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Stay Flexible This Fall

Fall is in full swing and the powersports market should be experiencing its annual turnover of moving inventory out so that new units can be showcased on the sales floor. However, inventory challenges continue to plague 2021 sales, with many analysts forecasting continued issues into 2022. In a recent article in the Wall Street Journal, companies such as Polaris offer a glimpse into the numerous issues facing a powersports OEM, which has trickle-down impact on dealers and ultimately customers.

Flexibility should be the mantra this fall as supply chain issues continue to work their way through the industry. For example, Polaris is changing its manufacturing and sales strategies on the fly to cope with shortages of materials and parts. The company said it is juggling approximately 30 + supply-chain constraints for its units, sometimes changing its plans daily for what it produces.

This story has played out in the retail sales numbers across manufacturers. Coming off an historical 2020, the August major unit sales declined 1.4 percent overall in the US. This is not reflective of demand, which remains high. It speaks to inventory, or the lack thereof.  Where dealers are usually offering sales ‘blow-outs,’ many are now scrounging for units.

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New Personal Watercraft Protection from EFG Diversifies Powersports Dealer Profits

School may be back in session but summer lingers for many parts of the country. In fact, autumn is a preferred time to be on the water for many, with fewer crowds and more pleasant temperatures to spend valuable time with family. Your customers are still clamoring to get on the water – but do you have the inventory to meet demand?

Personal watercraft sales have skyrocketed during the pandemic, and the trend shows no signs of slowing. According to 360MarketResearch, the market will register a 6.2 percent compound annual growth rate in terms of revenue, with a global market size of $2059.2 million by 2025. But powersports dealerships are struggling to stock inventory, sticker prices for units on the lot are rising, and supply chain challenges have impacted manufacturing timelines. Whether looking for new or used vehicles, the squeeze is real.

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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.

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