If tomorrow everyone left their car in favor of a bike, rail, or a bus (or gondola, or streetcars in 5 cities where those exist), a glaring need would still find this segment on the road; whether in cities or in rural locations. That’s right I’m talking about the commercial vehicle market, and this week I’ll talk about its hottest segment (that didn’t exist 6 years ago in the U.S.): small vans.
What do you define as a small van?
Glad you asked. In 2009, Ford brought its European-produced Ford Transit Connect to the States selling 8,834 vans in 2009 to 39,703 in 2013. Based on the Ford Focus, Ford began selling it in Europe in the early 2000s (CO2 regulations, high fuel prices, and history of small spread out rural communities and tight spaces of London all but make it small van-centric or larger vans based on cars-centric), before finding its way here as a trial during the height of the recession when fuel was expensive and car sales were hard to come by, let alone the commercial vehicle market. After all, the commercial vehicle segment (especially on the lower end) has always depended on small businesses, which were the first to feel the real pain of the Recession.
Small Vans are new?
Before 2009, the smallest vans general consumers and businesses alike could buy were short wheelbase vans based on full-size van platforms that were either paired with an old V6 or a large V8 engine, like the below Chevy Astro van.
|[caption id=”attachment_296” align=”aligncenter” width=”700”] Mid 00’s Chevy Astro Van||Source: wikipedia[/caption]|
For the average florist, distributor, or even repair service manager, these offerings well outdid their needs, which sparked a small niche of vehicles in the mid 2000s of panel converted car-based crossovers like the Chevrolet HHR and the vehicle it emulated the PT Cruiser. These vehicles provided the room these groups needed without the large payload capacity (they didn’t need) offered by small wheelbase full size vans. Instead of (city / combined / highway) 15/17/20 mpg, (adjusted for 2008+ EPA Maroney window labels) they got 22/25/30 mpg, an improvement of 1.9 gallons for every 100 miles travelled or 264 gallons of fuel per year (assuming they travel 14,000 miles a year with their van). With their fuel savings, they could keep their businesses in tact through the economic downturn and keep those savings to the benefit of their customers. Add to it a lower carbon footprint (as well as easier places to park and smoother ride), and many businesses found this small niche rather convenient. Although both the HHR and PT Cruiser would find their end due to uncompetitiveness with their main selling audience (non cargo van versions), the Ford Transit Connect created its own market share to grab this small but growing need that was never really realized in the marketplace.
|[caption id=”attachment_297” align=”aligncenter” width=”1000”] Late 00s Chevy HHR Panel||Source: wikipedia[/caption]|
A little thing known as the Chicken Tax and why it's hurting US consumers
Like any good economics class will teach you, new markets with relatively low barriers to entry don’t last long without new competitors entering, less they not be a totally free market. Well, as it turned out, there was a reason why this “untapped market” was left untapped: the story of the Chicken Tax. You can read more here about the Chicken Tax, but essentially it all started after WWII, where US chickens were finding their ways to European dinner plates, undercutting European chicken prices by a great deal. Europeans didn’t quite like it (they loved the chicken but
farmers farming conglomerates found many friends in various government offices) and chose to restrict US chicken imports. President Johnson decided after 18 months of failed talks through Proclamation 3564 to impose a 25 % tax “on potato starch, dextrin, brandy, and light trucks, effective January 7, 1964.” This effectively killed VW Microbus (both van and pickup versions) sales among other European truck imports, as well as Japanese produced vehicles as well. As time has gone, all but light trucks have been repealed, and as Robert Lawrence, professor at Harvard specializing in international trade, postulated that the Chicken Tax effectively insulated the US from the growing reality outside of the US of small light duty trucks that would ultimately find their way to be successful today (delivering class leading space with more efficient powertrains).
Circumventing the Chicken Tax
So if a tarriff is still preventing the import of light trucks from other countries and no small vans are being built inside of the U.S., how are they selling here without a tarriff? Well, friends, let’s jump into the secret refitting that goes on to get a commercial vehicle to the States.
As this Wall Street Journal article points out, any Ford Transit Connect van that comes to the U.S. starts life on container ship from Turkey as a full passenger “wagon” - that is, there are seat belts, windows, and bench seats in the rear of the van. When they arrive in Baltimore, if that vehicle is matched to a cargo van configuration, the seats come out: the metal goes straight to recycling, and the seats become landfill cover. The expense (and carbon footprint) to ship back the components is way too prohibitive, whereas this reconfiguration is seen as cheaper. Rather sad isn’t it? Unfortunately, that is the reality for this growing segment. Why not build in the States you ask? Although their market is expected to grow from 44,000 in 2013 to 120,000 in 2017 according to IHS Automotive, this number pales in comparison to the expected 16.7 million vehicles to be sold this year and for this year or next, US production may not make sense (yet) for this vehicle type.
Small Vans: A Big win for Cities and Small Businesses alike: Vanshare!
Despite the Chicken Tax’s growing induced environmental problem, the small van movement has seen more entrants develop US versions of their European offerings to grab a small piece of the growing market. With better fuel efficiency, these vehicles provide better options for small businesses to move goods and services across cities and towns with better maneuverability and space density. While in the U.S., Zipcar offers vans (of which I have used personally to move myself from a summer in DC to finishing my last year of undergrad last summer), they are a fleet of Ford E-150 full size vans, and with the E-150 set to be phased out in 2015 for the new full-size European-designed Ford Transit, I would expect within 18 months to 36 months, ZipCar to offer small cargo vans as part of its growing
car van share fleet. This could allow more consumers to get behind the wheel of a new small van and replace ungainly van rentals. Better yet, it could even promote further use of vansharing by eliminating the need for many to still need a car: transporting “stuff.” And with electric vans like the Ford Transit Connect Electric that was briefly sold during 2010, further technologies could find their way into this segment that could make a long lasting impact due to their lack of substitution by other transit means in urban city centers.
Small van offerings
2015 Chevy City Express / Nissan NV 200 (Chevy rebadged the Nissan NV 200 to get into the market quickly) More here
|[caption id=”attachment_302” align=”aligncenter” width=”700”] Ram Promaster City||Source: Motor Trend[/caption]|
2015 Ram Promaster City More here Price and fuel economy TBA
[youtube id=”_cBkvtOMzAk” align=”center” mode=”lazyload” autoplay=”no”]
With the small van market expanding, maybe so can the midsize pickup truck market? Abandoned during the recession by the Big Three citing “consumers would spend a few thousand more for a full-size truck anyway,” this market has remained stale ever since, with the only two offerings: the Nissan Frontier and Toyota Tacoma using underpinnings at least a decade old(!). Add to it an unfavorable position on the CAFE mandate, and you find a disappearance of a market that is far more loved than the industry believes consumers will respond to. Chevy and its upscale counterpart GMC have released the new Colorado/Canyon (the models it last had in the segment) to breathe new life and turn that previous sentence’s assumption on its head. Just like the small van market, it too was vastly crippled (and still is) by the Chicken Tax resulting in the present situation of “new” 10 year old trucks with no competition to deal with. (Not to put blame on Nissan or Toyota, but when the costs to upgrade said trucks without stiff competition outweighs the perceived sales increase, it takes a new (or in this case returning) entrant with new technology to take a risk and shake up the market, not to mention the fact that they cannot effectively sell their overseas trucks in the U.S.) I’ll take a look at what the Chevy / GMC twins show promise and how that too could change the landscape of the urban environments, especially in pickup truck dominated urban markets like Houston and Dallas, or add to ZipCars carshare fleet. In addition, I’ll look at key features that could turn around the full-size mid-size debate.