We’ve left the mid-way point for 2021 in the dust and many powersports dealership owners and managers are beginning the planning process for 2022. Now is the perfect time for a quick review of the mid-year economic indicators. While the previous quarters delivered exceptional sales, there is no crystal ball that shows this level of growth will continue. Just as Sir Isaac Newton proved that all things that go up – will come down – the powersports market is still susceptible to market and economic conditions. Let’s take a look at some of this data and resulting prognostications.
Inventory and price markups
The Q2 2021 Powersports Business/BMO Capital Markets Dealer Survey showed that overall powersports inventory levels were too low for 91 percent of all responding dealers. ATVs, side-by-side units and personal watercraft appeared to be the largest pain points. Unfortunately, it appears that a return to pre-pandemic inventory levels will not occur in the near term. Supply chain issues, parts and chip manufacturing, and persistent COVID outbreaks continue to impact OEM production. For example, Renesas, one of the largest chip suppliers to the automotive and powersports industry was hit by a massive plant fire in March and does not expect to be back to full capacity until later this year. Add unit manufacturing to that and we are looking at the first quarter of 2022 before we see a significant uptick in units being delivered to dealerships.
Tight inventory for new units has prompted increased interested in used powersports units. Previously considered a courtesy option for customers purchasing new, today’s dealerships are making the majority of their money through used inventory sales. This has resulted in growth in used powersports auction houses, and higher than average price markups. As unit prices go up, dealers are leaving a significant amount of money on the table by not leaving enough room for F&I product sales. They are also pricing many of the near and subprime consumers out of the market with LTVs that are too high for lenders to approve for consumers with lower credit scores, thereby shrinking their pool of potential customers.