EDITOR’S NOTE: During December, 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 5,700 snowmobiles sold through November of the 2004 season. We estimate these dealers represent about 6% of the total market to date.
These dealers were asked specific questions pertaining to their snowmobile sales, inventories and other trends. This research was supplemented with recent reported industry information obtained from several knowledgeable industry sources.
According to our survey and recent industry reports, total year-to-date North American snowmobile sales through November were running about 5% behind last year’s pace. While this decline may seem lower than what most people would have expected, sales have in fact been buoyed by the generous fall promotion programs the four OEMs have implemented in order to reduce non-current inventories carried over from last spring.
Although our survey sample was too small to accurately show regional trends, indications are that sales in the Eastern U.S. are running well ahead of last year, while the Midwest, which now accounts for perhaps 60% of U.S. total sales, could be down as much as 10% compared to a year ago. The Canadian market in total appears to be trailing only slightly behind last year’s pace, by a few percentage points.
November year-to-date historically has represented the mid-point in annual sales and December year-to-date accounted for about two-thirds of the snowmobile season’s sales. Because spring buying programs were hit particularly hard by poor snow conditions, current model year sales will have to rely much more on the November through January holiday period.
CURRENT/NON-CURRENT SALES RATIO
Based upon published data from last spring, dealers were holding carryover inventories at near 35% of annual sales going into the 2004 season. These historically high levels have forced both dealers and OEMs to focus on clearing non-current models from dealer showroom floors.
Non-current sales for the 2003 season were in the range of 25% of total sales, according to dealers we had surveyed then. However, 2004 year-to-date estimates for non-current sales are clearly running much higher, we estimate at perhaps 38%.
Also, according to dealers we surveyed in the Midwest non-current sales to date for 2004 are averaging about 50%, offsetting much lower non-current sales figures in the Eastern U.S. and Canada.
According to our survey of 100 dealers, inventories through November were down approximately 8% from previous year’s levels. This inventory reduction was more notable in Canada.
The combination of lower new model orders and aggressive discounts and promotions of non-current models seems to be having the desired effect of lowering field inventories.
Moreover, estimates are that OEMs as a whole have cut production and current sled shipments by 12-13% this year.
We asked dealers to segment their end of November inventory into current, 2003 models, and prior to 2003 models. Based upon our dealer responses, end of November dealer inventories were comprised of 71% current, 24% 2003 models, and 5% pre-2003 models.
For Midwest dealers participating in our survey, reported inventories were 59% current, 33% 2003 models, and 8% pre-2003 models. A total of 16 of 45 dealers surveyed in the Midwest stated that non-current inventories were 60% or more of their total inventories at the end of November.
Based upon our examination of the non-current sales and inventory figures, it is critical that the Midwest U.S. have a good 2004 season with plentiful snowfall and cold weather.
FALL SNOWMOBILE PROMOTIONS
We asked dealers as part of our survey, “What percent of your new snowmobile sales to date do you estimate are incremental sales resulting from the fall OEM promotion programs?” While this may be a difficult question for a dealer to accurately answer, we wanted to understand the dealers’ opinions of the effectiveness of fall promotions.
According to the 100 dealers we surveyed, 35% of new unit sales are from the OEMs’ fall promotion activities. This figure is quite constant across the US with US dealers estimating 37% of sales are due to promotions, while Canadian dealers stated a lower figure, approximately 30%. We also asked dealers which programs they thought were the most effective. Dealers said rebates/cash discounts were the most effective, followed by finance packages and extended warranties.
According to other sources, two areas in particular have been heavily discounting to induce incremental sales – the Detroit, Mich., and Minneapolis, Minn., markets.
AFTERMARKET SNOWMOBILE TRACKS
Two years ago, we conducted a survey related to the market for aftermarket snowmobile tracks. As part of our survey, we worked to update what has been happening with this important aftermarket component.
While the market for new snowmobiles has declined sharply over the past two seasons, the market for snowmobile tracks appears to be much less influenced by poor snow conditions.
According to dealers we surveyed, slightly less than half said that their track sales were the same for the 2003 season as the 2002 season. While the number of dealers saying they increased track sales in 2003 were closely balanced by the number of dealers reporting declines in track sales, the average decline in track sales slightly outpaced the average increase in track sales.
Dealers said during interviews that many of their customers plan ahead to upgrade or replace tracks at the start or end of a season regardless of the number of miles they ride. Additionally, poor snow conditions can lead to increased track wear and/or track damage.
Significant trends in the market include Camoplast entering the pre-holed track market. Pre-holed snowmobile tracks are tracks that are designed and manufactured with holes to incorporate studs and, unlike standard tracks, placing studs in these tracks does not affect the warranty.
While Kimpex has offered a pre-holed track for several years, many dealers felt that Camoplast entering the market would raise the awareness of this product across the entire market.
Another trend affecting the track aftermarket is the dramatic increase in OEM long track offerings. In earlier years, one of the main markets for aftermarket track suppliers was customers converting standard length (121-inch) snowmobiles to long tracks. Now that each of the four manufacturers offer several long track snowmobiles as well as the newly popular cross over length models, the aftermarket for long tracks has decreased dramatically.
Greg Boeder is senior partner for Power Products Marketing, a market research firm based in Minneapolis, Minn. PPM (www.powerprods.com) specializes in the power products and components, powersports and marine industries. Boeder may be reached at 952/893-6870 or at firstname.lastname@example.org.