Euro-Style Vans Gain Momentum in U.S. Market

Refrigerated Sprinter SalesWhen Daimler AG (DAI), the maker of Mercedes-Benz luxury cars and former owner of Chrysler, brought its Euro-styled Sprinter van with a 14-foot high roof and sloped brow to the U.S., it stood out on the parkway like a pachyderm.

A dozen years later, the commercial-van market has embraced the look. Traditional, big vans, such as General Motors (GM) Co.’s Chevy Express and Ford Motor Co. (F)’s Econoline, are starting to fade from the scene as stricter fuel-efficiency standards are prodding a convergence around a more aerodynamic, European look.

“Guess what? The world has changed,” Claus Tritt, who heads Daimler’s U.S. commercial-van business, said in an interview. “We are no longer the oddball.”

Automakers, including Daimler, Ford and Chrysler Group LLC, are all bringing new, large, fuel-sipping work vans to the U.S. as they gear up for a boom in the highly profitable segment. The surge is fueled by new-home construction and an improving economy, the same forces helping make 2013 the year of the pickup, said Tritt.

Commercial vans, like pickups, have long been a strong source of profit for automakers. Sales of both are tied to the housing market and both have a loyal customer base, which include buyers of fleets such as PepsiCo Inc. (PEP), FedEx Corp. (FDX) as well as plumbers, painters and carpet installers.

The new vans tend to have straighter sides and taller roofs than traditional ones that looked more like bulked up minivans. With their improved fuel efficiency and utility, they complement the U.S. automakers’ best lineup from top to bottom in a generation.

New Models

Ford, which brought its smaller made-in-Turkey van, the Transit Connect, to the U.S. from Europe in 2009, is introducing its larger Transit van next year, replacing its segment-leading E-Series work van. The Transit will be made at the Kansas City Assembly Plant in Claycomo, Missouri. Large vans make up about 80 percent of commercial-van sales.

Chrysler, based in Auburn Hills, Michigan, is bringing a Ram version of the Ducato, the work van of majority owner Fiat SpA (F), to the U.S. this year. Detroit-based General Motors, which sells the GMC Savanna and Chevrolet Express, said last month it will start selling a rebadged version of Nissan Motor Co. (7201)’s small commercial van, the NV200, next year.

Nissan, which entered the light commercial truck business with its NV cargo and passenger vans in 2010, began selling the compact NV200 in April, targeting a segment Ford moved into with its Transit Connect model. New York City chose a taxi variation of the Nissan as its official cab, which will replace the city’s fleet of 16 taxi models by 2018. The van, assembled in Cuernavaca, Mexico, starts at $19,990.

Growing Economy

Nissan may have about 10 percent of the commercial-van market this year, up from 2.4 percent in 2011, according to R.L. Polk & Co. The Yokohama, Japan-based company assembles its larger commercial van in Canton, Mississippi.

Toyota Motor Corp. (7203), the world’s largest automaker, does not offer a commercial van in the U.S., nor does Honda Motor Co.

U.S. economic growth will accelerate to 3 percent or more in 2014 after averaging an annualized 2.1 percent during the first four years of the recovery, according to projections by forecasting firms Moody’s Analytics Inc. and Macroeconomic Advisers in St. Louis. That would be the fastest rate of expansion since at least 2005.

Residential building permits rose 36 percent in April from the year earlier and 14 percent from March, according to the U.S. Commerce Department. Large pickup sales have risen 22 percent this year, according to Autodata Corp.

‘Circle of Life’

“If people buy houses, somebody’s got to build them and the people who build them need materials so someone’s got to take the material to the construction site,” Tritt said in an interview. “It’s almost like a circle of life.”

Commercial-van registrations will probably rise to 301,000 this year from 155,900 in 2009 and may jump 21 percent to 365,000 next year, according to Polk. The category’s share of the U.S. market may climb to 2 percent this year and 2.4 percent next year from 1.5 percent in 2009, Polk forecasts.

Ford, based in Dearborn, Michigan, has long dominated the segment with its E-Series, including the Econoline, topping 45 percent of the market since 2008, according to Polk. GM’s brands have had at least 34 percent during that same period. Stuttgart, Germany-based Daimler’s share rose to 7.5 percent last year from 1.6 percent in 2010.

Daimler and Chrysler are betting that their new models will shake loose some large buyers from Ford and GM.

“There are more choices out there,” Tritt said “And if the U.S. consumer has choices, they automatically have to look at us.”

Fuel Sippers

To help lure buyers, Daimler is introducing a four-cylinder Sprinter for the 2014 model year, which will improve fuel efficiency by about 18 percent over the six-cylinder. Daimler sells the Sprinter for the same price under the Freightliner brand as well.

Daimler is forecasting 5 percent growth in the market to about 265,000 commercial vans this year, and it expects to outpace the market’s growth and gain share.

“The recession hit the commercial-vehicle market pretty heavily,” Tritt said. “People were holding on to equipment but it’s time to replace. There’s a pent-up demand.”

Len Deluca, director of Ford’s commercial trucks unit, said the E-Series, market leader for 33 years, was due for a makeover.

“From a technology, fuel-efficiency and capability standpoint, it was time,” Deluca said in an interview. “I think we would have become uncompetitive if we didn’t move forward.”

‘Terrific’ Timing

Ford’s Transit, which goes on sale in mid-2014, replaces the E-Series. Buyers can choose from three roof heights, three body lengths, two wheel bases and two four-cylinder gas engines or a diesel-burning powertrain. The Transit is 300 pounds (136 kilograms) lighter, on average, and gets about 25 percent better mileage than the E-Series, Deluca said.

Ford brought the smaller Transit Connect to the U.S. in 2009 and it quickly became an unexpected hit, Tom Libby, lead North American analyst for Southfield, Michigan-based Polk, said in an interview.

“Ford was ahead of the curve with the Transit Connect,” he said. “It really resonated. The timing was terrific.”

Ford sold about 9,000 of the smaller Transit Connect vans in 2009, and sales took off from there, topping 35,000 last year. Before Transit Connect, buyers used larger vans or customized larger sport-utility vehicles, Deluca said. It starts at $22,425.

Fleet Replacement

“Change can be hard, but based on what I’ve heard from customers, I believe they’re looking forward to getting Transit in the U.S.,” Deluca said. “I can’t tell you how many times I’ve heard from a customer, ‘It’s about time you guys did this.’”

The age of the commercial-truck fleet also should help drive demand. Heavy-duty trucks on the road are about 13 years old, on average, about a year older than the light-duty fleet, he said. Ram is well positioned with a new 1500 pickup, as well as a heavy-duty pickup and the ProMaster coming to the market. The ProMaster will show up on dealer lots in the third quarter with a price that starts at $29,630.

“The timing’s pretty good for us to be bringing new products to market,” Bob Hegbloom, director of the Ram truck brand, said in an interview.

Function is a bigger factor than fashion for commercial buyers, especially delivery and cargo fleets, Hegbloom says. The new ProMaster improves mileage, comes with a diesel engine or V-6, lowers the step-in height by three inches and can go longer between routine maintenance, such as oil changes.

“With commercial-vehicle customers, the last thing they’re concerned about is the look,” Hegbloom said. “It comes down to cost of ownership and does it deliver on the capability.”