DETROIT (May 2, 2016) — Sales of full-size vans in the U.S. are increasing eight times faster than the industry average, putting the commercial van sector on track to top a half million in sales for the first time ever.
It's one of the fastest-growing, most lucrative vehicle segments — yet you'll almost never see one prominently parked in a dealership's showroom.
While the pace of overall industry gains is slowing, the improving economy means demand for work vans — both full-size and compact — is heating up.
Newcomers to the market from Nissan Motor Co. and Fiat Chrysler L.L.C.'s Ram brand are surging, while Ford Motor Co., the dominant player by far, enjoyed its best March van sales since the Carter administration.
Ford replaced its aging E-series van, also known as the Econoline, with the European-bred Transit in 2014, just as many businesses had recovered enough from the recession to start upgrading their van fleets.
“You won't see it on the cover of Motor Trend, but it's certainly a great addition for Ford,” said Marc McEver, the owner of Olathe Ford outside Kansas City, Kan. About 20 percent of the dealership's sales are now Transits, which come from a plant 30 miles away.
“It's really light years different between the Econoline and the Transit,” Mr. McEver said. “And profitability vs. the Econoline is much better.”
Commercial vans are a big reason fleet sales rose 14 percent in the first quarter. Many vans are sold in bulk to utility companies, cable providers and other big businesses.
But every year, tens of thousands of vans are bought one or two at a time by small businesses — plumbers, electricians, caterers and florists — helping boost retail sales as well.
Either way, commercial van sales are coveted by auto makers and dealers because many businesses tend to purchase the same brand repeatedly. In addition, dealers with strong commercial sales often have busier service departments.
Business owners put a lot of miles on their vans and are more careful than many consumers to ensure the vehicles don't break down unexpectedly and disrupt operations.
Don't sell vans short.
“Their shops are always full, whether it be day or night,” said Jim Morrison, the head of Ram trucks, “because those people are smart enough to know they need to do the maintenance on the vehicles.”
At Ram, which introduced the ProMaster in 2013 and the compact ProMaster City last year, van sales are up 46 percent. But Mr. Morrison said he thinks some Fiat Chrysler dealers are still overlooking a big profit generator by not focusing enough on those commercial vehicles amid the consumer frenzy for pickups, SUVs and cross-overs.
“So some of the biggest growth, in an industry that's up 3 [percent], some of the best money potential for our dealers, is sitting right in their lots," Mr. Morrison said in an interview in March. "Unfortunately, sometimes they put them in the corners and hide them away."
Euro van invasion
The addition of the Transit, ProMaster and Nissan NV has revolutionized the U.S. commercial van market since the last time many small businesses bought one.
"It was in serious need of a transformation," said Karl Brauer, senior director of insights for Kelley Blue Book. "They literally used to look and drive like a box of metal on a skateboard.
"They were all archaic and obsolete vehicles that just went on and on because there wasn't a better option. Finally, in a short span of time, a bunch of better options became available."
As a result, the segment's average transaction price jumped from the upper $20,000 range in 2010 through 2014 to $32,366 in 2015, according to KBB data. For 2016, prices have risen almost $600 more.
The only manufacturer still selling the old-style, body-on-frame full-size vans is General Motors Co., whose Chevrolet Express and GMC Savana have kept a similar look for two decades. GM began selling a rebadged version of the Nissan NV200 as the Chevy City Express in 2014.
In contrast, Ford Motor Co., which accounted for 55 percent of the commercial-van market in the first quarter, has made a major investment in its offerings. It brought the fifth generation of its Transit van, which dates to the 1960s in Europe, to the U.S. in 2014.
Whereas the Econoline came in one basic form, Ford offers the Transit in 64 configurations of different heights, lengths and capacities, plus a huge array of options that have proven popular, including LED lighting for the cargo area, premium audio systems and rain-sensing wipers.
Fuel economy is considerably improved, meaning businesses can spend more up front on a Transit but pay less per mile than their old Econoline, said McEver, the Kansas Ford dealer.
“If you've got a fleet of 50 trucks and you can save 20 percent on fuel economy, that's a huge savings,” Mr. McEver said.
The Transit's average transaction price in 2015 was $35,111, according to KBB, up from $29,527 for the E series in 2014.
So far this year, sales of the Transit are up 57 percent. It accounted for 66 percent of the total unit increase across small and large commercial vans in the first quarter.
"That's really impressive growth, and it just says that businesses have a need for them," said Erich Merkle, Ford's chief U.S. sales analyst. "There's economic activity going on out there."
Ford said many dealers now have at least one sales consultant trained as an expert on the Transit. Some also promote the van with special Transit customer events.
Among the challengers trying to take a bite out of Ford's dominance is Nissan Motor Co., which launched its first U.S. full-size van during the recession.
At Nissan's make meeting at the National Automobile Dealers Association convention last month, Fred Diaz, vice president of Nissan's recently created North American Trucks & Light Commercial Vehicles division, told dealers that the company will increase production of both the full-size NV and compact NV200 this year. Sales of those nameplates rose 30 percent in the first quarter.
A large part of the meeting was conversation about the commercial vehicle segment, with dealers asking how they could obtain more of the vans, company executives said.
Only a portion of Nissan's approximately 1,100 dealers are authorized commercial vehicle dealerships. The designation requires dealers to invest in additional store equipment, such as service lifts capable of raising fully loaded vans off the ground for maintenance work.
The dealerships also must hire commercial sales specialists to work outside the stores when necessary to assist commercial customers on site.
Automotive News reporters Lindsay Chappell and Dave Guilford contributed to this report, which appeared on autonews.com, the website of Automotive News, a sister publication of Tire Business.