ATV unit sales decline, inventories increase

During May, we conducted a survey on behalf of Powersports Business among 130 ATV dealers across the U.S., most of whom sell youth ATVs as well as the adult models. These dealers collectively sold over 15,000 ATVs through April, nearly 7% of the actual market, which would represent a very good sample size.
As in past years, we will focus some of our spring coverage of ATVs on the growing youth segment, which has outsold the adult segment of the market in recent years. Most of these mini ATVs are produced in Taiwan and China, and an increasing number of Far East OEMs are offering new youth models as well as entry level ATVs ranging between 125cc and 250cc and above, as were exhibited at the Indy Dealer Expo.
But first, here’s an update on the U.S. adult ATV market.
2003 may YTD Adult ATV Sales
According to industry sources, and recent statistics of unit sales compiled by the Motorcycle Industry Council (MIC) and published in Powersports Business (See page 24), U.S. adult-size ATV retail sales (i.e., over 150cc) were down about 2.4% for the first five months of 2003 compared to the same period a year ago. Industry sales for the month of April reportedly increased 9% over April 2002 while March month sales were down about 1%. May sales were off 6.6%, declining by 4,825 units from the same month last year.
Up until April, a number of industry watchers, including many in the financial community, were uneasy about the pattern monthly sales had exhibited since August of 2002. After two months in 2003, February year-to-date sales were running nearly 10% behind 2002 and some were predicting a severe setback in the industry for 2003 and beyond. With the economy showing signs of rebounding, forecasts of a single-digit increase for the industry in 2003 appear to be reasonable.
According to the dealer body we polled for our survey, they anticipate ATV sales increasing 8.5% for 2003, about the upper limit what forecasters have been projecting of late.
Dealer Inventory Levels
Based upon the responses from 98 of 130 ATV dealers we surveyed, dealer inventories at April month-end were approximately 22% higher from a year ago. This roughly computes to nearly three months on-hand compared to about 2.4 months at the close of April 2002.
Our assessment is that this figure, assuming our survey sample is accurate, is in line with acceptable standards.
Years ago, the old rule of thumb was two months on-hand and one month on order. But that was back when interest rates were traditionally much higher, and given the proliferation of new models in ATV product lines, which makes the process of planning orders more difficult, three months is certainly not out of line for this time of year, although it would tend to represent the upper extreme of the range.
ATV Sales By Application
We asked the dealers we surveyed to provide estimates of their recent ATV sales based upon the primary application or use. Most ATVs, of course, are used in more than one application. For example, farmers may use them for farm chores, hunting or even recreational riding. Again, we emphasized the single most primary application. Here’s what we compiled:
Sales by Application
Farmers 17%
Hunters 21%
Young Sport Riders 20%
Older Recreational Riders 29%
Homeowners for Utility 10%
Commercial Businesses 3%
Youth ATV Market Update
Much of the following information was gathered at the Indy Dealer Expo in February, with additional follow up research conducted through various industry contacts.
According to our analysis, U.S. mini ATV sales (ATVs under 150cc) grew about 25% during 2002, including models reported by MIC members. This amounted to an estimated 157,000 units compared to the estimated 125,000 mini quads we derived for 2001 and 100,000 for 2000. It also contrasts sharply with what appears to be a leveling of growth in the adult market.
Several significant shifts in market shares occurred during 2002. AEON’s share fell from 34% in 2001 to an estimated 25%. AEON produces brands for Polaris and AlphaSports.
E-Ton’s share rebounded slightly after a dismal 2001, to what we estimate was between 11 and 12% for 2002. Suzuki’s share, which includes newly-branded Kawasaki models, increased to 11%. Yamaha’s share increased to about 10-11% from what was 8-9%. Dinli’s combined share from its own operations and TOP/Madami surged to about 9% from what had been between 4 and 5% in 2001. Her Chee’s share, which includes Bombardier and Arctic Cat models in addition to another half dozen importers, increased to about 8%. Honda’s share was about 5% while Stannic Motor (Kazuma) and Unilli Motor (Dealer’s Distributing) each had an estimated 3% last year. The remaining OEMs account for an estimated 14% of the market and number at least twenty, according to our accounting.
Based upon our research conducted at the Indy Dealer Expo, there were at least another dozen new OEMs from mostly Far East countries Taiwan and China that were exhibiting new youth and entry level adult ATVs for sale into the U.S. market for 2003. Despite this ongoing flooding of new OEMs into the youth ATV market, we expect the playing field to ultimately narrow to a small number of players, such as MIC members and AlphaSports and E-Ton, while others may ultimately implode.
Youth ATV Sales By Buyer Type
We asked our 130 dealers to identify the type of buyers that purchased new 90cc youth ATVs. While at Indy, we were told by one distributor that half of their 90cc mini ATV sales were going to adults. This contrasted with what other manufacturers had told us. According to our sample of 124 dealers who responded out of the 130 we sampled, 90% of all 90cc ATVs sold go to youths 12 years of age and older. About 6.5% go to adult women riders and only 3.5% go to older adult male riders.
We next asked the dealers to identify type of buyers that purchased new 125, 150 and 175cc ATVs. According to our sample of 68 dealers who were able to respond out of the 130 we sampled, 65% of all 125, 150 and 175cc ATVs sold go to youths 16 years of age and older.
About 25% go to adult women riders and 10% go to older adult male riders.

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