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Motorcycle inventories decline

EDITOR’S NOTE: During the first week of January, Power Products Marketing conducted a telephone survey on behalf of Powersports Business among 100 authorized motorcycle dealers across the U.S. These dealers collectively reported 2003 motorcycles sales of over 58,500 units, nearly 7% of the actual market.

We asked the 100 motorcycle dealers we surveyed to what extent the number of motorcycle apparel and accessory items they are carrying in inventory had changed during 2003. It should be emphasized that this is not total inventory but the number of different items and brands dealers choose to carry in apparel and accessories.

Based upon the responses, the number of items dealers stock increased on average nearly 18% last year. Here is an historical log of the annual increases reported from prior surveys:

Change in number of items stocked by dealers

2003 17.9%
2002 8.8%
2001 16.4%
2000/1999 25.0%
1998 20.0%

This computes to an overall increase over the six-year 1998-2003 period of about 125%.

There were seven dealers who reported a decrease in their apparel and accessory offering during 2003 and 33 dealers who reported no change. However, 60 dealers, or 60% of those sampled, reported an increase of varying amounts. These percentages for the three categories were nearly identical with the dealer survey we conducted a year ago. However, dealers showed a much larger overall increase in 2003 compared to 2002.

APPAREL/ACCESSORY FLOOR SPACE
According to the 100 dealers we surveyed, the amount of floor space in motorcycle dealerships devoted to apparel and accessory items increased nearly 13% during 2003. Here is an historical log of the annual increases reported in prior year surveys.

Change in floor space

2003 12.9%
2002 9.3%
2001 9.7%
1999/2000 19.0%
1998 16.0%

This computes to a cumulative 75% increase in floor space over the six-year 1998-2003 period.

Only three dealers reported an actual decrease in floor space during 2003 while 54 dealers, 54% of the sample, reported no change. There were 43 dealers who reported increasing the amount of apparel and accessory floor space during 2003.

PG&A PROFIT MARGINS
Profit margins on motorcycle parts, garments and accessories continue to face pressure from competition despite a recently recovering economy. We asked the 100 dealers we polled to indicate how much their motorcycle PG&A profit margins had increased, decreased or stayed the same over the last year and by what percent age.

According to the responses, the overall average amounted to an increase of one half of 1% during 2003. Below is our historical log of the annual increases that were reported in previous surveys:

Changes in PG&A profit margins

2003 0.5%
2002 1.1%
2001 2.4%
2000/1999 3.0%
1998 3.0%

There were 16 dealers who reported a decrease in their PG&A profit margins during 2003 while 64 dealers reported essentially no change. Only 20 of the 100 dealers we surveyed, roughly one in five, reported an increase.

CHRISTMAS HOLIDAY PG&A SALES
Based upon our dealer survey, motorcycle PG&A sales over the 2003 Christmas holiday were on average nearly 9% better compared to 2002 and consistent with previous historical averages from earlier surveys.

Change in holiday PG&A sales

2003 8.8%
2002 3.9%
2001 8.9%
1999-2000 19.0%
1998 9.0%

Of the 100 dealers who responded in our telephone survey, 20 indicated their motorcycle PG&A sales during the 2003 Christmas holiday had decreased, 25 reported no change or flat sales compared to the previous year and 55 dealers, over half, reported increases of varying amounts.

USED MOTORCYCLE SALES
We asked 100 dealers to report their new and used motorcycle sales for 2003. As indicated earlier, there were over 58,500 new motorcycles collectively sold by our sample of dealers during 2003, which reported over 13,700 used cycles sold. This computes to a 21.5% used/new ratio on average, or about 1 used bike for every 5 new sold. This is nearly identical with the 21.5% ratio we compiled from our survey from a year ago for the year 2002 and the 22% ratio from 2001.

This is telling us is that motorcycle dealers have collectively been selling used bikes over the last three years at the same pace as new.

NEW MOTORCYCLE INVENTORY
We next asked the 100 dealers we surveyed to identify how many new and used cycles they currently had in inventory at December month-end. Based upon their responses, there were over 15,700 new motorcycles in dealer inventories, which computed to 27% of their 2003 annual sales they reported, or about 3.2 months of product on-hand. The chart below compares prior year surveys.

Months New Inventory On-Hand

Dec. July
2003 3.2 2.9
2002 4.3 NA
2001 3.8 NA
2000 4.4 NA

It is interesting to note that between January and July of 2003 dealers were able to substantially reduce new motorcycle inventories from what had historically been running at excessive levels with single-digit sales increases in new bikes for 2002 and 2003.

USED MOTORCYCLE INVENTORY
Used motorcycle inventory reported by our 100-dealer sample totaled nearly 2,200 units. This computed to about 16% of used cycle sales or 1.9 months of used motorcycle inventory on hand. The chart below compares previous averages from prior years.

Months of Used Inventory

Dec. July
2003 1.9 1.3
2002 2.5 NA
2001 2.6 NA
2000 2.7 NA

Similar to new motorcycle inventories, there appears to have been a sharp drop in used bike inventories between January and July of 2003. However, levels appear to have picked up significantly since last July.

NEW MOTORCYCLE SALES BY BUYER
We asked our 100 sample dealer body to estimate the percent of their new unit motorcycle sales by four distinct groups of customers – first-time buyers, those customers returning to the sport after an absence, those customers adding another cycle or more to their existing number and those customers replacing an existing bike being sold or traded in. Here are the most recent averages compared to prior periods:

Types of Motorcycle Buyers

1/04 1/03 8/01 8/99

First-Time 26% 25% 28.5% 21%
Returning 19 20 22 24
Additional Bike 21 20 15 17
Replacing Unit 33 35 34.5 38

According to our recent survey, it appears the percents of all categories have remained fairly stable over the last three years with very little change. An estimated one-third of all new motorcycle sales appear to go to customers replacing an existing bike.

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