FEDEX, UPS SEEK USED VANS

Fedex and United Parcel Service are running into a shortage of delivery vans, prompting a surprise cost squeeze that’s cutting into profits during a record surge in package volumes.

Urged by the couriers to purchase any vans they can scrounge up, leasing companies are dipping into the used market. Added demand in the rental market “is creating shortages,” a UPS spokesman said by email. Fedex is even paying a stipend to its contractors to offset the extra cost of renting. “If there’s a cargo van out there, we’re trying to buy it,” said Brendan Keegan, chief executive officer of Merchants Fleet, which provides vehicles to package delivery companies. It expects to have 15,000 vans out for lease at year-end, up from 6,000 a year earlier.

The van drought sprang from pandemic-induced shutdowns at factories that build the high-ceiling and box-like vehicles — just as soaring e-commerce ratcheted up demand for home deliveries. While Fedex and UPS don’t expect that the scarcity will hobble delivery capacity, it adds to the rising expense of doing business as COVID-19 rages on.

Total vehicle output is nearing pre-pandemic levels, yet inventories are still thin. The number of all new vehicles available in the U.S. was almost 1 million units lower in October than a year earlier, according to researcher LMC Automotive.

Some of the bottleneck lies with manufacturers of custom truck bodies for step vans, which were affected by the auto plant closures.