U.S. market off 15%, Canada flat.
Carryoverinventories up 23%
During April, Power Products Marketing conducted a survey, on behalf of Powersports Business, among 100 snowmobile dealers across the northern United States and Canada. These 100 dealers collectively accounted for over 6,000 snowmobiles sold annually, which we estimate represented about 3.5% - 4% of the total market.
We asked these dealers specific questions pertaining to their 2003 season sales, carryover inventories and orders for the 2004 season. We supplemented this research with recent reported industry information obtained from several knowledgeable industry sources.
2003 Season End Sales
According to publicized reports, total North American snowmobile sales for the 2003 sled season, which concluded March 31, declined nearly 11% from the previous year. This marks the sixth consecutive annual decline for the North American market from a peak of nearly 240,000 sled sales in 1997 to the current estimated 165,000 unit level, according to annual data published by the International Snowmobile Manufacturers Association (ISMA).
Once again, there was a significant contrast between the U.S. and Canadian markets, the second consecutive year Canadian sled sales outperformed the U.S.
2003 U.S. snowmobile sales reportedly declined about 15% compared to the 2002 season while Canadian retail sales were nearly level. The previous year, U.S. sales declined nearly 5% from the 2001 season totals while Canadian retail sales increased approximately 8%. The Canadian market now accounts for about 30% of North American snowmobile sales, according to the latest preliminary figures.
We reported in our January Trendline analysis that year-to-date 2003 North American sled sales through mid-December were estimated to be running about 20% behind the previous year’s pace as a result of poor snow conditions overall for the second consecutive season.
This would mean North American retail sales for the season’s January through March fourth quarter would have been about 15% ahead of the previous year. However, fourth quarter sled sales for the 2002 season were extremely weak, about 25% below the 2001 season’s final quarter, based upon our analysis from last year. So, actually the fourth quarter for the 2003 season was about 10% below the 2001 fourth quarter.
Other 2003 Trends
Weather conditions again were very unfavorable for sledding across the Midwestern U.S. this
last year and, as a result, sled mileage driven would have been significantly down in this important region.
As indicated in previous snowmobile Trendline articles, the Central or Midwestern region accounts for well over half of all annual U.S. snowmobile sales, with Michigan, Wisconsin and Minnesota representing the vast majority of that number.
Alaska, which has historically been the number one Western sales state, had a very poor season for snow and sales. On the other hand, New York, the top Eastern sales state, had a good year because of above average snowfall and Canada generally had respectable snow conditions.
One thing that Canadian dealers mentioned affecting their snowmobile sales was insurance companies refusing to insure sleds of 700cc and up.
Not surprising, early spring snowmobile sales reported by the dealers we spoke with were extremely weak for the second consecutive year. This could indicate a large number of sleds sold in recent years with low mileage that are still waiting to get ridden.
Preliminary estimates indicate that the recent snow check sales decline for the industry could match last year’s 25% drop.
According to various reports, the top-selling snowmobile for the 2003 season was Arctic Cat’s F-7 Firecat, followed by Yamaha’s RX-1 four-stroke, with Bombardier’s REV 600 ranked third. The previous season, Yamaha’s Viper was the industry’s number one selling sled.
As reported in our January Trendline article, the trend at that time, which continued throughout the remainder of the year, was generally that the new performance models were the hot-sellers, with the only other models to move through dealerships being heavily discounted non-currents.
Current/Non-Current Sales Ratio and carryover Inventories
Last January, we reported that through the mid-2003 season it appeared the current/non-current model sales ratio had significantly shifted upward, with non-current sales accounting for as much as 30-35% of total sales.
This was in stark contrast to the current/non-current mix of about 80/20 at the end of the 2002 sled season.
Based upon our survey of 100 snowmobile dealers, the current/non-current mix ended the 2003 season at about 75/25. This indicates current product sales declining by nearly 16%-17% compared to an actual increase in non-current sled sales of between 11%-12% during the 2003 season. The U.S. reportedly had a much higher percent of non-currents in their sales mix, at closer to 30% of sales compared to Canada at about half that.
Based upon our sample of 100 snowmobile dealers across the U.S. and Canada, snowmobile inventories at March season-end increased about 23% over the 2002 season ending levels, which reflected a similar such increase the previous year.
According to our calculations, this computes to a 2003 season carryover percentage of about 35% versus a 25% figure from the previous year. We consider levels exceeding 10% — and certainly 15% — of unsold machines to be excessive.
We asked our sample of 100 snowmobile dealers what they anticipated their 2004 season ordering to be in comparison to what they had ordered for the 2003 season. Based upon the collective results, the dealers reported they anticipated ordering 27% fewer units compared to what they had ordered for the 2003 season.
This represents the largest drop in the five seasons we have tracked this indicator and tops the 24% drop from our survey of a year ago for 2003 orders.
The overwhelming message from our dealer survey was that dealers do not want to exceed any order that could place them in an even more serious situation with their inventories.
Many of the dealers indicated they know they will be in for a battle over orders with the regional managers, and they are concerned that OEMs will try to jam sleds down their throats.
Yamaha seemed to be far better off regarding their dealer inventories compared to the other three OEMs.
Many dealers said they are considering dropping snowmobiles altogether. It is their perception that the market may be oversold and oversaturated and that this is leading them to much lower margins.
Others, however, feel that the demographics appear good for snowmobilers, and consumers will buy if there is snow.
Snowmobile sales decline 11% for 2003 season
U.S. market off 15%, Canada flat.