Category: Powersports Market

Categories
Business Growth Powersports Market

Keep the Banner Flying in 2022

For powersports dealers, 2021 is shaping up to be another banner year, mirroring the record setting gains made in 2020. Regardless of continuing inventory issues caused by pandemic supply chain bottlenecks, units continued to hit the road. While on-road unit sales repeated their decline, off-road and personal watercraft unit sales increased exponentially. Powersports has proven to be a balm to ease consumers’ pandemic malaise.

Will the good times continue? For 2022, demand for off-road and personal watercraft vehicles is expected to remain high. Once manufacturers begin producing more units at scale, dealers can expect the 30-point margins enjoyed during the boom years to begin to decline as supply chain issues resolve. For some, it will be tough to wean themselves from those lofty profits. Dealers who pay close attention to market pricing – and adjust accordingly – will continue to show strong sales and market penetration. Dealers who cling to those margins may find themselves priced out of the market, even though consumer demand remains high.

The key to a successful 2022 will be based on implementing a consistent sales model at prices the market can bear, with a focus on creating long-term customer relationships. Training for all staff members on financing and protection products will also be key to boosting revenue as the sales process evolves to incorporate more online resources. Savvy dealers know there is more than one way to generate profit from a sale. Adopting a more ‘full service’ approach within the dealership will keep those customers coming back.

Continue reading “Keep the Banner Flying in 2022”
Categories
Powersports Market

Mid-Year Economic Indicators

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.

Continue reading “Mid-Year Economic Indicators”
Categories
Powersports Market

Opportunities in These Tumultuous Times

In three short weeks, 2021 has proven to be as unpredictable as 2020. However, opportunities still abound. While vaccine doses are making their way across the country, COVID-19 cases are hitting all-time highs. Congress passed a last-minute stimulus package that some believed fell far short of the need, while others welcomed the opportunity to apply for new loans. So what’s in store for the powersports industry? Likely much of the same, plus some new things to address.

Let’s start with the new stimulus package. In 2020, the powersports industry saw record sales of dual and off road units and notable revenue generation covering the past two years of declines.  While anecdotal, many dealers attribute the spring stimulus coupled with stay-at-home orders with the spike in sales. The same scenario could play out with the latest stimulus package, and any others that might follow in the first quarter.

However, there are some headwinds which could put a damper on sales. Data from the Bureau of Labor statistics saw 140,000 jobs lost in December, reflecting the first time job growth has shown a reversal since April. The lingering economic effects of the pandemic have also widened the wealth gap. Americans facing wage challenges and potential housing evictions have depleted any savings they may have accumulated earlier in the year, making a bike purchase out of the question, while families in more secure financial positions may be looking for that off road purchase to fill the time.

Continue reading “Opportunities in These Tumultuous Times”