Volvo Bus’ James Hyde and Dave Porter talk to Andy Izatt about the Swedish manufacturer’s carefully structured approach to retail sales in the face of what is an increasingly volatile market
The £1.4m redevelopment of the Volvo Bus and Coach Sales Centre at Coventry is now underway. Due to complete in the autumn, it will quadruple existing office space to more than 700 square metres and as well as improved meeting facilities, there will be a dedicated customer specification room and a new glass fronted showroom where vehicle handovers can take place. [wlm_nonmember][…]
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James Hyde, Retail Sales Director for Volvo Bus UK & Ireland, explained: “Our existing location in Coventry is widely recognised as being in the ideal place to service our customers. However, our business has expanded by more than 100% since 2010 when it opened and it is vital we extend it inline with this growth.”
“The new centre will be on two floors and the facilities provided will enable us to take the quality of experience we provide quite literally to a new level,” said Dave Porter, Retail Sales Manager – UK & Eire. “A full range of moquettes will be available in the specification room where there will be different pieces of software to help with the decision-making process. There will be conference facilities so we’ll be able to host events, and also a canteen because staff welfare is important as well.
“This investment underlines how committed Volvo is to the retail bus and coach market. We value all our customers, whether they’re buying a £250,000 new vehicle or a £20,000 used one and we’re really looking forward to the opening. However, in the meantime, it is business as usual.”
Used coach
Last year, Volvo invoiced 356 new coaches including those bodied by Caetano for National Express and chassis bodied by Plaxton. Around 150 of that total were retail sales. The number of used sold was 145.
“Overall we’ve been able to maintain our market share, but the current used market is one of the toughest I’ve ever witnessed,” said James. “Dave has been in this business 31 years, but I’m not historically from a coaching background. My introduction was walking into the yard at Loughborough in the mid 2000s when there were more than 250 vehicles parked there looking for buyers. Volvo’s change in mindset in how it approaches used sales dates back to that time.
“We said then as a business that we were going to trade our way out of that situation and never go back. Because of the recession in the late 2000s it became a protracted process, but used sales, which is a separate business within Volvo Bus, has made a positive contribution to the overall figures for the past four years – something for which we’re very proud.
“We invested heavily in terms of facilities when we moved retail sales from Loughborough to Coventry in 2010, the first time we’d a standalone centre dedicated only to selling. We don’t maintain vehicles at Coventry, although there are facilities we can call on at the Volvo dealership next door and they continue to be available at Loughborough. That’s where frontline technicians like James Coleman are based and he can come here to work on vehicles when necessary, but other support activities such as cleaning are subcontracted.
“We probably turn down more used vehicle deals at the moment than we do. That’s not through arrogance. Some of our competitors are extremely aggressive on the new vehicle front at a level where we can’t compete – certainly not based solely on frontend cost. We feel operators are being encouraged to buy when they don’t necessarily need to.
“We’ve always sold on the basis of whole life costs and the back up support we provide. I think how the market feels about that is reflected in Volvo residual values. Nevertheless it’s difficult to sell a £160,000 three-year old Jonckheere B11R with 250,000km on the clock when there are new alternatives being offered for £180,000.
“The used market started to really deteriorate 18 months ago as a result of changes in legislation and the pronouncements that were being made about low emission zones. It’s not just London and the ULEZ (Ultra Low Emission Zone). Five other cities are going for clean air zones and more are lining up to follow.
“With so much uncertainty, it’s not surprising operators are being very cautious about what they buy. However, we’re here to sell vehicles and for the long-term. Our approach was to ensure our sales team understood what the issues were so they could sit down and have sensible discussions about what was going on. By the end of March we had 34 used in stock. By the end of April it will be up to around 45. While it’s below what we would normally need to trade in an ideal market, it reflects how we see the current situation.
“What we do take in we can sell and there have been 58 confirmed used sales since the beginning of the year. Our sales team is really good because they will often place a vehicle before it comes in. They know their customers and share the information with colleagues.
“The ideal vehicle for us would be one with at least 53 seats and a demountable toilet. All the new coaches we sell have demountable toilets because we understand how important that can be to the second life of a vehicle, but it does represent an additional cost.”
“What we do is ensure that the stock we have for sale at Coventry is prepared and presented correctly,” said Dave. “That reflects our investment, not just in terms of facilities, but also our people. All the vehicles are regularly cleaned and maintained, batteries are checked and they’re moved in rotation so they’re ready for a potential buyer to drive away. Doing that has become a bit of a science over the years and because our stock is always presentable, we’re able to turn it over more quickly. That’s important, not least because the biggest cost to this business is obsolescence.
“If vehicles aren’t in the right condition when they leave here, customers are going to have issues and that’s not good for them or us. We want to limit our exposure as much as we can and it can be measured by what we end up having to spend after the sale.
“Relying predominantly on one specialist supplier, we can up-seat Plaxton and Caetano bodies to 57 or 70 seats although Jonckheere is also now an option. That supplier supports what it does very well and the suitability of a vehicle for conversion will often be taken into account when we’re negotiating a trade in deal.
“We’re also making good progress in our response to the impending introduction of the ULEZ and other clean air zone initiatives that are on the horizon at this time. When we consider the upgrade of Euro 4 and Euro 5 vehicles, it’s important to note that we will not claim that the current retrofit solutions accredited under the CVRAS (Clean Vehicle Retrofit Accreditation Scheme) will deliver full Euro 6 benefits in terms of emissions as some others claim. We are however, aware that medium term measures to reduce NOx are required which such systems will provide. However, these should not be considered as a long term solution from Volvo’s perspective to the air quality issues seen in our cities today. What we will ensure is that any conversions undertaken will meet the specific NOx requirements that these zones dictate. A B11R Jonckheere will be first, while a B9R is in development. It’s all about trying to take the risk away from customers and giving them some piece of mind.
“The potential to sell used from the UK in Ireland is limited by the VAT rules. Customers would have to pay the UK rate of 20% and there’s no way of reclaiming it. That said, I am inclined to believe that in a lot of instances vehicle standards and values in Ireland are higher than in the UK and the internal used market remains buoyant. Operators are very close to their businesses. There’s a lot of incoming tourism so expectations are high and they keep their vehicles really well. Because of that, they hold their value.”
Bus market
“It would be around three years ago that our retail coach sales team took on sales responsibility for retail bus as well,” said Dave. “There have been some new Wrightbus-bodied vehicles sold, but the majority have been MCV, which we build for stock, normally ordering in batches of five in what is a rolling programme.
“They may have been sold mostly in ones and twos, but we’ve now placed close to 50 eVolutions and eVoRas. Nine of the initial batch of 10 eVoRas have found buyers. JJ Kavanagh and Sons of Urlingford took delivery of three while six – with a special specification for Uno in Hertfordshire – will be delivered in May.”
“More than 90% of new Volvo bus sales are handled by Commercial Sales Director, Phil Owen and his team who have 32 key accounts,” said James. “But tasking our retail sales team with selling bus as well as coach makes sense because they’re talking to a wide range of other customers that may require both. Building buses for stock is a risk, but one we can manage because we want to be able to respond to what is a spot market. Operators win contracts and can need quick availability. We can supply.
“MCV is a really good bodybuilding partner. The people there are open, honest, approachable and very proactive which we find quite refreshing.
“The used bus market is much more limited. We have no obliged buybacks from London at the moment, although at one time we had hundreds, and there’s nothing due. Pretty much all buses in London are on lease and we have no residual value risk on what’s running there because we use exterior funders.
“If we’re going to sell new retail bus, we can’t say to customers that we’re not going to take any part exchanges, but it can be a different kind of negotiation to coach. We know that operators need to realise a certain value and that we need to make the deal attractive, but equally we have condition expectations. It’s about finding the right balance.”
New coach
As well as its own 9700, new Volvo coaches for retail sale in the UK and Ireland are bodied by Plaxton, Sunsundegui and Jonckheere. Caetano-bodied vehicles are only built for National Express and its contractors.
“We work with a lot of bodybuilders, but that means we can offer the most extensive range of products in the market,” said James. “For us the tri-axle market is limited. The only tri-axles we build for stock are 9700s, but there are a lot of legislative changes that have added weight to vehicles such as driver support systems that are now a legal requirement. Euro 6 drivelines or just exhaust kits add weight as do the new rollover requirements. It’s putting a lot of pressure on chassis manufacturers and bodybuilders to make coaches lighter. To be honest, technology makes it possible for us to reduce weight by two tonnes now, but the resulting vehicle would be twice the price.
“Operators still talk about the 280bhp B10M, which was a legendary, global product. Because, as an engine manufacturer, we were able to take different units off the shelf, by the time Euro 6 came along we were selling vehicles with D7K, D8K, D9K, D11K and D13K engines. Some of those options were derogated so were going to disappear anyway, but there was an opportunity to simplify what we offered and focus on just the B8R with a D8K up to 350bhp and B11R using the D11K up to 460bhp. That’s what we’ve done.”
“It meant we could give customers a clear choice,” said Dave. “The D11K is very reliable, but I think the D8K is also very refined. It’s one of the quietest engines I’ve heard and Plaxton, in particular, has been very successful with B8R retail sales placing at least 70 last year.”
“Plaxton is very important to us,” said James. “At the moment we enjoy exclusivity on chassis supply, but we don’t take that for granted. It’s a true partner that’s very flexible within the build process when it comes to meeting different requirements, particularly when it comes to higher capacity vehicles. It’s a bodybuilder that is particularly close to the market.
“What Plaxton builds for Volvo is to the order of a very limited number of our own customers. We supply chassis to it for its own customer base and so it can build for stock. In Ireland we have joint customers such as Aircoach, which has bought around 39 Volvo Plaxtons.
“Talking about Sunsundegui, Volvo works with it in a number of key countries across Europe, particularly its domestic market, Spain and Portugal, and also Israel. €5m is being invested in the factory at the moment and it’s expecting to produce nearly 500 vehicles in 2018.
“The financial issues Sunsundegui faced several years ago were well documented. Volvo committed to a high number of build slots at that time and that gave the business the stability to negotiate with its funders to secure its future. It’s now 51% owned by the management and 49% by the workers so is a co-operative and it made money in 2016 and 2017.
“The UK and Ireland is not a big market for Sunsundegui at around 40 units annually. While the SC7 with Kiel Avance seats is available on the two-axle B11R at 12.6m for stock, we’ll build tri-axles up to 14m with 59/61 seats to order. However, we serve niche markets with the 10m SC5 midi coach and high capacity 72-seat SB3 both on the B8R.”
Said Dave: “There are five stock built 53-seat SC7s with demountable toilets available at the moment. The SC5 and SB3 are also built for stock, but all of the latest batch of SB3s were sold prior to arrival. Reays Coaches of Wigton bought four, but more are on order for delivery in July/August.
“We have an excellent relationship with VDL, which builds the Jonckheere JHV2 with Brusa Extend 300 seats. Launched two years ago, it is a body that can be used for many different applications and we’ll sell around 70 retail in 2018 so will account for just under half of what we do. Capacity at the Roeselare factory runs at between 350 and 400 units a year so we’re taking a sizable chunk of that.”
“We only build the JHV2 on the B11R. That’s a two-axle 12.6m 53-seater with a demountable toilet built for stock or 13.4m or 14m tri-axle, the latter with up to 65 seats. Jonckheere options are higher priced than Sunsundegui.
“While the range we’ve outlined has all been traditionally-built bodies on chassis, Volvo’s own 9700, assembled in Poland, is an integral. We build both the two-axle 49/51-seat 12.3m 9700 and tri-axle 53/55-seat 13m for stock, but the 13.8m 57/59-seater is to order.
“The 9700 is our premium offering and has a Volvo seat manufactured under licence by Kiel. We would expect to sell around 30 units a year. While the premium sector has declined in the UK, we still do well with the 9700 in Ireland. There are customers there that use them on express work, Galway-based GoBus being one. Its 50th was one of a batch bought last year and it’s ordered another six for 2018.”
Customers first
Said James: “Our new coach sales proposition is based on offering the broadest range of options. We could limit that and it would save money, but it would be at the expense of customers that we have credibly sold to over many years. We would be letting them down and that would reflect in sales.
“Volvo is fortunate in that it has a very good dealer network with more than 95 outlets across the UK and Ireland. Every one of them has ‘Bus and Coach’ written above the door. We’ve also invested a lot in the body side and we most definitely take responsibility for the complete product. Everything is in place to support our vehicles. As we said earlier, that’s what enables us to maintain our market share and why a used Volvo has a good residual value.”
“The role of our regional sales managers has evolved,” said Dave. “The relationship they have with customers has become much more rounded. They’re a first point of contact and we encourage that because it’s so important that we’re responsive as a business at every level.
“On handover day, we try and make the customer feel particularly special. Their vehicle will be properly presented and we’ll spend time with them explaining how all the functions operate. That can take around two hours and we also give them a handy printed guide so they have something to refer to.
“Once a new vehicle leaves here, it predominantly becomes the responsibility of the local dealer, a representative from which will visit the customer within two weeks. Normally the regional sales manager will make the introduction and they’ll be keen to outline the soft products available whether its service and parts support or the backup provided through Volvo Action Service. Additionally we have area service managers who have similar territories to our regional sales managers.”
“There are some very good people working for Volvo,” said James. “What’s more, we’ve been here a long time and will continue to be here supporting our customers for a long time to come. We see it very much as a two-way partnership and we’re very flexible in how we can help.
“The year ahead is going to be an exciting one. Our used position is fully under control and our new order book is very strong as well. We envisage invoicing more than 320 new coaches in 2018 of which 140 will be retail. There are also going to be some exciting and significant product developments in the next nine months to further enhance our customer offer.”
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