed the tremendous fuel economy improvements of later Euro-5s through 2012

and the early part of 2013, to maximise pre-Euro-6 sales, and since then have concentrated on the

technological and operational prowess of Euro-6.

1. The average Euro-6 truck is only 200kg heavier than an equivalent Euro-5; some are lighter

than this.


33 2014 Edition

2. 2013 road tests in Commercial Motor magazine suggest that many Euro-6 tractors are

sustaining or beating the fuel consumption of even late Euro-5 models.

3. However, at the time of writing, Euro-6 trucks look likely to cost 8%-10% more than Euro-5

equivalents, largely thanks to the substantial R&D costs which have not only achieved the

greatest proportional reduction in emissions yet, but have done so without sacrificing

weight or fuel consumption. Some operators suggest that a need for 2014 sales will drive

discounts at dealerships; however, they may well find there is a limit to what price cuts

manufacturers can afford to make.

TABLE 16: NEW COMMERCIAL VEHICLE REGISTRATIONS

New HGV registrations

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

51.1 51.5 48.8 51.9 52.9 55.2 52.5 45.2 50.7 29.5 28.8 38.8 40.4

Key: Thousands

SOURCE: DfT 'VEHICLE REGISTRATION BY AGE'

The rolling year figures for 2013 are still very healthy overall. SMMT’s figures for August show

44,279, a higher final figure than DfT for the close of 2012. (As stated above SMMT and DfT figures

sometimes show variance.)

TABLE 17

June Year-to-date Rolling year

No. % change No. % change No. % change

Vans 23,041 3.4% 133,177 11.2% 253,032 2.6%

Trucks 3,995 11.7% 21,320 -10.4% 43,226 -9.7%

Total 27,036 4.5% 154,497 7.6% 296,258 0.6%

SOURCE: SMMT JUNE 2013 VAN & TRUCK REGISTRATIONS

June 2013 registrations figures mark the halfway point for 2013 truck sales. The figures show strong

monthly growth, but overall rolling-year figures slightly depressed from 2012’s 45,000, almost 10%

down from the same point in the previous year. SMMT says: “While truck demand is 10.4% behind

2012 for the first six months of the year, an 11.7% rise in June could be the first signs of 2013

demand rebalancing in the second half of the year.”


34 2014 Edition

TABLE 18: JUNE 2013 ROLLING YEAR FIGURES

RY 13 RY 12 % change

Rigids > 3.5 - 6.0t 6,102 7,219 -15.5%

Rigids > 6.0 - 16t 9,183 10,067 -8.8%

Rigids > 16t 10,754 12,686 -15.2%

All rigids 26,039 29,972 -13.1%

2-axle artics 2,979 3,109 -4.2%

3-axle artics 14,208 14,767 -3.8%

All artics 17,187 17,876 -3.9%

SOURCE: SMMT JUNE 2013 VAN & TRUCK REGISTRATIONS

However, October 2013 figures are positive. The rolling year figures are much stronger than June’s at

almost 47,000, and only fractionally below the previous year.

TABLE 19

October % change Year-to-date % change Rolling year % change

Vans 22,473 26.3% 227,477 11.0% 262,257 6.6%

Trucks 5,105 32.0% 39,457 3.2% 46,921 -0.9%

Total 27,578 27.3% 266,934 9.8% 309,178 5.4%

SOURCE: SMMT OCT 2013 VAN & TRUCK REGISTRATIONS

It is also worth noting that light commercial vehicles (LCVs), which SMMT counts as up to 3.5 tonnes,

have started to recover lost sales ground. In December 2011 these vehicles had rolling year figures

of 260,000. This had declined by 20,000 units by December 2012. An upturn in the figures may be

indicative of greater business confidence generally.

2014 will be a perilous year for the UK truck industry, as manufacturers cannot predict to what

extent the introduction of Euro-6 will suppress new vehicle sales.

More broadly speaking, there is a still a trend toward polarisation at the extremes of weight.

Although 3.5 tonne to 6 tonne vehicle sales are still depressed (15.5% down year-on-year in June

2013), anecdotally more truck operators are considering lightweight vehicles, even at 3.5 tonnes,

which can carry only one or two pallets but have excellent fuel economy and can access a wide

range of urban or rural locations. This operational flexibility is becoming more important as B2C

deliveries grow. At the far end, the concentration of top weight vehicles is well established to allow

maximum payload, with artics outselling rigids by an additional 60%.


35 2014 Edition

3.2 COMMERCIAL VEHICLE SALES BY MAKE, OVER 3.5T AND LESS THAN 6T,

AT END OF DECEMBER 2012

TABLE 20

YTD-12 % YTD-11 % % Change

Ford 2,879 40.40 1,381 24.95 108.47

Fiat 1,416 19.87 1,171 21.16 20.92

Mercedes 1,367 19.18 1,458 26.35 -6.24

Iveco 444 6.23 567 10.25 -21.69

Peugeot 359 5.04 354 6.40 1.41

Volkswagen 251 3.52 221 3.99 13.57

Renault 215 3.02 113 2.04 90.27

Other imports

83 1.16 140 2.53 -40.71

Vauxhall 73 1.02 51 0.92 43.14

Isuzu Trucks

21 0.29 40 0.72 -47.50

Renault Trucks

8 0.11 5 0.09 60.00

Nissan 6 0.08 11 0.20 -45.45

Citroen 4 0.06 18 0.33 -77.78

Hino 0 0.00 4 0.07 -100.00

Total 7,126 100.00 5,534 100.00 28.77

SOURCE: SMMT REGISTRATION FIGURES DEC 2012

In 2010 the market shifted 6,870 units and so the 2012 figures (7,126) represent not just a comeback

from the supressed figures of 2011 but a genuine leap forward. It is notable however, that the extra

volume stays very much in the hands of the top three players who hold 80% of the market between

them.

Ford has pulled ahead strongly in the 3.5-tonne to 6-tonne range, almost doubling its number of

units sold. This had previously been safe ground for Mercedes-Benz. However, it should also be

noted that the 3.5-tonne to 6-tonne figures include manufacturers such as Ford, Fiat, Peugeot and

Citroën who are not really in the truck business. The Fiat vehicles are mainly motor homes.

Many of the Ford vehicles are minibuses. Indeed Ford says that while its success in the sector was

due to fleet renewals and economic recovery, its biggest seller of 2,400 units was a 17-seat minibus

shortly after the introduction of bus emissions Stage 5 legislation.


36 2014 Edition

Only Iveco and Mercedes produce bona fide commercial vehicles in both weight categories. The over

6-tonne category is considered by some manufacturers to constitute real load-carrying vehicles.

3.3 SALES OF VEHICLES > 6.0 TONNES AT END OF DECEMBER 2012

TABLE 21

Year to Date 2012

Year to Date 2011

% Change

YTD-12 % YTD-11 %

DAF Trucks 11,153 28.91 9,863 26.36 13.08

Mercedes 6,422 16.65 6,326 16.91 1.52

Scania 4,652 12.06 4,071 10.88 14.27

MAN 4,324 11.21 4,772 12.76 -9.39

Volvo Trucks 3,976 10.31 4,624 12.36 -14.01

Iveco 2,908 7.54 2,834 7.58 2.61

Renault Trucks 2,555 6.62 2,763 7.39 -7.53

Isuzu Trucks 873 2.26 720 1.92 21.25

Dennis Eagle 748 1.94 664 1.77 12.65

Mitsubishi Fuso 735 1.91 597 1.60 23.12

Hino 198 0.51 141 0.38 40.43

Other imports 31 0.08 24 0.06 29.17

BMC 1 0.00 11 0.03 -90.91

Total Heavy CV 38,576 100.00 37,410 100.00 3.12

SOURCE: SMMT

DAF still leads the field overall in terms of heavy vehicles, with Mercedes still second. However, the

notable change here is that the new volume in the market has found its way almost entirely to DAF.

DAF’s consistently strong showing in the HGV sector is due to factors such as price, reliability and

local manufacture.

Scania has beaten DAF in terms of percentage change – 14.27% against DAF’s 13%, but is still a long

way behind in terms of volume, or numerical increase. As the overall increase in the market was only

3.12%, DAF gained that and a substantial portion of existing sales.


37 2014 Edition

The market overall has come back strongly in 2012 and 2013. Rolling year figures for June 2013 put

truck sales at 43,000 units – and although the rigid market is slightly down and the artic market less

so, October’s figures suggest 2013 will end well over 40,000 units. (See Tables 18 and 19.)

In Part II, data from the Texaco Operator Research Programme into 500 fleets shows that fleet

buyers bought almost twice the vehicles they were expecting to in 2013 and that 2014 sales look

likely to be strong as well, with the biggest fleets earmarking 100 new vehicles a piece.

It is also worth noting that some manufacturers – such as MAN – have built up a sizeable Euro-5

rental fleet, thereby retaining new Euro-5s for the market ahead of the Euro-6 deadline.

3.4 SALES FOR VEHICLES OVER 6.0 TONNES FOR SEPTEMBER 2013

TABLE 22

Sep 13 Sep 12 % Change

Year to Date 13 Year to Date 12 % Change

No. % No. % No. % No. %

DAF Trucks 1,516 28.63 1,184 30.05 28.04 8,366 28.58 8,619 30.33 -2.94

Mercedes 1,087 20.53 637 16.17 70.64 4,782 16.34 4,485 15.79 6.62

Scania 625 11.80 377 9.57 65.78 4,130 14.11 3,341 11.76 23.62

Volvo Trucks

611 11.54 401 10.18 52.37 3,071 10.49 2,802 9.86 9.60

MAN 516 9.75 454 11.52 13.66 3,023 10.33 3,161 11.13 -4.37

Iveco 362 6.84 381 9.67 -4.99 2,433 8.31 2,329 8.20 4.47

Renault Trucks

226 4.27 279 7.08 -19.00 1,475 5.04 1,767 6.22 -16.53

Isuzu Trucks 111 2.10 85 2.16 30.59 682 2.33 660 2.32 3.33

Dennis Eagle

93 1.76 67 1.70 38.81 563 1.92 569 2.00 -1.05

Mitsubishi Fuso

128 2.42 62 1.57 106.45 517 1.77 500 1.76 3.40

Hino 15 0.28 10 0.25 50.00 144 0.49 164 0.58 -12.20

Other imports

5 0.09 3 0.08 66.67 82 0.28 15 0.05 446.67

BMC 0 0.00 0 0.00 0.00 0 0.00 1 0.00 -100.00

Total Heavy CV

5,295 100.0 3,940 100.0 34.39 29,268 100.0 28,413 100.0 3.01

SOURCE: SMMT REGISTRATION FIGURES SEPT 2013


38 2014 Edition

The figures above show that although there have been some fluctuations lower down the table, DAF

has seen marginal shrinkage in its market share year-on-year, along with Renault, while Mercedes,

Volvo, Iveco and, more spectacularly, Scania have cemented their positions.

Best-selling trucks of 2012

Industry observers indicate that, of the best-selling trucks in 2012, the Renault Premium led the way,

at 44-tonnes, closely followed by the 7.5-tonne DAF LF, and the 40-tonne DAF XF. The MAN TGX, at

44-tonnes was followed in unit terms by the 18-tonne DAF LF and then the 7.5-tonne Iveco

Eurocargo. Volvo’s FH460 is in seventh place, while its FH500, both at 44-tonnes is in twelfth place.

Mercedes Actros and Axor take eighth and ninth place, with the 2545LS version of the Actros not far

behind. DAF’s LF 160HP 7.5-tonner is in tenth place.

DAF has four of the top 12 models, Mercedes three, and Volvo two. Unit sales for the top four

performers were between 1,000 and 1,500 trucks annually.

TABLE 23: COMMERCIAL VEHICLE REGISTRATIONS 2012 BY TYPE OF VEHICLE

YTD Sept

13 YTD

Sept 12 % change

All vans to 3.5t 205,004 187,067 9.6%

Rigids > 3.5t - 6.0t 5,084 5,958 -14.7%

Rigids > 6.0t - 16t 7,098 7,525 -5.7%

Rigids > 16t 8,760 9,263 -5.4%

All rigids 20,942 22,746 -7.9%

2-axle artics 2,179 1,805 20.7%

3-axle artics 11,231 9,820 14.4%

All artics 13,410 11,625 15.4%

SOURCE: SMMT SEPT 2013 VAN & TRUCK REGISTRATIONS


39 2014 Edition

TABLE 24: 2012 VS 2011 SMMT DEC 2012

Rolling Year

2012 2011 Change

Rigids > 3.5t - 6.0t 7,126 5,534 28.8%

Rigids > 6.0t - 16t 9,738 8,452 15.2%

Rigids > 16t 11,741 10,538 11.4%

All rigids 28,605 24,524 16.6%

2-axle artics 2,911 3,144 -7.4%

3-axle artics 14,186 15,276 -7.1%

All artics 17,097 18,420 -7.2%

Total 45,702 42,944 6.4%

SOURCE: SMMT DEC 2012 VAN & TRUCK REGISTRATIONS

3.5 FORECASTS FOR 2014

TABLE 25: UK ANNUAL TRUCK SALES GVW > 6T

GVW Class 2013 2014

Heavy total 30,109 27,342

Medium total 9,529 8,424

Key: Medium trucks = 6-15 tonnes; heavy trucks = 15 tonnes+ SOURCE: LMC AUTOMOTIVE 'GLOBAL COMMERCIAL VEHICLE FORECAST'

3.6 TRENDS IN THE SECOND HAND MARKET

The second-hand market has been under considerable pressure to acquire good clean trucks which

fit operators’ needs for both price and emissions standards. Emissions legislation has driven used

truck sales as much as it has shaped the new truck market. The final phase of the London Low

Emission Zone in 2010-11 pushed used Euro-4 prices high, and it looks likely that Euro-5 vehicles will

command excellent residual values for two reasons. One is their first-life owners are likely to run the

vehicles for longer to postpone expensive upgrades to Euro-6 or beyond; and secondly, as Euro-6

models are likely to command 8%-10% more than an equivalent Euro-5 when new, that price hike is

likely to be passed on into second life wherever possible.


40 2014 Edition

The used market rarely deals with product less than three years old and usually considerably older; it

is therefore some years behind the new vehicle registrations trends. As context therefore, we should

note that low new vehicle sales in 2009 and 2010, coupled with operators’ extending normal

replacement cycles meant that fewer desirable trucks came into the used marketplace in 2011, 2012

and 2013, keeping prices unusually high.

Approximately 280,000 Euro-3 vehicles over 3.5 tonnes were sold between October 2001 and the

introduction of Euro-4 in October 2005. By contrast 165,000 Euro-4 vehicles made it to market. But

the real hit was taken by Euro-5, which since its introduction in October 2008 had shifted 144,000 by

July 2011. Most of these vehicles would not make any impact on the used market until 2012

onwards, or for three+ years after first sale.

There are two main auction houses in the commercial vehicle sector: BCA and Manheim. BCA notes

a slow market, with the strongest activity in the vibrant export sector. The demand abroad for 18-

tonne rigids and for manual gearbox artics is helping to support prices.

Most re-marketed vehicles are Euro-3 or Euro-4, agree both houses. BCA says the average age of

vehicles is eight years, Manheim seven to eight years.

Manheim says that it recently saw strong competition for 2009-plated Euro-5s.

BCA says tractor units are maintaining high residuals thanks to a lack of available stock, and are more

sought after if they have manual gearboxes. Rigids over 14 tonnes are holding their value; but 7.5-

tonne vehicles struggle with an eight-year-old model realising close to scrap value. BCA attributes

this to licence changes, which mean that drivers who gained their licence post-1997 must take a

separate vocational test to drive a 7.5-tonne vehicle. There is plenty of available 7.5-tonne stock but

little demand. (See section 2.5 for analysis of 7.5-tonne sales.)

Manheim feel 7.5-tonners sell “if priced realistically”.

BCA concludes that buyers will pay whatever price is necessary to acquire desirable stock, and that

specialist vehicles and trailers are in particularly high demand.

Manheim acknowledges the severe restriction in stock levels but anticipates that an “artificial de-

fleet volume spike” will continue into early 2014 following strong new vehicle sales ahead of the

Euro-6 implementation. It notes that while operators have been defleeting to accommodate more

Euro-5 new purchases, many are holding onto a proportion of the replaced vehicles for the 2013

Christmas period and will re-market them in the New Year.

It is worth noting that the mechanism for auctions has changed substantially in the past few years

with e-commerce becoming a large part of the business. Online auctions attract a strong presence

for both Manheim and BCA. Online auctions open up the market increasingly to foreign buyers

which supports the already strong export market. Manheim anticipates selling 60% of its product to

online buyers in 2013.


41 2014 Edition

3.7 SUPPLIER DEALER NETWORK

It is estimated there are about 1,000+ franchised commercial vehicle dealers in the UK – the total is

boosted by the large number of Ford dealers covering their van sales and service.

The seven major truck brands have over 650 between them, some of which offer service or sales

only.

Company policy with regard to ownership of the outlets can vary from one company to another.

Some have the philosophy that independents provide a better service to the customer as they are

more entrepreneurial and more motivated than a head office controlled outlet is likely to be. They

take the view: “If it’s your own money invested in a business you work harder for it.” In some cases,

however, the cost of real estate makes it financially difficult to justify a presence and so the vehicle

manufacturer may take ownership to cover areas such as London.

Volvo has 84 dealers in the UK and Ireland, 32 owned by three Volvo Truck and Bus groups and 52

owned by independent dealer groups. Two are service only.

Scania has 90 outlets, 42 of which are company owned and the other 48 are run by six independent

dealers. Just four of these are service-only.

Iveco has 97 outlets, including 17 main distributors offering sales, service and support, and then 47

satellite outlets, offering sales and service and 33 service-only points. All are independent of Iveco,

with one exception – the company recently took over Grays Truck Centre, its dealer in Guildford.

DAF has 136 dealers, all independent, including 33 sales dealerships. DAF Dealers in the UK are

supported by PACCAR Parts Distribution Centres in the Netherlands, the United Kingdom and Spain.

There are seven dealers in Ireland, of which one handles sales.

MAN has 69 dealer locations, including two in Northern Ireland. 16 are wholly-owned by MAN, the

remainder franchised. Technically MAN dealerships are all service outlets, as all sales are conducted

by manufacturer employees.

Renault has 74 sites in the UK and Ireland. 30 of these are service-only.

Mercedes-Benz has 88 sites, 54 of which handle sales.

Ford has 220 CV dealer sites, all offering sales and service. Of its 550 total sites (including passenger

car dealerships) it owns only 50 and the rest are independent.

An estimate of the number of outlets is shown overleaf.


42 2014 Edition

TABLE 26: DEALER NETWORKS OF MAIN COMMERCIAL VEHICLE SUPPLIERS

Brand Total dealers

DAF Trucks 136

Mercedes 88 *

Scania 90

Iveco 97 *

Volvo 84 **

Renault Trucks 74 *

MAN 69 **

Subtotal:

638

Ford 220

Others 80+ *

Total estimate

938

*As published in September 2012 **UK and Ireland

SOURCE: MANUFACTURERS’ FIGURES

Discussions with industry suggest the number of sales outlets is fairly stable. The market is mainly a

replacement one nowadays and the emphasis is on service of the existing parc. It is estimated by

industry experts that two-thirds of dealers did not make a profit on truck sales last year and that, for

all dealers, there is a greater margin in afterservice than in sales.

The truck market is reported to be more relationship-driven than the car market and so local

representation can be important. Volvo, for example, operates a hub-and-spoke arrangement where

there is a main dealer with a number of service outlets in the surrounding area.

It is also important to operators’ efficiency that they do not have to travel too far for servicing.

While dealers make their money from servicing, the replacement parts market is the on-going

revenue-spinner for truck manufacturers. As it is easier for them to sell into the 0-4 year old

warranty market, and operators often have mixed fleets, manufacturers have to try to add value in

this part of the market. DAF’s Truck-Related Parts (TRP) system, which supports parts for all vehicle

marques, while also acting as a distributor for consumables such as fuel and lubricants, is an

example.

Manufacturers also put a high emphasis on compliance tools and first time pass rates through their

dealerships.

A review of the structure of the fleet operator business (see tables 28 and 29) reveals that some 44%

of vehicles are run by 3% of the operators (about 355 fleets including own-account fleets) and

overall some 90% of vehicles are run by 45% of operators. Thus it is prudent for the corporate offices


43 2014 Edition

to deal on a key account management basis with the (3%) large fleet operators and local dealers to

focus on the other 41% which have between two and 20 trucks.

Some manufacturers, such as MAN, handle all sales centrally with dealers' premises as facilitators.

3.8 SERVICE AND AFTER SALES

It is estimated that some 50% of operators have an R&M contract associated with new vehicles,

many of which will be extended beyond the original term.

However, as the pattern of vehicle acquisition becomes more complex, you also need to factor in the

number of vehicles leased from third parties, which are then maintained by the rental or leasing

company. If we see rental and leasing firms as owning approximately one-third of the vehicle parc,

then this pushes up the effective R&M market considerably.

As truck diagnostics become more complicated, it is increasingly hard for in-house mechanics,

particularly those presiding over a mixed fleet, to effectively manage all repair and maintenance

themselves. The level of training and investment in kit can become prohibitive. Hence it is likely that

the end user will become increasingly distanced from truck servicing.

Last year’s Texaco Operator Research Programme into buying patterns also suggested that, out of a

sample owning 52,000 vehicles, 38% of them used a combination of maintenance methods. This

broke down as: 48% franchised dealer; 30% independent dealers and 22% in-house workshops.

Medium sized fleets (26-50) vehicles were the most likely to use in-house workshops, and many of

those subsidised their running by taking third-party customers.

This year the combination of methods approach to maintenance affected 33% of operators and

broke down much more evenly across the various options.

Of those who had a primary or exclusive method of maintenance, 28% are by franchised dealer

(presumably for new vehicles sold on R&M contracts as below), and 31% have in-house workshops.

Only 8% exclusively use independent workshops.

Scania now sells all its new vehicles with an R&M contract.

DAF says: “DAF tractors now come as standard with a two-year R&M contract while CF and XF rigids

come with a full compliance package that includes preventative maintenance, scheduled servicing

and MOTs.”

DAF also says there is a steady increase in those requesting R&M contracts.

MAN sells 65% of its trucks with an R&M contract.

In the case of some manufacturers the dealers may manage the contract themselves – others are

backed by the manufacturer. The latter are growing in favour as dealers choose to reduce their

burden. There is, however, a wide degree of variation in the levels of maintenance cover operators

may choose.


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Contract hire, which includes R&M, has remained a popular option with truck buyers because it

enables high levels of compliance and roadworthiness with fixed costs – providing a reputable third

party provider is appointed.

3.9 REPLACEMENT PARTS

Service and parts are key to profitability for much of the dealer network. There are few over the

counter sales of branded replacement parts as the bulk is used within the franchised dealer

workshops. A proportion are delivered to operator workshops via a delivery service and some are

also distributed to independent service outlets and motor factors such as ETP, Multipart etc. (Motor

factors may sell new and re-conditioned parts, both branded and unbranded.) Parts loyalty drops off

with age but as R&M contracts are extended the uptake of branded parts may be maintained.

Fleet operators with their own workshops and the independent service outlets may also source

some replacement parts directly from the truck manufacturers.

Manufacturers are increasingly focused on aftermarket as a source of on-going revenue, which

means parts availability is of crucial importance if they are to retain customers with out-of-warranty

vehicles. This has focused much attention on supply chain effectiveness for automotive parts for all

vehicle categories.

3.10 FINANCIAL SERVICES

The banks changed their underwriting policy quite severely during the credit crisis leading to

difficulties in securing finance for commercial vehicle investment. The overall availability of business

lending is still troubled. Banks have characterised the past two years with statements about their

willingness to lend but blaming a lack of demand, while government has produced some limited

guarantee measures to boost confidence. However, in August 2013, the Bank of England released

figures showing:

Total business lending (loans and overdrafts) fell by £3.8bn in August 2013, the largest fall

since December 2012

SME lending fell by £0.7bn in August 2013

The British Chamber of Commerce slammed the diminishing levels of finance available to UK plc and

called for a British Business Bank. “While bigger and older companies can get finance when they

need it many young, dynamic, and fast-growing businesses are still frozen out,” it said.

Financially strong transport firms have maintained healthy relationships with their banks.

Although the base rate has remained low, arrangement fees have climbed and this may have had

some effect on demand.


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It is also possible that attitudes to debt have changed through the recession and operators are now

more cautious about exposing themselves to borrowing. One seasoned operator commented that

directors who believed in cash reserves were considered old-fashioned before the recession, when

cashflow was king and nothing was paid for upfront; but the credit crunch made it clear those with

cash would be the survivors.

Those with poorer credit scores have seen suppliers step-up with self-insured financing to secure

sales.

One of the biggest changes in vehicle purchasing, particularly for smaller fleets, is the increased

annual investment allowance (AIA) introduced in the Finance Bill 2013. This raised the level which

could be claimed back from £25,000 to £250,000 for two years.

One area where most purchases are still financed is vehicle acquisition. Although manufacturers

report no clear pattern to finance choices, the lack of bank funding has meant a much higher

proportion of sales are funded by the vendor.

A number of manufacturers operate their own banks (eg Mercedes-Benz) or have such financial bulk

behind them that their credit score is a steady triple A – such as DAF/Paccar. While manufacturers

do not offer finance entirely regardless of risk, they do have far more flexibility than banks and a

vested interest in financing the sale. They are also better equipped to dispose of returning vehicles

than banks.

Purchase-based funding methods include hire purchase and contract purchase. Lease-based

methods include operating lease, contract hire and finance lease. However, although the final details

of proposals have not yet been released, it is likely that by January 2017, the financial reporting

regulations around leases will have changed, removing off-balance sheet leasing. Therefore

distinctions such as finance lease and operating lease will become meaningless. Funding

organisations will have to substantially redefine their offerings.

These changes seem likely to be retroactive, and will therefore affect five-year leases being written

now (2013).

The British Vehicle Rental and Leasing Association (BVRLA) says few companies now offer spot-hire.

Due to varying definitions and ways in which the suppliers label their finance options it becomes

difficult to distinguish trends in types of finance. Last year we noted a blurring in the product

definitions for finance offerings — what may be long-term rental could, differently expressed, be

short-term contract hire. This blurring has continued with growth in markets such as flexi-rental,

which combines the low price and flexibility of rental with high service levels. Discussions suggested

that short-term hire and operating leases have been growing as operators aim to reduce their

upfront commitment in a climate in which their client contracts may be uncertain. Taxation

regulations and credit availability can alter preferences.

This drive towards flexibility in contracts is continuing. Operators are looking for longer terms as the

recession proved that trucks which are kept in service beyond the standard three-to-five year

replacement cycle, do not become prohibitively expensive to maintain or fall short on fuel economy.


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They are also looking for flexibility in the ability to return vehicles. BVRLA has noted a trend toward

lease arrangements which act, for the operator, like rental, with all the benefits of leasing but the

inherent elasticity of contract typical of rental.

Operating lease: Operating leases currently allow the asset to remain off-balance sheet with

ownership retained by the supplier, but will not once new rules come into play. Currently rentals are

lower than with finance leases because the residual value of the vehicle is off-set against monthly

costs. However, these popular products will need to be redefined once regulations change.

Contract hire has become a popular form of vehicle leasing in the UK hire and reward sector, as well

as with own-account operators. For a set monthly payment, the customer gets the use of a vehicle

for an agreed duration and mileage. The fee takes into account the vehicle’s price when hired, its

forecast mileage during the contract and its estimated residual value at the end. As long as the

mileage is not exceeded (and the vehicle is in a fair condition) it is returned at the end of the

contract, with no further cost. The leasing company take the residual value risk. For the operator it

avoids tying up capital.

With a finance lease the user chooses to pay either the entire cost of the vehicle, including interest

charges, over an agreed lease period or opts to pay lower monthly rentals with a final payment

based on the anticipated resale value of the vehicle. The user benefits with a fixed cost but does

take on the administration and operating risks, for example unexpected maintenance, repairs and

losses in residual value. The benefit of a finance lease, which is an on-balance sheet product, is that

the lease rentals can be written off against taxable profit as opposed to ‘writing down’ allowances

(depreciation) which is likely to be less.

At the conclusion of the contract you can continue to operate the vehicle for a nominal fee, but you

will at no time take ownership of the asset. Ownership of the vehicle remains with the leasing

company for the duration of the contract, but the vehicle does appear on your balance sheet with

the capital element of the outstanding rentals representing a liability. Finance leases have been

declining in popularity but manufacturers argue there is a still a place for them. Once new reporting

regulations come in, technically most leases will be finance leases.

Under contract purchase the company agrees to buy the vehicle via a series of monthly instalments,

covering the cost of the vehicle and an interest element. The monthly fee usually includes a charge

for any additional services, such as maintenance. There is usually a final balloon payment, equal to

the vehicle’s residual value, after which legal ownership passes to the user.

Having gained legal ownership, the new owner can keep the vehicle, sell it on directly, or sell the

vehicle back to the finance company for a price agreed at the start of the contract.

Ownership of the vehicle for tax purposes passes to the user on the day the contract is signed,

meaning that its cost can be written down on the balance sheet (by claiming capital allowances).

It is worth noting that while hard data on vehicle acquisition methods is scarce, some points can be

drawn from our investigation:

The market is likely to sustain its demand for flexible products, particularly around cashflow

management. The trend for lease terms to be dictated or negotiated by company


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accountants rather than operational directors will also remain strong, particularly as balance

sheet rules shift.

Again the big part played by the leasing companies muddies the picture. Sale and lease-back

schemes through which operators can release equity from assets and return to a monthly

instalment plan is popular. Equally long-term leasing, long-term rental and contract-hire

arrangements all become murkily similar in practice. Operators themselves do not always

differentiate between whether they own or lease the asset.

Trends in acquisition methods are difficult to define, as some manufacturers will not reveal

information they categorise as commercially sensitive, and those who do, notice different patterns.

While leasing terms have remained stable or lengthened very slightly, funding terms have often

lengthened as trucks became more expensive and operators wanted to spread the costs over a

greater time period.

Those manufacturers who shared information show a range of 16%-25% of vehicle buyers use cash,

which is a reduction for some of the manufacturers and against the operator sample surveyed in last

year’s report. This is quite possibly because as vehicle operators step up their investment, they are

protecting cashflow.

The BVRLA (which represents the UK vehicle rental and leasing industry) has 78 commercial vehicle

members covering some 443,000 vehicles, of which about 103,000 fall into the HGV category.

Information from the BVRLA indicates that member fleets under different finance arrangements

break down as shown in the table below.

TABLE 27: FINANCE OF BVRLA MEMBER TRUCK FLEETS

2006 2007 2008 2009 2010 2011 2012

Rental 38,974 52,197 53,530 28,325 48,604 38,520 43,105

Contract hire 86,801 98,593 102,864 101,940 94,847 59,315 44,014

Fleet management 13,518 15,956 23,325 21,357 22,807 8,825 8,096

Finance lease 2,890 853 615 416 641 3,180 2,946

Contract purchase - 55 60 44 3,620 109 4,301

Personal contract 6 3 2 1 15 0 1

TOTAL HGV 139,293 166,746 179,719 151,622 166,258 109,949 102,463

SOURCE: BVRLA

Last year the number of vehicles in the collective BVRLA fleet had grown by some 23,000. In 2013

however, the members’ truck fleets have contracted by 8.5% or almost 10,000 units.

BVRLA says its member data is not robust enough for market analysis, as it is not audited and

members can make mistakes in categorising vehicles in the survey, with each member having

sufficient vehicles to severely skew the numbers. Contract purchase, for instance, was strong (over


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3,000 units) in 2010, dropped to almost nothing in 2011 and has returned to over 4,000 units in

2012. This is quite likely anomalous and may be the result of a single firm miscategorising its

contracts.

More revealing perhaps is the overall reduction in fleet and, in particular, the reduction in contract

hire. BVRLA classifies every contract apart from finance leases and fleet management as an

operating lease. Contract hire typically has R&M thrown in and has long been the most popular form

of truck acquisition outside direct purchase. The BVRLA figures suggest this has dropped by 25%. It

will be interesting to see if this data is corroborated over time by other sources.


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TABLE 28: TOP 20 LEASING COMPANIES BY TRUCK FLEET SIZE

Truck Fleet

Ryder 11,500

MAN Financial Services 8,000

Contract Vehicles Ltd 7,374

Fraikin 6,500

Scania Truck Rental 5,000

Dawsonrentals 4,500

Salford Van Hire 3,180

Gulliver's Truck Hire 3,000

Iveco Capital 2,000

Pullman Fleet services 1,657

SHB Hire 1,519

Prohire 1,500

Hitachi Capital CV Solutions 1,450

MC Truck Rental 1,400

BRS 1,400

Burnt Tree 1,210

Close Brothers Commercial Vehicles

1,200

Leeds Commercial 1,100

Collease 1,000

Seven Asset Management 900

Total 65,390

SOURCE: MT/BVRLA CV Informer May 2013


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TABLE 29: TOP 12 LEASING COMPANIES BY TRAILER FLEET SIZE

Trailer fleet

TIP Trailer Services 12,000

Ryder 10,300

Dawsonrentals 7,000

Cartwright Rentals 5,500

Hireco 5,000

Fraikin 4,500

Contract Vehicles Ltd 3,107

Collease 2,500

Axis Fleet Management 1,500

Hitachi Capital CV Solutions 1,440

Salford Van Hire 1,335

Trailer Resources 980

Total 55,162

SOURCE: MT/BVRLA CV Informer May 2013

These charts underline the power of the leasing sector. Of the 342,473 vehicles in the market, the

top 20 leasing companies alone own 65,390 of them, or just under 20%.

Equally of a market of 220,000 trailers the top 12 leasing companies own slightly over 55,000 or

25%.

3.11 MERGERS AND ACQUISITIONS IN THE CV MARKETPLACE

In July 2011 German manufacturer Volkswagen took a majority stake in MAN and said it planned to

seek synergies between Scania, MAN and VW, starting with procurement and expected to extend

into R&D and production. It received regulatory clearance in November 2011.

MAN and Scania are now showing greater sales synergies, offering a number of joint tender

documents which offer a combined supply from across the entire group to fleet operators.

Renault SA sold its cross-stakeholding in Volvo AB during the past 12 months, leaving Renault Trucks

as a wholly owned subsidiary of Volvo AB. Renault Trucks, Mack Trucks and Volvo Trucks remain

three strong global truck brands now housed within the Volvo AB portfolio.

October 2013 saw the first DAF truck roll out of its new PACCAR plant in Brazil.


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4 OPERATIONAL CHALLENGES

4.1 INTRODUCTION

According to the Office for National Statistics (ONS), land transport services, which includes delivery

by pipe, was worth £197.8bn in 2011 and £192.2bn in 2012. Despite this drop, there has been

stabilisation in the market and returning business confidence.

Companies hoping to sell into the road transport marketplace need to understand the barriers to

investment, the attitude of senior management and the prevailing concerns of the operations

involved. The full year 2013, and indeed 2014, may see greater business confidence but the

marketplace is dominated by a handful of truisms which have evolved from years of operating in a

tight and latterly crippled sector.

1. It is extremely hard to make money from running trucks. Although successful firms do

command decent margins, these are hard won and come from rigorous cost-control and

efficiency. Firms often make more money from value-add services such as order fulfilment

than from pure transport.

2. There is relentless pressure on rates while, at the same time, customers are demanding

greater visibility of transit, greater efficiency and greater accountability (particularly in areas

such as environmental sustainability). A 2013 Road Haulage Association Members Survey

found most believed rate increases were essential but impossible to achieve.

3. The need for cost control has brought IT systems into increasing focus. Most transport

companies still lack a fully integrated end-to-end IT solution which can capture all costs, and

speed up scheduling and administration across the entire business.

4. Fuel price sensitivity is high, with many hauliers still struggling to pass on costs. There is still

a reluctance to fix fuel costs (hedging), although a few customers may be keener to have

predictable outlay than volatility. Fuel duty rises in 2013 were scrapped by Chancellor

George Osborne, and he has stated that he would like to freeze fuel duty until 2015 if

Treasury funds allow.

5. Collaboration, between transport companies, and across customer accounts is now

prevalent. Shared-platform transport is now commonplace. The use of freight exchanges are

developing into sites not just to find backloads but to create partnerships, find customers

and out-source all but the most core, profitable work. The pallet networks are a significant

and established lifeline for approximately 1,000 UK hauliers but are coming under increasing

price pressure and competitive strain.


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4.2 TRANSPORT RATES

According to the Freight Transport Association (FTA)’s Managers’ Guide to Distribution Costs, overall

haulage rates decreased slightly in 2013 by 0.05%, with 73% of contributors to the survey saying

domestic rates were static, and 15% seeing rates fall. International rates are unchanged.

The ONS Services Producer Price Indices, Quarter 2 2013, also show minimal change for road freight

transport rates through 2013.

Clearly margins are still being squeezed hard with the real cost of operation outstripping existing

rates for the job. (For cost changes see section 4.8.)

4.3 SECTORAL BREAKDOWN

Transport companies are investing cautiously in order to take advantage of remerging volume and a

slightly more robust economy. The ONS summary of its gross domestic product (GDP) report for Q2

2013 reads thus:

UK GDP in volume terms increased by 0.7% between Q1 2013 and Q2 2013. Between Q4

2012 and Q1 2013, GDP in volume terms increased by 0.4%, revised up from the previously

estimated 0.3% increase.

GDP in volume terms increased by 1.3% when comparing Q2 2013 with Q2 2012.

Output of the agriculture, forestry & fishing industries rose by 2.0% in Q2 2013, revised up

from the previously estimated 1.7% increase. This follows a decrease of 5.1% in Q1 2013.

In Q2 2013, production output increased by 0.8%, revised up from the previously estimated

0.6% increase, and follows a 0.5% increase in Q1 2013. Manufacturing output increased by

0.9% between Q1 2013 and Q2 2013.

Construction output rose by 1.9% in Q2 2013, revised up from a 1.4% increase, following a

decrease of 1.3% in the previous quarter.

The service industries grew by 0.6% in both Q2 2013 and Q1 2013.

Output of the transport, storage & communication industries rose by 0.2% in Q2 2013 but

this is mainly due to increases in air traffic and telecoms, not road transport.

The transport firms which survived the recession are stronger, leaner and tougher. 2012 and 2013

saw eventual reinvestment in fleet, but companies are moving cautiously in terms of growth. The

recession may have passed but the lessons learned will not fade quickly.

It has become axiomatic in the road transport industry, however, that a proportion of hauliers do

not know their true operating costs with the accuracy and timeliness they require. This opinion is

often expressed by road transport operators, the Road Haulage Association (RHA), and consultancies

such as DFF International which provides cost tables for RHA members. There is also anecdotal


53 2014 Edition

evidence from the pallet networks that, without investment in appropriate software systems to

generate management accounts, many of their members cannot accurately project rates from their

cost base.

The demand for transport is underpinned by four main sectors: construction, retail, manufacturing

and agriculture.

4.3.1 CONSTRUCTION

According to the ONS, construction order books are finally showing significant growth. In Q2

2013 the volume of new orders was estimated to be 19.8% higher than Q1 2013. The Q2

2013 estimate showed a 32.8% rise compared with Q2 2012. There were large rises in

construction orders for new housing where both public and private new housing showed

strong growth enabling all new housing to record its largest growth (19.4%) since Q3 2010

and its highest volume since Q4 2007. ONS estimates that in July 2013 the volume of

monthly construction output increased by 2.2% when compared with June 2013. This

increase was predominantly due to a rise in new work of 3.2% coupled with a small rise of

0.6% in repair and maintenance.

When comparing July 2013 with July 2012, construction output has increased by 2.0% due to

a 5.8% increase in new work. This rise in new work is in contrast to the estimated 3.6% fall in

repair & maintenance during the same period.

Comparing the three months, May to July, with the same three months a year ago, the

output of construction has increased by 0.8%. Construction output grew by 2.0% when

compared with the previous three months (February to April 2013).

4.3.2 TOTAL RETAIL SALES

TABLE 30

All retail excl. automotive

fuel Food stores

Non-food stores

Non-store retailing

Automotive fuel

2013 Jan 23,940,493 11,276,920 10,996,653 1,666,920 2,926,397

2013 Feb 24,354,249 11,283,423 11,338,602 1,732,224 3,056,020

2013 Mar 30,372,850 14,446,703 13,711,662 2,214,485 3,820,953

2013 Apr 24,096,365 11,179,255 11,173,564 1,743,546 2,993,792

2013 May 24,656,267 11,515,842 11,322,456 1,817,969 3,003,926

2013 Jun 30,919,554 14,416,719 14,222,704 2,280,131 3,796,439

2013 Jul 25,051,064 11,862,939 11,330,889 1,857,236 3,120,246

2013 Aug 24,835,537 11,598,820 11,365,918 1,870,799 3,120,342

SOURCE: ONS 'RETAIL SALES, DATA TABLES, AUG 2013' (SEASONALLY ADJUSTED VALUES)


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Food and drink transport is at the heart of the logistics industry. ONS year-on-year estimates for

August 2013 showed that the quantity bought increased by 2.1%. This continues the underlying

pattern of growth seen since April 2013. The amount spent (value) increased by 3.6%.

Of particular significance to the transport sector is the continuing escalation of the non-store retail

sector, which is predominantly online. From January 2013, the amount spent and quantity bought in

the non-store retailing sector have shown continued strength.

In August 2013, for every pound spent in the retail industry:

42 pence was spent in food stores;

41 pence in non-food stores;

6 pence in non-store retailing; and

11 pence in stores selling automotive fuel.

The greatest contribution to the increase in the amount spent came from non-store retailing.

The Centre for Retail Research’s report Retail Futures 2018 forecasts that by 2018 total store

numbers will fall by 22%, from 281,930 today to 220,000 in 2018 with a further 28,000 shops

disappearing from UK town centres. The share of online retail sales will rise from 12.7% (2012) to

21.5% by 2018 or the end of the decade.

This has huge implications for retail transport providers and for the sector as a whole as the B2C

delivery model will grow in importance. The growth in home delivery has given the transport sector

specific challenges to overcome, not least:

The growth of e-retail has seen a corresponding shift in the behaviour of consumers, such as

the living room replacing the changing room, and many purchased items are therefore

destined for return. This means that reverse logistics (returning goods to distribution point)

is becoming a large part of transport. The business models for this are not yet perfected

either in terms of price or logistics. Transport customers will expect operators to fix this

problem. A Royal Mail survey reveals 75% of online shoppers would be unlikely to use a

retailer again if they had a difficult returns experience.

Consumers are interested in convenient delivery – communication, reliability and

convenience are more important than speed.

Consumers do not want to pay for delivery. Although many cite the success of retailer-led

payment schemes such as Amazon’s Prime and Tesco’s Delivery Saver, these are keenly

priced for the transport they provide, in order to secure customer loyalty rather than profit.

The pressure on rates will continue.

An overview of output from the key industries underpinning freight movements:


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TABLE 31: QUARTER-ON-QUARTER PERCENTAGE GROWTH

Component 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2

Agriculture, forestry & fishing -2.0 -3.9 -4.1 -3.9 -7.2 -3.3

Total production -2.4 -2.4 -2.0 -3.4 -2.5 -0.7

Mining & quarrying (extraction) -11.7 -7.4 -5.9 -14.3 -8.2 -4.1

Manufacturing -0.6 -2.2 -1.5 -2.6 -2.7 -0.4

Electricity, gas, steam & air (utilities) -5.7 2.8 -2.9 5.1 6.9 -0.7

Water supply, sewerage etc. 0.9 -1.1 0.5 -1.5 -1.5 2.0

Construction -4.6 -9.2 -9.9 -7.8 -5.2 0.5

Total services 1.7 1.1 1.1 0.9 1.3 2.1

Distribution, hotels & restaurants 0.6 -0.1 1.4 1.3 2.2 4.2

Transport, storage & communication 2.4 0.3 -1.6 -0.6 0.2 1.8

Business services & finance 2.7 2.2 1.2 1.2 1.4 1.9

Government & other services 0.7 0.8 2.0 1.1 1.2 1.0

SOURCE: ONS TABLE B1 QUARTERLEY NATIONAL ACCOUNTS

TABLE 32: YEAR-ON-YEAR GROWTH (AGAINST 2010 BASELINE)

Component 2010 2011 2012

Agriculture, forestry & fishing -0.7 10.6 -3.5

Total production 2.8 -1.2 -2.5

Mining & quarrying (extraction) -2.4 -14.8 -9.8

Manufacturing 4.2 1.8 -1.7

Electricity, gas, steam & air (utilities) 3.9 -5.9 -0.3

Water supply, sewerage etc. -1.3 4.1 -0.3

Construction 8.3 2.3 -7.9

Total services 0.8 1.5 1.2

Distribution, hotels & restaurants 1.0 0.7 0.8

Transport, storage & communication 3.0 1.6 0.1

Business services & finance 0.4 2.5 1.8

Government & other services 0.3 0.5 1.1

SOURCE: ONS TABLE B1 QUARTERLEY NATIONAL ACCOUNTS


56 2014 Edition

The FTA Quarterly Transport Survey for July 2013 says that, despite a fragile economy: “Sustained

growth in domestic road freight activity levels was reported in Q2 2013. Most industry sectors

expect significant growth in domestic road freight activity in Q3 2013.”

4.3.3 TRADE DEFICIT

July 2013 saw the UK trade deficit soar to £3.1bn compared to June’s £1.3bn. This is an

improvement on 2012’s £5.2bn but nonetheless leaves a £9.9bn deficit in goods.

Crucially, for transport companies, import volumes increased over the same period to a record high

of £104.2bn. The export picture is complex and volatile.

4.4 THE DOMESTIC ACTIVITY IN FREIGHT MARKET

(The most recent Department for Transport (DfT) road freight data available at the time of writing is

Q1 2011. DfT’s statistical analysis unit has migrated to a new computer system and new

methodology and is therefore currently delayed. 2011 Q2, Q3 and Q4 data may be released in the

Spring of 2014, either individually or together. No decision has yet been made on whether to

continue its quarterly bulletins.)

DfT Road Freight statistics tell us that:

Between Q1 2010 and Q1 2011, goods moved by UK HGVs in the UK increased by 6% to over

37 billion tonne kilometres (tonne-km). The amount of tonnes lifted also increased over that

time period by 15% from 355 million tonnes to 408 million tonnes.

Domestic freight activity trends for the UK in recent years broadly mirror those in three of

the four other largest EU economies.

In Q1 2011, there were 1.3 million tonnes of road freight exported from the UK by UK-

registered vehicles. This was an increase of 9% compared to Q1 2010. There was a similar

weight of goods imported in Q1 2011 (1.4 million tonnes).

In 2011, there were about 1 billion tonne-km of cabotage by foreign hauliers in the UK.

Levels of cabotage carried out by operators from the 27 EU states in the UK have declined in

recent years. The level was 44% lower in 2011 than in 2005.

Due to the economic recession, road freight activity was 20% down in 2009 compared to 2004.

However, 2010 and the first quarter of 2011 showed upward figures apart from one glitch during the

heavy weather conditions of Q4 2010. (Freight is categorised by goods lifted and goods moved.

‘Lifted’ measures goods by weight, ‘moved’ is by distance travelled.)

According to the FTA Logistics Report 2013, HGV traffic fell by 3% in 2012 compared to 2011, while

van traffic increased by 1% in the same period. HGV traffic is now 12.64% below its 2007 pre-

recession level while van traffic has dropped around 1% compared to 2007 levels.


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According to DfT Road Freight Data, in 2010 the amount of goods carried by GB registered HGVs

increased by 11% to 139bn tonne-km. However this followed a dramatic contraction during 2009, to

132bn tonne-km, a 13% decrease over 2008; this was largely attributable to recessionary factors.

In 2010, the amount of goods lifted increased by 10% to 1,489 million tonnes compared to

2009’s 1,356.2 million tonnes. In 2010 goods moved increased from 2009’s 125 tonne-km to

139, and 11% jump.

Nonetheless the amount of goods moved was 6.5% lower than in 2000.

In Q1 2011 which is the most recent data set available from DfT at time of writing, goods

lifted was 408 million tonnes (15% up on Q1 2010); goods moved was 36bn tonne-km (5%

up on Q1 2010). The fact that the weight of freight is still growing disproportionately against

the vehicle miles travelled is evidence of continuing efficiency.

The average length of haul for HGVs increased by 17% since 1990 to 93km in 2010. The

average length of haul for articulated vehicles, at 122km, was longer than rigids at 51km.

However the average length of haul decreased against all sizes of vehicles for Q1 2011

against Q1 2010, an average of 8% down for rigids and 9% down for artics.

Between 1995 and 2009, tonne kilometres increased less than GDP. A move to a services-led

economy, with emphasis on financial services on one hand, and increasing supply chain

efficiency on the other, conspired to obscure the link between road freight volumes and

GDP, which had always been considered closely coupled. However, the link remains and the

two, while not always equivalent in growth, usually travel in the same direction. In 2010 GDP

increased by 1% and tonne-km by 11% as the industry re-expanded into ground it lost during

recession.

Commodity movements – broken into bulk, chemicals, retail and miscellaneous — saw a

13% rise in all except retail.

The amount of freight moved by rigids has declined from 31% in 1990, and 24% in 2000 to

just 22% in 2010. This is a 24% decrease for rigids since 1990 against a 20% increase for

artics. Use of large rigid vehicles, over 25 tonnes, has increased by 50% since 1990. This

further supports the idea that operators are moving up the weight range.

However, the 2011 Q1 figures show an increase of 26% in the amount shifted by rigids and a

15% lift against the amount moved by Q1 2010.

It is worth noting there are some difficulties represented by the data in terms of the weight

of freight lifted and, in particular, the distance goods vehicles travel. The DfT road freight

figures suggest that in 2009 goods vehicle kilometres stood at 18.1bn and by 2010 this

increased by 4% to 18.8bn. These figures have not yet been updated to reflect 2011. (DfT

Table RFS0101)

However, the traffic statistics from the DfT are quite different (DfT Table TRA0201). These

list HGV kilometres travelled at 26.2bn for 2009, 26.3bn for 2010 and 25.6bn in 2011. Clearly

there is a huge discrepancy between 18.8bn km, and 26.3bn km. It seems likely that some of


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this can be explained by the wider scope of the traffic statistics which may also take into

account emergency vehicles, foreign vehicles, cranes, fairground trucks and other unlicensed

vehicles which operate outside the freight sector.

However the accuracy of this data is important to understanding the distance goods travel,

the lading factors involved and the amount of empty running which occurs. Further

tightening of the data sets for such figures, and continuing sampling of those data sets for

accuracy, will be increasingly important if the appropriate policy is to be set for road freight

efficiency and indeed, for the industry to continue to achieve such efficiency.

There’s a significant increase toward own-account operators. See below.

The own-account market versus hire and reward

There are three types of licences in the O-licence system: restricted, which allows a company to

transport its own goods; standard, which allows goods to be moved for hire and reward

domestically; and standard international, which allows goods to be moved for hire and reward

domestically and internationally.

The numbers of these licences in 2012 was as follows: restricted 43,420; standard, 31,738; and

standard international, 8,914. In 2013, they stood at: restricted 42,382; standard, 30,196; and

standard international, 8,316.

Own-account operators (or restricted licence operators) have traditionally been considered

approximately 40% of the market. However, this truism masks a growing importance of the own-

account sector shown by DfT figures. When we look at Goods lifted or moved by mode of working

(table RFS0108) in DfT’s road freight statistics, we can see a steady increase in the weight and

distance for freight proportionately handled by own-account operators, or in-house, as opposed to

the third party logistics market.

In the first quarter of 2011, however, there is a huge step towards own-account operators. For the

first time they take over half the market for goods lifted. There is often a slight lift in own-account

freight activity in the first quarter but the 35% step up in Q1 2011 is much higher than usual. Own-

account fleets lifted 216 million tonnes (53%) and transported them 16bn tonne-km (44% of market)

in the first quarter of 2011.

DfT warns that there may be inaccuracy levels of +/-5% in these figures, as they are extrapolated

from the results of 1,000 postal surveys which ask operators what they have shipped in the previous

week. Clearly overall numbers are therefore going to be dicey, and a spike in one quarter may be

due to a higher proportion of own-account operators being in the sample for that survey.

However, this does not explain the long term trend toward own-account growth.

In 2010, hauliers carried 800 million tonnes of goods, own-account 689 million tonnes; that’s 54%

and 46% respectively. In 2000, these figures were 67% versus 33%.

In 2010, hauliers carried 89bn tonne-km, or 64% of the market; own-account 50bn tonne-km or 36%.

In 2000 these figures were 77% versus 23%.


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The growing importance of own-account is undeniable.

There are a number of factors which can be considered here, as part of a hypothesis about the rise

of the restricted licence holder.

Few new logistics contracts are outsourced in the UK; however, there is some evidence that some

companies may take transport in-house after a period of out-sourcing, perhaps when they have

sufficient volume and the right geographic profile. It would not be surprising for some of the largest

e-retailers to take home deliveries in-house, for example

The move between own-account and third party logistics is cyclical. When the economy is stronger,

there is a trend toward focusing on core activities and outsourcing other areas to experts; when the

economy contracts, work gets sucked back in-house. It would not be surprising if, during the 2008-10

recession, more logistics work was taken back in-house, due to the impact of austerity on

commercial spending. However, this would not explain the steady growth in own-account work since

2005.

Although it seems unlikely that own-account operators can achieve the level of efficiency that a well-

run haulier can enjoy, because the opportunities for backloads and consolidation is so much more

limited, it is fair to say that a great deal of innovation and improvement emerges from the own-

account sector. Several finalists in the Motor Transport Awards tend to be own-account operators.

However, the figures for Q1 2011 must be skewed. They show own-account operators carrying 53%

of the freight by weight and 44% by distance – a 35% jump over Q1 2010. We cannot know whether

this remarkable increase will be sustained and DfT figures for the rest of 2011 are not due until

Spring 2014.

The proportion of own account work always lifts slightly in the first quarter of the year, and it is

possible that this trend is increasing due to higher levels of reverse logistics after e-commerce-

fuelled Christmas spending. However, much consumer-led reverse logistics is returned via parcel

carriers and so would not show in these figures.

Let’s look at what this says about the efficiency of the sectors. In 2010, there were 44,435 restricted

(own-account) licences out of a total of 87,747 – that’s 50.6%. This sector controlled 97,030 of the

vehicles (up to 2,000 from the year before against a shrinking market) out of a total of 365,484.

Own-account operators therefore had 26.5% of the vehicle parc – but were shifting 46% of the

goods by weight, and 36% by distance. That suggests very high efficiency levels.

If the Q1 2011 figures are to be believed, then 28% of the vehicles moved some 53% of the freight –

although this strains credulity, it is clearly an important development worthy of future study.

If the DfT figures have any credence then clearly there is a complex and shifting picture emerging

here. This is an area worthy of greater study. It would also be worth the DfT reviewing the data

gathering techniques about freight ownership in order to improve the accuracy of the figures

informing our view of the marketplace.


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TABLE 33: ROAD GOODS VEHICLES TRAVELLING TO MAINLAND EUROPE

Vehicles by country of registration Unaccompanied trailers

All vehicles

UK Foreign Unknown Total

2007 400 1,718 11 2,131 776 2,882

2008 382 1,673 4 2,059 744 2,868

2009 347 1,405 12 1,764 605 2,402

2010 379 1,406 9 1,794 674 2,453

2011 362 1,447 5 1,814 661 2,475

2012 338 1471 0 1,808 622 2,428

2013 Q1/2 167 829 0 996 316 1,312

Key: Thousands

SOURCE: DfT TABLE 'RORO0101: ROAD GOODS VEHICLES TRAVELLING TO MAINLAND EUROPE ANNUALLY FROM 1983'

International freight is declining slowly in terms of UK vehicle numbers and unaccompanied trailers.

However, although cabotage as a whole is in decline, with 2011 levels just 44% of their 2005 total,

the most recent figures show a 12% lift in the first half of 2013 in foreign registered trucks.

Only 20% of trucks travelling to mainland Europe from the UK are owned by British companies.

Goods lifted by UK trucks to go abroad is still fractional, with just 2.7 million tonnes lifted in Q1 2011.

However, that does represent a 10% increase against Q1 2010, following the same increase in the

whole of 2010. We saw a similar but slightly lower increase in goods moved in 2010, although the Q1

2011 figures held steady at 1.7bn tonne-km.

4.5 EVIDENCE OF EFFICIENCIES

Between 1989 and 2007 trucks handled an extra 32bn tonne-km, but with less than an extra million

vehicle miles.

In 2009, 132bn tonne-km were covered by truck, equivalent to 1989 levels but with almost three

million fewer vehicle kilometres.

These extreme efficiencies have been the result of:

Collaborative working

Better routeing and scheduling

Better load-fill including double-deck trailers


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A small proportion of multimodal shift

Better placement of regional distribution centres

The growth in freight exchanges and pallet networks

These efficiencies have been driven by the cost-imperative to use less fuel and, latterly, the

legislative and popular demand for more environmentally friendly transport.

Industry observer and former DAF marketing director Tony Pain comments that in 1960, a 24-tonne

truck with a 15-tonne payload gave a fuel figure of 8mpg. Today we can produce 44-tonne trucks

which run faster and have cut 99% of particulates and NOx emissions with fuel figures of 9mpg.

Against this we have the disconcerting data from DfT which shows that far from empty running

decreasing, it has actually increased. While lading factors have remained fairly constant (ie the ratio

of available payload to actual payload), the percentage of empty running has increased by

approximately 2% to 2.5% across all weights. Truck optimisation is currently running at

approximately 72% on average.

There are many theories as to why this is the case:

It is possible that the freight industry is already optimised in terms of loading. Some own-

account operators, such as the major supermarkets, run at extremely high levels of vehicle

utilisation. For other sectors of the industry, this is simply not possible, such as in waste or

the chemicals industry, where return loads are not an option. It is possible therefore that

increases in the volumes carried by such sectors will affect empty running statistics – but this

does not explain the uniform increase across all weight ranges.

The home delivery sector has expanded hugely and has struggled to optimise deliveries,

given the nature of localised multi-drop freight.

The real reason why empty running is increasing must be subject to greater investigation.

Broadly speaking we have moved to bigger vehicles and bulkier but less dense product.

However, empty running has only decreased by 2% overall since 1985, despite industry’s

best efforts.

Operational efficiency and environmental sustainability go hand in hand as they both relate to the

reduction in emissions caused by fuel consumption and to reducing waste. There have been a

number of initiatives in 2012/13 which may finally offer a scientific basis for the measurement of

environmental/operational improvements and a way for operators to predict the return on

investment for their interventions.

An extensive report by Ricardo-AEA for the Low Carbon Vehicle Partnership’s, snappily titled

Opportunities to overcome the barriers to uptake of low emission technologies for each commercial

vehicle duty cycle report, looked at the most cost and carbon-efficient interventions for each type of

vehicle on different applications.

The Centre for Sustainable Road Freight has the potential to make a tremendous contribution to our

understanding of freight efficiency. It is the first sustained investment in wide-ranging academic


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research to answer the complex questions dogging operational efficiency, such as the industry’s

inability to eliminate empty running, next-generation body designs, and the effects of compounding

interventions on efficiency results.

The Centre brings together Cambridge engineering expertise with Heriot Watt’s Logistics Research

Department, and participants and backers from the commercial vehicle sector and logistics

operators.

4.6 FINANCIAL STABILITY

TABLE 34: TRANSPORT SECTOR – NO. OF INSOLVENCIES

2011 2012 2013

Jan 65 64 46

Feb 54 43 57

Mar 68 74 45

Apr 58 35 55

May 62 61 51

June 57 54 49

July 66 61 62

Aug 57 56 66

Sep 51 90 -

Oct 58 60 -

Nov 49 72 -

Dec 81 31 -

SOURCE: EXPERIAN MONTHLY INSOLVENCY INDEX

The Experian data above suggests that insolvencies were running almost as high in July 2012 and

then again in July 2013 as they were at the beginning of 2011. August 2013 shows substantially more

insolvencies than the same period in the previous two years.

However if you total the first eight months of each year, there is a steady decline, by 11% in the

number of failing firms. 11% may not seem nearly as great a reduction or as reassuring as many

would have hoped almost two years after emergence from recession however.

Indeed FTA quotes Insolvency Service data which suggests that: “The number of road freight

operators declaring insolvency rose by 14% in Q2 2013 compared to Q1 2013. The longer term trend


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over the last couple of years has generally been downwards, but the rise in Q2 2013 means the

number of road freight operators declaring insolvency is returning to a similar level as that seen in

Q2 2011.”

The FTA’s Quarterly Transport Activity Survey, July 2013, notes that despite the pattern of recent

growth in freight activity, customer demand and therefore volumes remain unpredictable and

erratic; and together with rising costs and lengthening customer payment cycles, it remains a

challenging and dangerous market.

The Commercial Motor Trucking Britain shows that business positivity was higher across the board

than it has been previously in the year, with own-account operators feeling the most positive about

the future. (However, optimism bias is a well-known phenomenon associated with periods of

economic contraction, where subjects are more likely to overestimate the chances of good things

occurring.)

TABLE 35

How optimistic are you about the prospects for your company over the next 12 months?

Very optimistic 23%

Fairly optimistic 59%

Not very optimistic 13%

Not at all optimistic 4%

Don’t know 1%

SOURCE: COMMERCIAL MOTOR TRUCKING BRITAIN

4.7 FINANCIAL SUPPORT

The recession was famously associated with the tightest lending culture Britain has known for some

time. Even as the economy has improved, according to the British Chambers of Commerce (BCC), the

lack of confidence in available lending and negative messages from the banks are inhibiting SME

growth.

The BCC conducted a report in May 2013 which showed:

Only 39% of SMEs using any form of external finance, the lowest recorded;

SME confidence that their bank will agree to a future lending request dropped to 40% in Q1

2013, from 43% in Q4 2012.

Among ‘would-be loan seekers’, 40% said they had felt that ‘discouragement’ had stopped

them applying for a loan.


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For those with any appetite for future borrowing, 27% cited access to finance as a major

barrier to running businesses in the next 12 months. The current economic climate (43%)

was still seen as the biggest barrier to running a business

This is likely to be worse for freight transport firms as the sector is renowned for being high risk and

low reward. However, the BVRLA says that the sector is no longer seen as such a high-risk

environment and banks are showing a renewed interest in vehicle acquisition.

4.8 OPERATING COSTS

The FTA Manager’s Guide to Distribution Costs update July 2013 showed 62% of companies did not

raise wages at all in the first six months of 2013. The average pay rise for logistics workers was just

2%, although this is higher than the national average in the year to August 2013 which stood at just

0.7%.

In the 12 months to July 2013, the average vehicle costs climbed by 2%. Diesel climbed by 2.7% and

insurance and maintenance were both inching up. Interestingly overheads showed the highest

growth at 3.2%.

The total cost of running vehicles is still going up substantially. The annual increase to July 2013 was

approximately 2% over 16 tonnes, with 2.66% for a 16-18 tonner, 2.7% for a 26-tonner, and 2.8% at

44-tonnes in the 12 months to April 2012.

Fuel still represents 30% of running costs for a 16-tonner of average mileage; 36% of a 38-tonne artic

and 38% for a 44-tonne artic, according to the FTA report.

4.9 FUEL MANAGEMENT

As fuel is such a large proportion of operating costs and prices are both volatile and likely to keep

climbing, fuel management is important to the survival of road transport firms.

It is clear that with the high price of fuel, there is great scope for companies offering fuel reduction

services such as aerodynamic kit, driver training and scheduling software. A Commercial Motor

survey, Trucking Britain Out of Recession, in September 2011, showed that 20% of the market only

started to look at fuel interventions in 2010.

There has been considerably less talk of fuel escalators and fuel price over the past 12 months.

While an increasing number of transport operators see fuel cost management as their key priority,

for others it slipped in importance. The Chancellor’s repeated decisions to freeze fuel duty, and the

fact that prices slipped back marginally in 2012 (from approximately 112ppl to 110ppl) took some of

the urgency out of operators’ attitudes to fuel. (In the Texaco Commercial Vehicle Operator Report

2012, for instance, other factors scored more highly than fuel in terms of importance when

purchasing vehicles.)


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However, diesel has doubled in price between 2000 and 2013, and 2013 prices remained stubbornly

close to all-time highs.


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5 ADDITIONAL ISSUES

5.1 ALTERNATIVE DRIVELINES

Alternative drivelines are slowing gaining ground in the road freight sector, although numerically

their numbers are still low. Both the price of diesel and the urge to differentiate themselves with

environmental credentials have driven many large operations to consider hybrids, electric vehicles

and gas or dual fuelled trucks.

Most manufacturers say they are working on three strands for environmental improvement: high

efficiency, low emission diesel; alternative traction such as electric, parallel and series hybrids; and

alternative fuels such as next generation biodiesel, fossil gases such as compressed natural gas, and

‘green’ gases such as hythane or biomethane, which are the most futuristic. Hythane is

approximately 90% methane, 7% hydrogen.

Electric vehicles are primarily useful for lightweight urban distribution. The first OEM crop to be

produced in any quantity, and therefore edging towards affordable prices, came out in 2012. There

are still some issues to be resolved around battery life and whether such vehicles will be run to the

end of their useful commercial life and discarded, in defiance of normal asset acquisition patterns.

The UK government has shown considerable support for encouraging electric vehicles; currently its

Plugged In Fleets Initiative, run by Energy Saving Trust, is working with 20 of the UK’s fleets including

the London Fire Brigade, York University, Morrisons and Boots to advise on how EVs could be

applied.

The biggest contender in the heavier end of the market is dual fuel gas/diesel combinations. Many of

these are currently retrofitted at approximately 50% of the cost of the original vehicle. However, the

retrofit can be ripped out again at minimal cost before resale. Natural gas stations are still thin on

the ground, although moves are being made to establish a refuelling infrastructure. In the future

gas-run trucks will switch to biomethane, which cuts carbon emissions by 60% compared to

compressed natural gases’ 15%.

However, as promising as gas-powered trucks seem, we are still awaiting final emissions protocols

and engineering solutions for Euro-6. Scania announced its first gas truck in June 2013 and some

commentators suspect the first dual-fuel Euro-6 will be ready toward the end of 2014.

Having said this, the majority of road transport companies in the UK are more likely to examine the

efficiencies of their existing fleet and to investigate multimodal journeys, or subcontracting

uneconomic loads, before they find a role for most alternative driveline vehicles.

5.2 DRIVERS

There are three major causes for concern surrounding driver recruitment. The first is that the

average driver age is 50+ according to Skills for Logistics. 16% of HGV drivers are 60 or over. Only 1%

of employed drivers are under 25.


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The second is that a substantial number of older or own-account drivers are expected to retire from

the industry when the Driver CPC qualification date of September 2014 arrives. In April 2012, only

8.2% of drivers had completed their training.

And, thirdly, the logistics industry is struggling to recruit young drivers into the industry. Many

employers complain that logistics has a low and unappealing profile, and that funding for

apprentices is mainly aimed at the wrong age group (16-18) and 3. Most logistics apprenticeships are

currently carried out by the armed forces, whose recruits statistically have little interest in the

logistics industry once they leave the forces.

Although there are 645,000 qualified C+E drivers in the UK, there are only 299,000 who drive

professionally. (Source: Skills for Logistics FOI request to DVLA April 2012). 59% of these drivers are

over 45, and fewer than 3% under 25. This does not include, however, those drivers who have C and

C1 qualifications – ie a qualification to drive a goods vehicle pulling a trailer up to 750kg or a vehicle

between 3.5-tonnes and 7.5-tonnes.

According to the Driving Standards Agency the current training log for Driver CPC looks as follows:

TABLE 36

Periodic training hours since Sept 08 17,307,563

DQC's issued since Sept 08 for Periodic Training 273,897

DQC's issued since Sept 08 for Initial Qualification 65,866

All the public service vehicle (PSV) drivers in the country were obliged to complete their first five-

year Driver CPC training schedule by September 2013. It is likely that the vast majority of the

273,897 completed certificates belong to these PSV drivers.

Government figures suggest between 500,000 and 750,000 drivers are active in the marketplace

overall. If 273,000 of them are PSV drivers (qualifying by Sept 2013) then that leaves up to 477,000

HGV drivers.

TABLE 37

7 hours 7.5 to 14

hours 14.5 to 21

hours 21.5 to 28

hours 28.5 to 35 hours

Over 35 hours

Total

94,853 81,171 96,863 128,487 248,176 30,625 680,175

Of the 680,000 drivers participating in Driver CPC training in 2013, some 176,000 have only

undertaken up to 40% of their obligatory training, with less than 11 months of training time

remaining to them.


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A further 97,000 have completed 60%. It is possible that up 70,000 have not yet started their

periodic professional development courses or have no intention of doing so. There is an

unquantifiable level of scepticism among drivers in the industry, although as many employers

suggest courses can give operational benefit as not.

This would fit broadly with anecdotal evidence from some sectors of the logistics industry. The

aggregates sector is concerned that, with its particularly ageing driver workforce, and its heavy

reliance upon single-vehicle sub-contractors, many of whom struggle to make a significant margin

while facing heavy costs, many of its older drivers will retire rather than invest the time and money

in requalifying.

Driver agencies are also particularly sensitive to the issue of older drivers retiring.

TRG Logistics obtained figures with a 2013 breakdown of HGV driver age bands through an FOI

request. It discovered that:

GRAPHIC: C+E DRIVERS IN THE UK (BY AGE)

SOURCE: TRG LOGISTICS FOI REQUEST TO DVLA 2013, WITH COMMENT BY TRG

These figures, albeit rounded, do approximate the 299,000 total suggested by Skills for Logistics.

However, staff surveys conducted by TRG suggested that 33,000 drivers over 60 would retire in

2015, along with up to another 37,500 drivers in a younger age bracket.

This would take 70,000 drivers out of the workforce within two years; and cut available driver

numbers by 23.4%.


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This attritional loss will far outweigh the intake to the industry for the reason outlined at the

beginning of this section. Only 4% of the driver workforce is below 25 years old.

Furthermore HGV tests are down 25% between 2008 and 2012. 2013’s figures, as of October, are

8.6% down year-on-year.

TABLE 38: HGV LICENCE ACQUISITON

2008 2009 2010 2011 2012 2013 Total

January 2,726 2,338 1,399 2,096 1,806 1,817 12,182

February 2,822 2,187 1,927 2,233 1,974 2,050 13,193

March 2,577 2,488 2,190 2,445 2,412 2,107 14,219

April 2,959 2,246 2,002 1,927 1,855 2,028 13,017

May 2,902 2,292 2,099 2,091 2,218 2,120 13,722

June 2,944 2,467 2,099 2,229 1,999 2,013 13,751

July 3,013 2,614 2,361 2,196 2,163 2,119 14,466

August 2,418 2,186 1,872 2,052 2,067 1,979 12,574

September 2,589 2,371 2,123 2,032 1,863 1,958 12,936

October 2,984 2,233 2,165 2,024 2,110 507 12,023

November 2,669 2,040 2,202 2,183 2,366 - 11,460

December 2,164 1,521 1,144 1,899 1,632 - 8,360

Total 32,767 26,983 23,583 25,407 24,465 18,698 151,903

SOURCE: FOI REQUEST TO DVLA 2013


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PART II: UK COMMERCIAL VEHICLE OPERATOR

REPORT 2014

1 INTRODUCTION

Part II of the UK Commercial Vehicle Report is based on the results of the Texaco Operator Research

Programme. This is a quantitative study of the purchasing habits and attitudes of the UK road

haulage market. It is companion research to the qualitative assessment of the commercial vehicle

market in Part I of this report and has been conducted for four consecutive years.

In this document we will address:

Respondent profile

Company profile

Vehicle parc

Vehicle purchasing

EU emissions legislation

Sourcing new & used vehicles

Most important factors when purchasing vehicles

Maintenance provision

Fuel efficiency

Driver CPC

2 THE VEHICLE PARC

Our 500 companies share a total vehicle parc of 68,500, with the average number of vehicles per

fleet at 137. The average is substantially higher than in 2011 at 116 vehicles, or 2012 at 104.

Vehicle weights are evenly distributed throughout the sample, with top weight vehicles over 31

tonnes at 28%, again in line with broader statistics. Almost half the vehicle parc is Euro-5, with only

5% early Euro-6. The sample splits into approximately two halves, between vehicles bought outright

(46%) and vehicles on long-term lease or contract hire (49%). Only 5% of vehicles are second-hand.


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The larger the fleet, the more likely they are to buy new. Our sample shows its existing parc is

weighted towards outright purchase, with half of the largest fleets’ vehicles being bought. Almost

half of medium fleets also bought outright, falling to just over a third of the smallest fleets.

Of the medium and large fleets, approximately one quarter of their fleets are leased. The largest

fleets have an equal preference for contract hire or long term rental, but the smallest fleets have a

distinct preference for contract hire as opposed to pure leasing, presumably because it offers

greater repair and maintenance (R&M) support.

Unsurprisingly it is the smallest fleets which are most likely to buy second-hand, with one quarter of

their vehicles coming to them used. The appetite for buying used falls away disproportionately

quickly as the fleets grow in size, with just 4% of fleets over 51 vehicles bothering with second life

product.


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The trend towards buying second hand grew in 2012 but has dropped away again sharply in 2013,

perhaps reflecting fleets’ on-going caution about reinvesting shortly after the recession, and their

subsequent need to buy new vehicles to replenish the fleet in 2013. It may also reflect road

transport operators’ awareness of the lack of quality, young stock in the second hand market.

Contract hire is growing in importance, perhaps as stated earlier because smaller fleets benefit more

from the R&M provision in such contracts. Although operating lease figures have plateaued, there is

consistency there. Meanwhile finance leases have played a smaller role, but this will change as

regulatory amendments put all leases on balance sheet. (See Part I, section 3.9.)

The numbers of vehicles being purchased outright is holding steady against last year, although it has

fallen considerably against 2010, where 70% of the fleets’ vehicles were owned outright. What we

are witnessing here is quite possibly a historical effect, which suggests that pre-recession purchase

was an extremely popular form of acquisition – but that fewer vehicles were purchased outright

following the recession, as operators sought the flexibility and safety net of leases to buffer against

an uncertain commercial climate.

In terms of vehicle weight, our sample shows a fair spread across the weight ranges. The least

popular weight by proportion appears to be the 7.5-tonne category, (although it has a marginal edge

over the smaller vehicles for the largest fleets). However these lighter trucks are becoming more

popular numerically for their versatility and ease of access.


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In this sample we see that medium fleets run 40% top weight trucks; with the other two groups at

approximately one third each. 18-tonners to 32-tonners represent between 20% and 24% of every

fleet group; and then the smallest operations have lightest trucks as 20% of their vehicle fleet.

Weights in between struggle around the 10%-18% mark.

In terms of trends, 3.5-tonners have recovered some of the ground they lost since 2010, to become

14% of the overall vehicle parc. 7.5-tonners, as noted above, have become almost one in five of the

vehicles run. It is the mid-weight vehicles up to 18 tonnes which are struggling to resume their place

at the heart of the fleet, only growing by 2% despite the splurge in new vehicle growth.

Equally vehicles between 18 tonnes and 32 tonnes have done little more than hold their own, while

those over 32 tonnes have fallen substantially from their 2012 height of 42% to just 28% of the

sample parc.

2.1 MAKE BY FLEET SIZE

In terms of our sample, DAF leads the field, in particular, with the largest and smallest fleets.

Mercedes-Benz excels with medium and large fleets.


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Scania, Volvo and Renault have higher showings in the smallest fleets than in other categories.

MAN has greater numbers in the 25-50 sized fleets than elsewhere.


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3 EMISSIONS LEVELS BY FLEET SIZE

Unsurprisingly the smallest fleets still run the highest proportion of vehicles below Euro-3 at 28%.

One third of the market broadly is Euro-4, across all fleet size categories. There is then a steep rise

from 35% of small fleets which sport Euro-5 vehicles to 46% and 47% respectively in the medium and

large fleets – possibly this is indicative purely of higher numbers dictating greater turnover and

therefore newer vehicles on fleet. It also reflects the greater capacity for investment by the larger

fleets.

Euro-6, however, is intriguingly present in all three categories almost equally. 3% of small fleets, 5%

of medium fleets and 4% of the largest fleets are running the newest vehicles ahead of their

statutory introduction. The numbers are small. However, the fact that the willingness to trial the

new technology and/or future proof purchases as far as possible, regardless of extra cost, is equally

present in all three groups is unexpected. 2012’s research showed that smaller fleets were

considerably less aware of the technology shift and were the least likely to have given any

consideration to its effect on their buying patterns.

Euro-3 and below vehicles are holding their own in the market if our sample is indicative. In 2012

they represented only 9% of the vehicle parc but by 2013 had grown to 15%. Euro-4 by comparison

has declined from half the parc in 2011 to just under one third in 2013.

Euro-5 is dropping slightly, from 53% in 2012 to just 48% in 2013, perhaps making way for the 6% of

Euro-6 vehicles which now feature in the sample vehicle parc.


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4 VEHICLE PURCHASING

Operators bought almost twice the number of vehicles in 2012/13 than they anticipated buying last

year. The 2012 research indicated an average purchasing appetite of 12.8 vehicles over the coming

12 months; in actuality they bought 22.3 new vehicles.

The need to replenish and future-proof the fleet is very clear in the data; all categories of expected

acquisition were up on their anticipated figures barring second hand vehicles. An average of 13.2

vehicles per fleet were acquired under rental or contract hire agreements as opposed to a predicted

3.6; and 6.7 vehicles were kept on extended rental or contract hire as opposed to the predicted 2.2.

The predicted purchasing figures given for the next 12 months look even stronger than last year,

running counter to manufacturer suggestions that 2014 will see a flattened market due to the

introduction of Euro-6. Operators in the sample suggested they would buy 25.9 vehicles new; a

negligible 1.2 used; 14.6 on new contracts; and would extend 3.3 contracts.

29% of operators said they would increase their fleet numbers through buying more new vehicles in

2013/14, although the numeric growth in new vehicles is skewed by a small number of very large

operators (which is typical of the sector as a whole: see part 1 licences by fleet size). 7% of operators

will increase their fleet by buying used trucks; 10% will increase by taking on contract hire or rental

contracts and 2% will extend existing contracts.

4.1 PURCHASING TRENDS BY FLEET SIZE

The huge buying power of the largest fleets is clearly shown when we look at the numeric values for

vehicles bought in the previous 12 months. The biggest players in our sample bought an average of

49.5 new vehicles outright; 29.3 on contract and 15.6 on extended contract. Those numbers become

even more significant for next year, with 2013/14 seeing outright purchase of 60.3 trucks; and 33.4

on contract. Including a handful of predicted extended contracts, the biggest players are intending

to buy more than 100 vehicles each.

The drop to the medium and small fleets is dramatic. By contrast, medium players with 25-50

vehicles bought 6.1 trucks, and rented or contracted 2.8; in the following 12 months they predicted

buying just four vehicles, and renting 1.7.

The smallest fleets bought 2.3 trucks outright and had just over one each on contract and extended

contract. They anticipate buying 2.6 new, and 1.5 on contract, although the extended contracts lose

their appeal slightly.

The huge disparity between the buying power and needs of those fleets over 51 trucks and the rest

of the market cannot be overstated. In the wider market, 100,000 vehicles or 29% of the entire parc

are held by just 1.1% of operators with fleets larger than 50 trucks.


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4.2 VEHICLE MARQUE MOST LIKELY TO BE PURCHASED IN THE NEXT 12

MONTHS

Our sample suggests DAF (33%) and Mercedes-Benz (28%) are the front runners in their predicted

acquisitions. This is broadly indicative of vehicle registrations as they stand in the wider market.

Iveco and MAN follow them in popularity among our sample with 11% and 8% respectively.

When we break it down to likely choice of marque by fleet size, small fleets prioritise Scania (at

26%), DAF and then Mercedes. Medium fleets cite Mercedes, then DAF, then MAN. And the largest

fleets – which we have already established have a vast purchasing power in numeric terms, choose

DAF, then Mercedes, then Iveco.

4.3 EURO-6

16% of our sample still says – somewhat remarkably – that it has given no consideration to the effect

of Euro-6 on its purchasing strategy. One third have continued to buy vehicles according to their

standard strategy to meet operational need, regardless of emissions legislation.


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However an astounding 40% have said they pulled forward their buying cycle in order to secure

Euro-5 vehicles and avoid paying for Euro-6. This included 47% of the largest fleet players, and one

third each of the other categories. These figures are more remarkable if we consider that the largest

fleets did indeed buy considerably more vehicles in the previous 12 months than they anticipated,

and despite 40% claiming they have pulled forward their buying schedule, the top fleets intend to

purchase another 100 vehicles on average per fleet in the coming year.

It is also worth noting how strategies around Euro-6 matured as the year went on; in October 2012’s

research 30% and 25% respectively of medium and large fleets decided to pull forward vehicle

purchasing to circumvent Euro-6. In fact 47% of the largest fleets pre-empted the legislation; 37% of

the medium fleets and even 34% of the smallest fleets, of whom only 11% thought they would buy

defensively when asked last year.

Of those who have given no consideration to Euro-6, it is perhaps not surprising that these account

for just over one in four of small fleets. This does not necessarily imply a lack of sophistication but

rather that small fleets numerically have far fewer replacement windows; for fleets whose trucks

would not need replacing until 2015, it may seem counter-productive to consider buying early and

losing two years of sweet spot running, or incur cost before it is necessary.

Far fewer small fleets say that Euro-6 has not affected their purchasing strategy. Medium and larger

fleets are more likely to have thought about the issue and decided to stay their current course, than

to ignore it. However for small fleets to say ‘We’ve not thought about it’ and ‘It won’t change our


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minds’ is perhaps one and the same response. Essentially they are saying they don’t feel the issue is

relevant to them because they have little control over when to buy anyway.

4.4 SOURCING NEW AND USED VEHICLES

68% of new vehicles are sourced from a franchised dealer. 73% and 74% respectively of small and

medium-sized fleets buy direct from a franchised dealer, and indeed this small to mid-range haulier

is the dealer’s commercial heartland. As we noted before, the very largest fleets have a

disproportionate buying power, so the biggest fleets in our third category (47%) will deal direct with

manufacturers. However it is likely they will also have a close bond with their local franchised

dealers as a reliable back up for testing, repair or maintenance – and indeed 59% also buy from

them.

It is clear that, for our sample, the contract hire and leasing companies represent a relatively small

proportion of their sales – the highest at 15% and 17% respectively in the largest fleets. When we

compare this with BVRLA data which puts the total contract fleet at approximately 103,000 vehicles

out of 342,000 (or one third), this is close to representative.


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4.5 FACTORS IN VEHICLE PURCHASING

The most important factors in purchasing vehicles are reliability (90%), fuel economy (77%), and

purchase price (75%). Although fuel consumption accounts for slightly under 40% of a top-weight

truck’s operating costs, logistics companies clearly feel that breakdowns, which risk contract

deadlines being missed, are potentially more costly even than a few percentage points on their

diesel bill.

Purchase price is also an interesting choice, given that the manufacturers have spent a long time

trying to educate the market to view whole life costs rather than ticket price. This campaign around

whole life costs will become more vociferous as the more expensive Euro-6 models dominate the

manufacturers’ shop windows. However, it would seem that operators are relatively immune to the

argument.

When we look at factors influencing purchase by fleet size, we see that reliability, (listed by 86% as

very important), vehicle capabilities (82%) and purchase price (80%) dominate for the smaller fleets.

The medium fleets shift slightly with reliability (91%) purchase price (72%) and fuel consumption

(72%).

The largest fleets dictate reliability (92%), fuel consumption (80%) and purchase price (74%).

There are a number of things of interest. The first is that smaller fleets have a less homogeneous

approach to buying trucks – perhaps because some of them have less sophisticated strategies or

strategies which are less driven by financial managers. Hence the lack of emphasis on fuel prices,

especially since diesel prices appeared to stabilise in 2012. The largest fleets have the highest degree

of agreement overall about the important factors.

The lack of emphasis on fuel consumption for smaller fleets may also tie into the lack of financial

information many smaller fleets have. Fuel consumption as a buying factor is more meaningful if

measured, and those costs are being tracked.

Fuel consumption becomes more important as a factor the higher up the corporate food chain we

go, until for the biggest fleets it is the second issue on their agenda.

Payload is more important for smaller fleets than for the other two groups – perhaps because with

smaller fleets they have less operational flexibility between vehicles. It is also possibly that, as fleets

become more sophisticated in their business plans and pricing, payload as an absolute is less

meaningful than the cost of transport per tonne.

Residual values, driver acceptance and marque are towards the bottom of our respondent’s lists.

When we consider the trends in factors influencing purchase over time, we see that fuel

consumption, which dropped away a little in importance in 2012 has come back to the number two

slot enjoyed in 2011, albeit with only 77% of the marketplace agreeing. Purchase price has become

more important, sliding up from 68% in 2012 to 75% in 2013, perhaps as component prices continue

to climb and the 10% price penalty of Euro-6 weighs on the collective mind.


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In 2010 maintenance contract/costs were in the top five but have dropped off it now for three

successive years. As most new vehicles are sold with maintenance contracts, and contract hire has

continued to grow in importance, perhaps the cost of such contracts has become more the norm,

and less a factor to control.

When fleets are asked to prioritise, the factors shift slightly again. Fuel consumption is still the single

most important factor to 27% of operators, down from 32% last year, but still in the lead. This

mirrors the largest fleets straining for efficiency, both operationally and environmentally, with fuel

consumption the biggest factor they try to control in day-to-day running. However, it is also true that

the more efficient operations become, with optimised networks, maximised lading factors and

better handling of the vehicles, the less significant the fractional difference in manufacturers’ claims

can be.

Additionally it is hard to gauge the fuel efficiency of a truck from road test or manufacturers’ figures

– the only sure way is to run a trial within a real operation.

Purchase price, as stated above, has grown in importance as the single most important factor for

21% of operators rather than the 15% in 2012, but it is worth noting that, in 2010 and 2011, it was

the winning factor out of all. In 2010 one third of operators said their deciding factor was what the

truck cost, which was probably reflective of their iron-clad recessionary grip on spending.


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As economic confidence has grown (albeit slowly and cautiously) the market is edging more towards

operational cost and away from ticket price. The whole life argument is far from won though –

purchase price is still crucial to operators’ choices.


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5 VEHICLE MAINTENANCE

28% of vehicles are maintained by franchised dealers. It is likely that these are the newest vehicles in

the marketplace, still under warranty or contract hire agreements. If we take the current HGV

registration figure of 406,000, (which is higher than the number of licensed vehicles) then the new

registrations from 2010, 2011 and 2012, we see that the number of vehicles three years old or

younger emerges as approximately 26%. Our sample group would be therefore representative of

young vehicles being maintained as part of a warranty or maintenance agreement.

8% of vehicles are maintained by independent workshop. If we break this down over fleet sizes,

there is a slight decline towards bigger operations, with 9% of small and medium fleets out-sourcing

their maintenance and 6% of large fleets. This is clearly not a popular option, possibly because there

is no legislative protection for those who outsource vehicular repair on a B2B basis. The

responsibility for O-licence compliance also remains firmly with road transport operators, even if

their external maintenance provider fails them. Perhaps the low numbers who rely upon external

contractors exclusively, therefore, reflects the tighter control over roadworthiness for which they

are held legally responsible.

As reliability figures were topping 90% as a crucial factor when purchasing, it is also clear that

roadworthiness matters a great deal commercially.

A little under one-third are maintained in-house. Those fleets most likely to have their own

workshops (43%), and conversely rely least on franchised dealers (20%) are the 25-50 vehicle fleets.


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These are also the group who are most likely to off-set the costs of their in-house workshops by

carrying out maintenance work for others.

The smallest fleets rely most on franchised dealers (34%) and least on their own workshops (25%),

although over one-quarter of those who do have their own workshop take in external vehicles, so

use it as a revenue generator in its own right.

28% of the largest fleets use their own workshops, with 22% of those accepting external vehicles.

One-third of the overall marketplace uses a combination of all three methods. At 32%, 28% and 36%

respectively by size, it is hard to see any significance between the fleets at this point. Equally they

then use the three methods of maintenance almost equally: informed speculation would suggest

one third are relatively new vehicles being maintained by dealers, one-third of easy/cost-effective

work is done in-house and one third is outsourced where appropriate. It is also worth considering

that some road transport operators out-source truck maintenance while keeping the relatively low-

tech trailer work in-house.

As truck technology has become more complex it is increasingly difficult for fleets to maintain

vehicles totally in-house. Euro-6 will make in-house maintenance even more challenging, particularly

for those with mixed fleets. The manufacturers argue, with some justification, that the diagnostics

on vehicles which use both SCR and EGR and have highly tuned engines will require a

disproportionate amount of training for in-house mechanics.

There is already a high degree of caution shown in routine maintenance. When asked how often

they changed engine oil, 68% of the market (71% each of the smallest and largest fleets) follow

manufacturers’ instructions to the letter. And 24% of the market changes the oil more often than

recommended, with medium fleets being particularly assiduous. Only 16% of the fleets use a sample

analysis service to check engine oil condition.


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6 FUEL EFFICIENCY

The average fuel efficiency of the vehicles used is illuminating. In each case the figures cited are

below those suggested by manufacturers for new models, showing the cost of vehicular age, real

world duty cycles and the advances of new technology.

What is striking, however, is the performance of the different fleet sizes. The smallest fleets were

always fractionally behind in terms of average fuel consumption, with the largest fleets suggesting

15.7mpg on a 7.5-tonner, for example, as opposed to 14.6mpg for the smallest fleets. It is possible

that the smallest fleets are either less rigorous in measurement, perhaps because of their lesser

reliance on technology, or have less rigorous driver training and scheduling interventions to cut their

fuel bills.


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Curiously, however, the 25-50 fleets appear to score highest in every category of vehicle up to 44

tonnes. This could be for two reasons; the contract portfolios may be a better mix of trunking and

regional delivery which minimise empty running or, as the group which carries the heaviest

overheads without the national reach and economies of scale of the biggest players, they are the

most motivated about controlling cost.

All three groups agree on the 8.3/8.4mpg fuel consumption of a trailer-axle combo. It is worth noting

that 2013 road-tests of new Euro-5 and 6 trucks have showed record performance.

Commercial Motor has seen ground-breaking results from DAF and Scania, among others, in 2013

road-tests. Despite all the warnings that constant revision for cleaner engines would make them

thirstier, trucks are becoming more efficient by the year.

When questioned about the change in their fuel efficiency, 51% of fleets have found fuel economy

improvements in 2013, with 12% claiming a greater than 5% efficiency gain. For 44% of the market

fuel efficiency hasn’t changed; and only 5% has seen any decline.


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These improvements may be partly the result of the naturally more efficient trucks bought in 2012,

which we have documented under the early commentary on buying patterns.

However, a greater part has come from specific interventions. 72% of our fleets have undertaken

driver training focused on fuel-efficiency. More than half the market uses telematics to record

vehicle and driver performance. 42% monitor tyre pressures; 28% have fitted aerodynamics and 26%

have invested in routeing and scheduling software.

Interestingly almost one-fifth of the market is using fuel economy incentives for drivers. Incentives

are tricky to apply and monitor, as those which reward the outcome (ie low fuel efficiency) rather

than the process (such as good driving) can encourage participants to skew the results.

Only 6% of the market does not measure fuel efficiency. Those who do, use a mixture of monitoring

their own bunkered fuel, a practice which increases from 48% for the smallest fleets to 65% for the

medium fleets and 59% for the largest; using telematics, which is twice as common among the larger

fleets as the smallest; and monitoring company fuel cards which varies between one third and

almost half the market as you progress up the weight range.

6.1 MEASURES TAKEN BY FLEET SIZE

When we look at routine operational issues – such as the type of truck deployed, tyre pressures or

engine oils, we find far less differentiation between fleets based on size. Roughly one-fifth of all of


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them have reviewed its body types. Just over 10% of medium and large fleets have changed to low

viscosity engine oils.

However, this is clearly an area where money talks and when it comes to interventions which

require significant outlay, the larger fleets come into their own. 35% of the biggest fleets have

introduced routeing and scheduling (R&S) software compared to 20% of the medium fleets and 18%

of the smallest fleets. To put that into context a fleet with over 50 vehicles is almost twice as likely to

run R&S software than one with fewer than 50 trucks. Larger fleets, of course, have more to gain (or

conversely more to lose in terms of wasted fuel) from fleet optimisation than a company with only a

few vehicles.

42% of the largest fleets have invested in aerodynamics to decrease the drag co-efficient on vehicles.

Again the largest fleets are almost twice as likely to do this than the smaller fleets.

Telematics has won more widespread support, and these figures suggest that telematics has come of

age in the CV marketplace. 34% of smaller fleets, 54% of larger fleets and 64% of the largest fleets all

use telematics – a technology which five years ago was considered unproven, with an uncertain

return on investment and which raised ethical questions over invasion of employees’ privacy. The

fact that it is so widely embraced in fleets, from five vehicles up to the very largest, suggests all

those doubts have been overcome and it is likely only a matter of time before the rest of the market

complies.

This is particularly true as insurers finally developed sustainable products around truck telematics in

2012, feeling confident that the technology helps operators to target training, identify problems, and

prove no-fault claims. In other words, using telematics information can save fuel and prevent

collisions.

Finally the intervention which leaps off the graph is driver training. The Driver CPC will have had

some impact on the very high levels of driver training we see here, with large fleets running at 80%,

medium 69% and the smallest fleets in our sample at 64%. However, driver training for fuel

economy and safety was becoming very popular long before the introduction of the Driver CPC,

which imposes 35 hours professional development on drivers before the September 2014 deadline

(more on that later).

The market for driver training has, however, matured. The initial enthusiasm for training showed

10% fuel gains, but over time it was realised these were rarely sustained without monitoring. This

underpins part of the sector’s commitment to telematics which we just illustrated. Equally however,

a large part of training budgets can be wasted if they are applied universally – again telematics help

to provide clear evidence for the need for training by measuring instances of harsh acceleration,

braking or cornering.

It is not surprising that training and telematics are the two most universally accepted interventions

in the fleets’ fuel economy arsenal, as they fit tightly together and allow transport managers to

maximise the return from training and know where to spend the next budget.


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7 DRIVER CPC

The Driver Certificate of Professional Competence has placed the onus of continual professional

development upon vocational drivers, requiring them to undertake 35 hours tuition before

September 2014. Those who comply receive a driver qualification card and those who do not will not

be allowed to drive trucks for a living until they undertake the training.

The possible consequences of this training demand has caused concern and watching briefs

throughout the industry. Concerns tend to fall into three categories:

That many older drivers may retire rather than undertake the training, meaning that driver

numbers could drop abruptly in September 2014

That the rates at which training is taking place will leave latecomers short of good quality

training as the deadline looms

And that driver wages will leap up, as employers who have not trained their drivers in time

offer exorbitant wages to attract the fully qualified from companies who invested.

Our sample fleets have an average of 150 drivers, but this is heavily weighted towards the largest

fleets, which have a mean of 337. The smallest fleets have an average of 21 drivers and the medium

fleets 45 drivers.


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At the time of the research, fleets had 12 months in which to complete their Driver CPC training.

Only 26% had completed their training, and a further 59% have only one or two days left to

complete. 6% of the sample, however, has done nothing – and a further 3% had completed only

seven hours – the equivalent of a one-day course. This suggests one in 10 drivers was woefully

unprepared with only one year to go, and a further 7% who have completed two days, face a tight

deadline.

Driver CPC training modules vary hugely in price and quality. Prices range from £50 a day to several

hundred depending upon the course, but most driver-related courses are typically £80+.

Our sample operators had an average of 137 vehicles each. If we extrapolate that this implies at

least the same number of drivers, this suggests a total driver pool of 68,500.

Therefore of the 6% of drivers who have done no training at all, 4,110 of them face 143,850 hours,

or 20,550 days of training in the next 12 months. That’s 56 of these drivers training each day for the

next 12 months.

2,055 drivers have completed seven hours training which leaves them with 8,220 days of training

within one year. That’s 22.5 drivers training every day until 9 September 2014.

4,795 drivers have completed two days each and have a total of 14,385 days to complete, the

equivalent of 39.4 drivers per day until the deadline.

15,070 have done three days and owe two, which gives a total of 30,140 days or 82.6 drivers per day

until the deadline.

25,345 have completed four days, and are by DSA standards on track for completion. They owe

25,345 days or 69.4 drivers training each day for the next year.

26% or 17,810 of our sample have completed their Driver CPC training. For the remaining drivers to

all hit the deadline, our 500 operators must have 270 drivers training each day between them.

Driver shortage— a time-bomb for the industry?


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It is perhaps not surprising, therefore, that 59% of operators overall believe the Driver CPC will lead

to a driver shortage. The belief is held fairly consistently across fleet sizes, with only a marginal lean

towards the bigger fleets – which with their vastly higher personnel levels perhaps simply have more

reason to be concerned.

The difficulties with driver recruitment and profile outlined in Part I, (including the desperately low

numbers of young people coming into logistics; the lack of public awareness of the sector and lack of

appeal for school leavers or graduates; falling licence acquisition levels; and the financial and

regulatory burdens which put a disproportionate strain on the single-vehicle subcontractor, among

others) combine with the scepticism and, in many cases, slow adoption of Driver CPC training to

threaten huge pressures on driver availability in September 2014.

In the wider industry, DSA periodic training figures, complete to the end of October 2013, stand as

follows:

274,000 have completed their periodic training, the vast majority of which will be PSV (bus &

coach) drivers who had a deadline of 10 September 2013.

For the 406,000 others who are currently participating in training, 2,000 of them are PSV

drivers on their second period of training. The 404,000 who remain are likely to be HGV

drivers. Between them they require 135,000 training days to qualify by the September 2014

deadline. Using the calculation of 312 days between 1 November 2013 and 9 September


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2014, this equates to 432 drivers training per day, which ought to be achievable in terms of

industry resource, although not necessarily or entirely with top level providers.

In addition there is a potential 70,000 HGV drivers who have not yet started training and so

do not register within the DSA figures. Our sample group showed 6% current non-

participation. DSA figures suggest between 500,000 and 750,000 HGV and PSV drivers who

fall within Driver CPC scope. As 274,000 have qualified for the first PSV deadline, it is fair to

assume that the remainder are all HGV drivers – the 404,000 deduced above. If our 6% is

representative of the market as a whole, it would suggest approximately 25,000 drivers who

have not yet participated. If this is true, it suggests a further 125,000 training days required,

almost doubling the amount above.

If in fact 70,000 drivers are still to participate, it would put a training burden on the industry

of 350,000 training days or almost 1,121 drivers per day taking Driver CPC modules between

1 November 2013 and 9 September 2014.


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8 CONCLUSION

The Texaco Operator Research Programme shows us many things about an increasingly buoyant

market:

Despite manufacturers’ misgivings, vehicle sales and registrations seem likely to continue

strongly well into 2014. While the vehicle parc is still contracting overall, road transport

operators will be investing at higher levels than seen in the previous five years.

Euro-6 has caused significant movement in the market in terms of encouraging strong Euro-

5 sales. However, the evidence suggests that despite its challenges for the marketplace, the

R&D which has gone into Euro-6 compliance will have strong commercial and environmental

benefits for the industry in terms of ever-improving fuel economy.

The Driver CPC may well be the compounding factor which pushes the industry into a driver

shortage. With only 312 days to go until the deadline, November 2013 nonetheless saw a

training requirement of between 135,000 and 485,000 training days to be completed.

Sources differ on what proportion of the industry will remain unqualified or will choose to

retire from professional driving at the deadline, but it is likely that this will have an effect on

operational flexibility and on the price of labour.

More than half the road transport fleets claim to have improved fuel efficiency over the past

12 months. 12% of sample operators have achieved a greater than 5% efficiency gain.


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APPENDIX

1 RESEARCH METHODOLOGY

Our research was conducted during 500 15-minute telephone calls, during which the

sponsors were not disclosed. 50% of the sample companies have 5-25 vehicles in the fleet;

25% of the sample have 26-50 vehicles and 25% of the sample have more than 51 vehicles.

While this does not follow the pattern of licence holders in the UK precisely, it does reflect

the disproportionate buying power of the larger fleets.

All respondents had responsibility (or influence over) the purchase or lease of new and

second-hand trucks.


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2 COMPOSITION OF THE SAMPLE

The greatest concentration of respondents reflected the concentrations of licence holders in the UK

- the Midlands, South East and North West.

80% of our respondents were either principals (MD/owner/partner at 20%) or transport/fleet

managers, which constituted 60%. 95% of participants were male, 2% more than in last year’s

sample.

57% of respondents are in haulage or logistics firms. There has been a slight increase in the number

who serve public sector contracts as opposed to private sector.


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The number of standard domestic licences represented as opposed to restricted or own-account

operators here is not in line with the division of licence holders in the wider market. However

although restricted licence holders account for 51% of licences, they only account for 27% of vehicle

ownership, and so when investigating vehicle buying patterns, direct mirroring of the licence

distribution is not necessarily useful.

However, next year’s research will aim to increase the restricted licence holder representation in the

report as DfT figures suggest the sector is growing in importance.


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Retail wholesale and distribution are the biggest contributing sectors, closely followed by

construction, manufacturing and the service sector.


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ACKNOWLEDGEMENTS

Many organisations and individuals contributed to this report. The authors would like to thank, in no

particular order:

The Department for Transport; Vosa; The Office of the Traffic Commissioner; The Office for National

Statistics; The Society for Motor Manufacturers and Traders; Skills for Logistics; the Freight Transport

Association; the Road Haulage Association; the British Vehicle Rental and Leasing Association; the

Chartered Institute of Logistics and Transport; DAF Trucks; Iveco; MAN; Scania; Volvo; Mercedes-

Benz; Ford; Renault; Commercial Motor and Motor Transport; Manheim; British Car Auctions; Clear

automotive research group; LMC Automotive; Experian; and all the UK road transport operators who

participated in our surveys or were interviewed for this research.

We would also like to thank our sponsor Texaco Lubricants for its continued support.

The research and primary analysis for the UK Commercial Vehicle Operator Report 2013 Part II was

conducted by Fusion Research Ltd.

This report was researched and produced by White Rose Media Ltd on behalf of Road Transport

Media.


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GLOSSARY

ARTIC: An articulated vehicle (‘artic’) comprises a tractive unit (ie the cab and engine) and a

removable trailer connected by a king pin and power lines.

BVRLA: The British Vehicle Rental and Leasing Association represents the interests of those with

fleets commercially available for lease or rent. Their numbers represent approximately one-third of

vehicle acquisition in the UK.

EUROPEAN EMISSIONS LEGISLATION: EU law has successively lowered the amount of particulates

and other pollutants which can be expressed through vehicle exhaust. For freight vehicles this is

termed Euro-1 to the current level Euro-6.

FIRST LIFE: The time a vehicle spends with its first owner or user.

FREIGHT TRANSPORT ASSOCIATION: This is a trade body which represents the interests of freight

shippers (ie owners) and those who transport it by any mode.

LONDON LOW EMISSIONS ZONE (LEZ): This is a scheme which targets the most polluting vehicles on

London roads by setting minimum emissions levels. It is administered by Transport for London.

OPERATOR’S LICENCE: An Operator’s Licence or O-licence is required to run commercial vehicles,

whether for the movement of a company’s own goods or for moving third party goods (known as

‘hire and reward’). O-Licences are granted and revoked by the Office of the Traffic Commissioner, a

quasi-judicial office.

RIGID: A rigid vehicle is a non-articulated vehicle in which the cargo-carrying body is mounted on the

chassis behind the cab.

ROAD HAULAGE ASSOCIATION: A trade body which represents the interests of road hauliers.

SECOND LIFE: When a vehicle is sold on from its first owner and becomes a second hand vehicle.

SMMT: The Society of Motor Manufacturers and Traders is a trade body representing the interests

of those who make and sell vehicles.

TAX CLASS: The UK government charges differing levels of Vehicle Excise Duty depending upon the

size, weight and driveline of the vehicle.

TRAILER: Trailer refers to the separable load-carrying portion of an articulated vehicle. Trailers are

available for ambient (eg surrounding) temperature, or with chiller or freezer compartments. Some

trailers have compartments for varying temperature.

VEHICLE REGISTRATIONS: Vehicles are registered to a specific owner for purposes of paying vehicle

excise duty, the tax which gives a vehicle its right to be on the road.

VOSA: The Vehicle Operator Services Agency is responsible for administering annual tests of vehicles

and policing their roadworthiness and legal compliance. It has merged with the Driving Standards

Agency and will be known as the Driver and Vehicle Standards Agency (DVSA) from April 2014.

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