Executive Summary

The UK commercial vehicles market was estimated to be worth around £5bn at manufacturers' selling prices (msp) in 1996. Notwithstanding relatively strong gross domestic product (GDP) growth in recent years, commercial vehicle producers have continued to experience difficult trading conditions of late, with the industry characterised by overcapacity and manufacturers increasingly seeking joint ventures with partners to help defray costs and exploit economies of scale.

The commercial vehicles market is divided into two principal sectors. By far the most important of these, in both volume and value terms, is light commercial vehicles (LCVs) -- vehicles weighing less than 3.5 tonnes, which account for approximately 80% of total production. The other main sector is trucks and articulated lorries (HGVs) -- vehicles weighing more than 3.5 tonnes. Buses and coaches constitute the industry's third sector, but in fact represent less than 1% of the total commercial vehicle industry. The overall size of the market has declined steadily over the last 20 years. In the early 1980s, UK production was estimated at around 389,000 units a year; by 1996, this had fallen to 220,000. This decline has signalled a period of consolidation, with established companies such as Leyland and Ford being forced to seek foreign partners to provide backing.

One of the key factors affecting the development of the commercial vehicle industry in recent years has been the increasing volume of environmental legislation. In particular, EU `Euro 2' and `Euro 3' legislation has resulted in a much greater emphasis on truck technology as a method of reducing vehicle emissions. The challenge now facing the industry is to provide a vehicle that conforms to tough environmental standards on emission levels and noise and still satisfies fleet operators' demands for vehicle reliability at an attractive price.

The outlook for the commercial vehicle industry in the UK is, at best, uncertain. This is particularly true of the HGV market, which has fallen by around 15% by volume in 1996. Although some of this decline relates to the rush to register new vehicles before `Euro 2' standards were implemented in 1995, it seems there is still a reluctance on the part of fleet operators to commit to new vehicles. In the LCV market, however, where sales are linked more directly to economic activity, prospects are slightly more encouraging.

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