The why behind the PWC rebound – May 15, 2006

The personal watercraft industry has talked about it, analyzed the numbers for any proof of its presence, and yes, probably even prayed for it for nearly a decade: a sign, any sign, that the market is beginning a sustained climb.
Sure, we breathed a little easier in the leveling off period that has typified the past few years, but truly good news is not a level pulse, but an actual uphill line on the sales graph. In other words, a rebound, a word that has become like a sip of water to an industry that has been on a multi-year struggle through the desert.
Well, drink it in. For the first time in a long while, numbers are up. And no, this isn’t just a minimal blip we’re talking about, it’s a genuine increase, a push in the right direction that has seen sales surge to double-digit increases in many states. Spurred on by the continuing adoption of four-stroke technology, the best news in years on the legislative front, and undoubtedly a well-timed push on the low end of the price scale by almost all of the four major players, the PWC market finally has reason to celebrate.
And while our annual Focus section has typically centered on those throwing the bash, this year we have chosen to get the story directly from three of those celebrants themselves. From Florida’s behemoth all-line Riva Motorsports (Honda/Kawasaki/Sea-Doo/Yamaha), to Michigan’s average-sized Joe Gar’s Honda (Honda), to Arizona’s steadily growing Parker Yamaha (Yamaha/Sea-Doo), we spoke directly to the dealers to get the perspective of what is truly up in the personal watercraft industry.
The proof
While the National Marine Manufacturer’s Association numbers will not be released for several weeks, the personal watercraft industry can comfort itself with the news of a genuine rebound, according to information provided to Powersports Business by Statistical Surveys, Inc., a Michigan-based company that tracks the PWC market through retail registrations.
After several years of somewhat level growth, offset slightly in 2004 by the exit of Polaris from the marketplace, the PWC industry legitimately experienced that long-awaited uptick in 2005, with the four remaining manufacturers selling approximately 78,500 new machines to consumers, up from approximately 71,800 in ’04 and a fairly level 73,500 the previous two years. That’s a more than respectable 9-percent increase.
In addition, excellent growth was recorded in the so-called key states, with all reporting double-digit increases compared to 2004. California (up 14.8 percent), Florida (up 12 percent), Texas (up 11.9 percent), and even Michigan (up 12.4 percent) all reported above-average increases. The Carolinas and Arizona, meanwhile, really experienced a boom, with North Carolina up 24.5 percent, South Carolina increasing 28.6 percent, and Arizona surging 27.7 percent.
“I’m just strictly looking at retail registrations, and what I see over a period of time is that these numbers are starting to move to levels that they haven’t been at in a long while,” explains Statistical Survey’s Aarn Rosen. “I base my opinion that there’s starting to be a change there because it’s starting to make the needle move.
“The key leading states of Florida, California, Texas and Michigan are showing above-average growth. They’re showing that things are moving; people are attracted to the price point. Can they keep that growth over the long haul? That all depends on how innovative they get with their product.
“If (the manufacturers) get creative, keep making changes that excite the consumer and keep them wanting to get the latest model, they’re going to continue to see growth.”
Fresh Product
Certainly the sweeping technological changes in recent years can be given the lion’s share of the credit for giving consumers that long-awaited nudge. Four-stroke technology has proven to be a winner with consumers, originally on the high end of the price and performance scale, but thanks to Yamaha, Sea-Doo and even Kawasaki, now on the lower end of the curve as well.
“The new technology in general is playing a big part,” explains Dave Bamdas, owner of mega-dealership Riva Motorsports in Pompano Beach, Fla. “It’s fresh, it’s creating different products that are giving people a reason to either upgrade their old machines or get back into the market.
“When a customer comes into our dealership that had a watercraft five or six years ago, and maybe they got out of it and into something else, they’re just wowed by the new four-strokes, how quiet and fuel efficient they are. And they obviously have the newest styling and the newest instrumentation.
“This market is so product-driven, and the new technology has created new demand for us from all segments — performance, economy and even middle of the road.”
Eric Blodgett, owner of Parker Yamaha in Parker, Ariz., agrees wholeheartedly. “We’ve seen a strong improvement in the personal watercraft market,” says Blodgett. “And I really think that a lot of it is the retiring of the two-stroke technology, people retiring their old two-strokes and putting a new four-stroke on the water. So I think a lot of it is technology driven.”
The attractive new price points, however, cannot be overlooked, whether it’s the low MSRP of players like the Yamaha VX110, Sea-Doo GTI or Kawasaki STX-12F. “If you look at what’s in the market,” says Blodgett, “Yamaha’s VX made a big statement, because it was a new player on the block and it dropped the price barrier. Additionally, this year we’re seeing the BRP GTI line doing extremely well.”
Other vehicles showing low prices are attracting new buyers. Blodgett points to the two-stroke Kawasaki 900, at only $5,999, or the recently rebate-assisted Sea-Doo 3D, which has come into a range that some feel it should have been at all along. “The popularity of the 3D never took off, but we’re seeing some pretty substantial rebates in some areas right now,” explains Blodgett. “It never really sold at its initial price, but we’re selling a heck of a lot of them at a reduced rate. Under $5,000 watercraft, we’ve sold 10 or 11 of them in the past few weeks.
“So I think it’s been price-point sensitive on the two-strokes that are left in the market, but I think it’s been technology driven in the four-strokes.”
Gas price impacts
While the long-term impact of this spring’s rapidly escalating gas prices is yet to be fully felt, early indications are that, somewhat surprisingly, the impact is less than many might expect.
“With gas prices going up, I got very conservative and didn’t order a whole lot,” said Gary Meernik, owner of Gars Honda in Grand Rapids, Mich., and a self-professed “little guy” in the overall PWC market. “However, my sales are holding right up there.
“So far this year things have gone very well for PWC. I think there are still people who are going to do it no matter what. The person who we are selling to is the upscale buyer, the guy who’s going to write a check out for them. Well, we’ve got an upscale product; the upscale buyer is probably going to buy Honda. I don’t know that we’ve financed one yet.”
Meernik sold 32 boats in 2005, a number that he thought would be a peak. Surprising winter and spring sales, however, may soon force him to begin looking to order more.
As to what manufacturers are enjoying the increase the most, data from Statistical Surveys shows that while Sea-Doo continues to be the clear market leader, most of the increase in recent years can be attributed to its competitors, namely Yamaha and Honda. Sea-Doo sales have remained relatively level, with the company enjoying a peak of 45.6 percent of the market as recently as 2003, while holding down 43.1 percent in 2005. Yamaha, meanwhile, experienced a respectable jump last year, building its share of the market up to 33.2 percent, a six-point increase over 2004. Honda has edged ever closer to Kawasaki, holding down 9.3 percent of the market in 2005 compared to the Big Green’s 11.6 percent.
The Long Haul
Perhaps the best news is new blood is being attracted into the sport.
“What we’re seeing is that when people are buying their watercraft, they’re buying accessories to go with them,” says Blodgett. “So if they’re buying accessories, we’re getting some first-time buyers back into the market. And that to me is a plus.”
Even from the much-publicized legislative side, the news is decidedly upbeat. “Things are positive,” says Bamdas. “Four or five years ago we were hearing a lot of negative, ‘things were going to get banned’ kind of talk. Now we’re not only holding our ground, but advancing on the enemy.
“Overall, I believe the market finally has a solid foundation, and will slowly begin to creep back.”