During the first two weeks of August, Power Products Marketing conducted a telephone survey on behalf of Powersports Business among 100 authorized motorcycle dealers located across the U.S. These dealers collectively reported 2003 motorcycles sales through July of more than 38,000 units, about 8% of the market excluding scooters, which we consider a significant sample. The following is an analysis of the feedback we received pertaining to new and used bike sales and inventories, financing and credit approval for large cruisers, an update on the progress of dealer Web sites and the extent of female employment in powersports dealerships in sales and service functions.
New and Used Motorcycle Sales
We asked the 100 motorcycle dealers we surveyed to report their new and used motorcycle sales for 2003 through July. As indicated earlier, there were over 38,000 new motorcycles collectively sold by our sample of dealers to date during 2003 compared to about 8,400 used cycles sold. This computes to a 22% used/new ratio on average, roughly one used bike sold for every five new. This ratio is remarkably similar to the 21.5% average from last January’s survey for year-end 2002 and the 22% ratio we derived from an earlier dealer survey for the year 2001.
This would indicate that for the last two and a half years, used motorcycle sales have consistently kept pace with new unit sales at powersports dealerships, based upon our periodic surveys.
We next asked our 100 survey dealers to identify how many new and used cycles they had in inventory at July month-end. Based upon their responses, there were about 15,600 new motorcycles in dealer inventories, which computed to about 24% of their projected 2003 annual sales or 2.86 months of inventory on-hand.
This reflects a drastic drop from the motorcycle inventory levels we recorded back in January at 36% of 2002 annual sales from the dealers we surveyed then, or about 4.3 months of new product on-hand. Our survey for 2001 reflected a 32% ratio or 3.8 months on hand, and for year-end 2000 our dealer survey then registered a 36.5% inventory to sales ratio, or 4.4 months on-hand.
This noticeable decline in the inventory on-hand ratio for July may be more reflective of the sharp increases in June (+26%) and July (+22.5%) on-highway cruising and touring motorcycle sales compared to the sluggish January through May period during which dealers likely kept a tight rein on inventories that had been pushing the upper limits relative to the recent sales trends.
The used motorcycle inventory reported by our 100-dealer sample at July month-end totaled about 1,600 units. This computed to about 10% of new motorcycles reported in dealer inventories and an on-hand used inventory ratio of 1.33 months. Compared to last year’s figures, used cycle inventories then were running at 12% of new motorcycles in dealer inventories with an on-hand used inventory ratio of 2.4 months.
Financing For Large Cruisers
We wanted to update the most recent type of financing for large cruisers, specifically 1200 cc and over. According to the most recent responses of 100 motorcycle dealers we surveyed, about 22% pay cash or credit card, 56% finance through OEM programs, about 8% finance through local banks, 4% through the dealership and 10% through independent financial institutions. The cash purchases seem to vary dependent upon the local area. For example, some cities have many high income jobs, and in those dealerships as much as half of the large cc bike sales are cash.
The major OEMs have great revolving credit programs. This has taken away the ability of dealerships to offer their own financing or to try to make any incentives from third party finance companies. One store indicated they have lost $150K this last year from their customers using the revolving credit cards offered by the OEMs.
A year ago, we asked this same question but pertaining to all motorcycles. At that time, the percentages were 25% cash, 50% through the OEMs, 9% through local banks, 9% through the dealership and 7% through independent financial institutions.
Since the beginning of 2002, there have been a number of generous finance promotions being run by OEMs, which appeared to have contributed to a significant shift to more financing through the OEMs.
We asked the dealers how they would take large potential cash customers and convert them to finance customers profitably. Many dealers who responded simply said that they don’t even try; that they didn’t want to pressure the customer, which we found interesting.
However, others said they tended to push the low interest financing of the OEMs so that the customer could use his cash for other purposes, such as clothing and accessory sales through the dealership or home improvements.
Credit Approval For Cruisers
Several small custom bike dealers called us in recent months to discuss the difficulty they’ve had in obtaining financing for their new custom cycle sales. In other words, obtaining approved credit through their limited number of available lenders is becoming increasingly difficult.
Small custom bike OEMs can’t offer their dealers the generous finance plans the major OEMs offer their dealer bodies. Since over half of the financing for these large displacement bikes is through the OEMs, it seems to have significantly impacted small custom bike dealers on their finance sales.
The major OEM dealers we surveyed indicated that credit approval standards had not changed in the last year (57%). Another 27% indicated it was less difficult while only 16% responded that it was more difficult to get credit approval from lenders in the last year. Some dealers, however, said it continues to be a 50% to 60% turndown rate due to the poor credit of customers. We were also frequently told that the major OEMs and other creditors are freeing up more money and are expected to approve more customers with lower credit scores.
Web site Usage
We asked our survey group of 100 motorcycle dealers whether they had a Web site or not. About 80% indicated yes, while 20% responded they did not. About 58% of the respondents said they used their Web site for selling new motorcycles, 64% said they used it for selling used bikes, 74% said for promoting service specials, 80% for promoting sales specials and 57% for promoting open houses and other events. Most of the other uses for the Web sites given were simply to advertise the store location and hours.
We then asked each dealer we surveyed to rate his own Web site’s value or benefit on a 1-5 scale where 5 is extremely valuable, 3 is average and 1 is of no benefit. Based upon the responses of 76 dealers, the average computed out to about 3.5, slightly above just an “average” rating. Many stores seem to feel the Internet is a necessary evil and would prefer to not have to spend time and money on it.
Few Female Employees
Our body of dealers said they don’t employ many women in their sales and service and parts departments because they get too few applicants.
According to our analysis, only about 10% of all sales employees at the powersports dealerships we surveyed, a quarter of which were Harley dealers, were women. Of the 97 dealers who responded, however, 44 indicated they did not employ any women in sales.
For service and parts, the percentage was slightly higher at 12% female employees while 40 dealerships indicated they did not employ any women in their service and parts department.
Many stores said they would love to hire more women, particularly in sales, but get few applications.