More Efficient Commercial Work Vans Reduce Demand For Gasoline

| About: Fiat Chrysler (FCAU)
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Summary

New kinds of work vans come in more optimal and efficient sizes.

These new and lighter sizes, combined with better engines and transmissions, can reduce gasoline consumption by 50%.

New models from Ram, Ford and Nissan are now flooding the US market, and people are junking their old, inefficient commercial work vans.

I did a comparison test and found the all-new 2015 Ram ProMaster City to be particularly attractive on all metrics.

The Ram ProMaster City has the drive comfort and handling dynamics of a good new car, which is a new benchmark for a commercial work van.

When we talk about reducing the demand for gasoline and diesel, the discussion mostly circles around cars. In the US alone, over 17 million cars will be sold this year.

Sometimes, the discussion ventures into large trucks - 18-wheelers that cross from state to state in long overnight stretches. These mostly run on diesel.

However, one category that is often overlooked in explaining the reduced demand for diesel and gasoline is the smaller commercial work vans used mostly in cities and suburban areas. As it turns out, the efficiency improvements in this category have been staggering in a new generation of work vans that have recently been hitting the market.

I recently attended a presentation by Ram, a subsidiary of Fiat Chrysler (NYSE:FCAU), where the company pointed out that there are 400,000 of these vans/trucks sold every year in the US. In the smaller parts of this segment, there were huge inefficiencies for several decades in terms of the vans that were offered by the "Big 3."

Starting in the 1960s, until only a few short years ago, the commercial work vans offered by the "Big 3" were almost suspiciously lookalikes. They were rear wheel drive with a big V8 upfront. They had a relatively small cargo compartment in relation to the size and weight of the vehicle.

Worse yet, with only some minor exceptions - such as the Chevrolet (a division of General Motors (NYSE:GM)) Astro in the 1980s and 1990s - they tended to come in only one basic size. Besides, some of the alternatives were also very inefficient. In any case, as most of you who have driven these old American vans know, they typically did not yield much better than 10 MPG in city driving. Fuel economy was abysmal. The drive quality was also outright nasty - seat comfort, steering, handling and braking.

This was further exacerbated by the fact that their limited cargo space meant that some enterprises ended up having to buy even bigger vans, requiring commercial licenses and even more weight, producing even worse fuel economy, often down to single-digit MPG in the city. On the other side of the equation, there were few smaller alternatives, so many customers were "forced" to buy these larger vans, consuming much more gasoline.

All of this meant that MPG ranged from the single digits to the low double digits, at best. With these vans logging a lot of miles, it was a giant sucking sound on the nation's oil and gasoline consumption.

About a decade ago came the first crack at improving this situation. The first alternative was the Mercedes Sprinter. It improved the fuel efficiency in two dimensions:

  1. Diesel. This meant that you could now get city fuel economy a lot closer to 20 MPG than 10 MPG. Basically, for many users, fuel consumption got cut by almost half.

  2. Right-sizing. Because the Mercedes Sprinter was so much more spacious than the old Dodge, Ford (NYSE:F) and Chevrolet commercial work vans, it was possible for some companies to downscale from larger commercial trucks. This had a similar positive effect on MPG.

Mercedes was joined by Nissan (OTCPK:NSANY) in offering a more modern van a few short years ago. Then, in the last year, Ram and Ford both launched much more modern and efficient commercial work vans as well.

In the case of Ram, it was the first to offer a front wheel drive full-size commercial work van, of such considerable size for the largest cargo load. Combined with a diesel engine, it made for the largest-sized cargo transported for the least amount of fuel yet.

With the "traditional" full-size commercial work vans now being able to handle so much more cargo, we have also seen the rise of a new class of smaller commercial work vans. These are for those who just don't need the kind of payload and size. Examples include cable TV installers, florists and cupcake deliveries.

Ford entered this market with the Transit Connect commercial work van, and more recently Nissan followed with the NV200. These vehicles can also do double duty as large station wagons ideal for taxicab service. I'm sure you've all been in them in cities such as New York and Las Vegas.

The most recent entry into this smaller commercial work van segment is the all-new 2015 Ram ProMaster City. On sale starting late December, this heavily-specialized work van goes up against Ford and Nissan with what I evaluated to be a superior vehicle.

I drove the Ram van both unloaded, as well as with 600 lbs worth of cargo, on a variety of streets and surfaces, and then compared with the entries from Ford and Nissan. For starters, the Ram is a lot more powerful and has a more capable 9-speed automatic transmission.

The interior is vastly better than those two competitors. It's more modern, more ergonomic and makes for a superior seating position. I had a hard time trying to pair the Bluetooth in the Ford, so that I could stream my podcasts, and I gave up after about 10 minutes. In the Ram, I got it done in less than 10 seconds.

What impressed me about the Ram the most was the driving dynamics. The steering and handling felt like a good car - not at all like a commercial truck. Actually, if you have the need for a large station wagon, this could be your car. You can fit everything from very large pets to all sorts of large gear behind the rear seat.

As with its Ford and Nissan competitors, the Ram is sold both as a wagon for personal family transport, as well as a "raw" van space that can be left that way or outfitted with almost any kind of specialized interior. Including delivery, prices start at $24,125 and reach $29,275 for a fully-loaded model.

The capabilities of this Ram commercial work van are tremendous, as it can tow 2,000 lbs and carry 1,883 lbs including having a fork lift stick a pallet straight into the van. Yet, it's as easy to drive as a small car with slightly elevated ride height.

In the final analysis, this so-called "small" commercial work van has about as much capacity for cargo as the full-size vans from the 1960s, 1970s, 1980s, 1990s and 2000s. Yet, it consumes a lot less gasoline. The Ram ProMaster City is rated at 21 MPG city and 29 MPG highway. That's similar to an average car.

In my testing, I drove almost exclusively in urban and suburban areas, and I had no problem averaging 20 MPG despite part of the drive having 600 lbs of cargo, and driving on the aggressive side. It is the same engine and transmission as in the Chrysler 200 although tuned a little differently for this heavy load commercial purpose.

Here is the impact of this van on America's MPG efficiency and dependence on oil: Instead of getting barely 10 MPG in the old-fashioned work vans, you can now get a far more nimble vehicle that handles infinitely better and yields at least twice as much MPG. Small wonder that the gasoline price is falling, with the prospect of cutting the commercial work van market's consumption by half.

The impact on the nation's gasoline demand is disproportionate to the number of trucks sold per year. In a regular car, which may be kept in service for 10-25 years, you tend to see gradual improvements in MPG from generation to generation, ranging from 10% to 30%. In this kind of small commercial work van, however, we are seeing close to a 100% improvement in a single generation. Furthermore, these vans tend to be driven many more miles per year, therefore their life expectancy is shorter. As a result, this dramatically improved new vehicle helps reduce the demand for gasoline.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The author had no positions in any company mentioned in this article at the time of submitting this article for publication. However, positions can be initiated and changed at any time. RAM and Chrysler paid for airfare, lodging and meals at a product launch event, to enable this first-hand drive report. RAM/Chrysler also provided brand new Ford and Nissan commercial work vans for competitive evaluation test drives.

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