To deliver bouquets in and around Washington, D.C., Karin’s Florist has two big vans, two small ones and a boxy little wagon that’s clinging to life.
After the Valentine’s Day rush, the Vienna, Va., business plans to get a new van to replace the wagon, a Toyota Scion xB with 180,000 miles on it that has faithfully made its rounds since 2006.
“We’ve got it sewn together with rubber bands and paper clips,” said Maris Angolia, president of the family owned business named after her sister.
The van purchase, the second for Karin’s in the past four months, is evidence that small-business owners — once too suspect of a wobbly economy to make big-ticket purchases — are starting to invest in their companies again. The willingness to spend is good news for the auto industry and a positive sign for the broader economy.
The spending is coming for two reasons: Aging vans are simply wearing out. Plus business confidence is growing. A January survey taken for Wells Fargo found that optimism among small-business owners hit the highest level in five years. Most expect increased cash flow and hiring this year. Also, once-tight credit for small businesses has loosened, and borrowing rose in the second half of last year, according to research by Experian and Moody’s.
Commercial van sales last year were up more than 40% since 2010, and they rose 9% in January even as U.S. auto sales dropped 3%, according to Ward’s AutoInfoBank.
“A lot of these contractors have been trying to keep their old products as long as they can,” said Peter Bedrosian, senior manager of product planning for Nissan North America. “The vehicles are really nearing the end of their useful life.”
Van sales are a bellwether for the broader economic recovery since small businesses are reluctant to spend after a recession, said Mike Jackson, director of North American forecasting for the IHS Automotive consulting firm, which predicts commercial van sales will grow 27% between 2013 and 2015 to nearly 400,000 per year.
Auto companies have spotted the trend, and they’re moving quickly to enter a market once dominated by Ford, General Motors and Mercedes-Benz. Nissan entered the market with the NV full-size van in 2011 and the NV200, a small van, last year. Chrysler’s Ram brand started selling a full-size van last year and has plans for a small van. More products are coming from GM and Ford.
Ford’s Transit Connect, a van built on the guts of a compact car, created a new market for small vans when it was introduced in 2009. Before it arrived on the scene, businesses had to buy big vans even if they didn’t need them. Now, if owners want better gas mileage and maneuverability but don’t need huge cargo space, they have choices.
Earlier this month, GM’s Chevrolet unveiled its own Nissan-made small van, the City Express, at the Chicago Auto Show. GM contracted with Nissan so it could bring a van to market quickly to take advantage of growth, said Ed Peper, the company’s vice president of commercial sales.
Ford sold only 8,800 Transit Connects when it was introduced in 2009, but that grew to almost 40,000 last year. Nissan’s NV 200 and the Ram Cargo Van, a modified minivan, joined the market, pushing total small van sales to more than 53,000 in 2013. Big vans saw even larger growth, with sales rising from 159,000 in 2009 to nearly 259,000 last year.
Van sales began taking off in 2012 and 2013, and now they are accelerating, Peper said. “We’ve seen just a lot more activity, a lot more confidence,” he said. “There’s more (price) quoting. To me, that’s a very good sign.”
While Karin’s may be confident enough to pull the trigger on a new van, others are still waiting.
Kessler Plumbing near Dodger Stadium in Los Angeles is still running eight older-model Ford E-Series vans, some of which have more than 200,000 miles on them. The company’s owner has been against making a purchase, and Kessler hasn’t bought any vans since 2008, said Matt Martinez, a company supervisor.
“It’s been tough since the recession,” Martinez said. “We’ve been crawling out of that. This year is starting off strong, so we’ll see.”
Courtesy of USA Today