Hyundai to enter European commercial van market

An employee works at the Hyundai Motor’s manufacturing plant in Nosovice, Czech Republic. The South Korean automaker is preparing to enter the European commercial van market with a Turkish-built vehicle.

Reuters/Paris

Hyundai is preparing to enter the European commercial van market with a Turkish-built vehicle, a source said, adding to signs that Renault and PSA Peugeot Citroen could lose their grip on a lucrative part of the auto industry.

The South Korean automaker will debut a large van at September’s Hanover truck show and begin production with Turkish partner Karsan next year, a person familiar with the plan told Reuters. Hyundai declined to comment.

The move follows Volkswagen’s decision to build a second light commercial vehicle (LCV) in a lower-wage country, shifting its Crafter van to Poland from Germany.

Both new programmes underscore toughening competition in the van market, which has already seen margins squeezed by heavy discounting but remains more profitable than mass-market cars.

That poses a particular risk to French market leaders Renault and PSA Peugeot Citroen, which could now see models built in costlier western European plants, such as Peugeot’s Boxer, Citroen’s Jumper and the Renault Master, undercut by vans made in lower-cost countries.

“Light commercial vehicles are the category where competition is really much more fierce than before,” Renault sales chief Jerome Stoll told analysts on a recent call.

While LCVs account for only about 10% of all European vehicle sales, they make a significantly larger contribution to profit.

But discounting is intense despite recovering demand, which saw European van sales rise 9.9% in the first quarter.

Few manufacturers break down their profitability by vehicle type. Analysts say the estimated margins on the French groups’ vans were about twice the 3-4% made on cars in better years preceding the 2008 financial crisis.  “If LCVs were a 6-8% margin business in the past, this may deteriorate for some as the cost spread between manufacturers widens,” said Erich Hauser, an analyst at brokerage ISI Group in London.

“VW would have been quite happy building its vans in Germany for ever, so clearly something has changed in this market.”

Resisting the exodus from western Europe, the French have kept most production at home or in some cases even repatriated vans to fill gaps left by axed or offshored car programmes.

Vans replaced cars at Renault’s Maubeuge plant more than 20 years ago. The company is now moving its Trafic van from Spain to another northern French site as its ageing Espace and Laguna car models wind down.

Renault’s budget Dacia brand also builds vans in Morocco and Romania, accounting for a modest 7% of regional sales.

Peugeot is introducing new vans to its Sevelnord factory in partnership with Toyota to replace discontinued people-carriers previously built with Fiat.

While the two French groups still lead European registrations, their combined market share fell to 36.7% last year from 39.4% in 2010, IHS Automotive data shows.

VW’s share rose to 13.2% from 10.6 over the same three years. Ford, which halted UK production of Transit vans in 2012-13 to concentrate output in Turkey, advanced almost one point to reach 11.6% of the European market.

Backed by its lower-cost production, the US automaker is gaining ground with attractive discount offers on even its newest van models, ISI’s Hauser said.

EurotaxGlass’s, a leading market data provider, has charted a surge in price-cutting moves such as pre-registrations - where dealers receive new vehicles to sell as used.

Such margin-crushing van sales have increased 15-20% by volume since 2008 even as the overall market shrank by a quarter, technical director Dean Bowkett said.