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Outlook for worldwide PWC market improves

In 2003, the PWC market actually grew to approximately 123,000 units worldwide. That’s up about 0.4%. This follows roughly six years of industry decline after the market peaked in 1996 when approximately 233,000 units were sold.
We feel that the PWC market will grow in the low single-digit rage over the next several years, based upon expected continued economic growth, demographic trends, PWC manufacturers market expectations, and continued favorable reversals of PWC restrictions at major lakes due in part to wider availability of cleaner 4-stroke engine technology.
Dealers surveyed reported a sales rating of 5.3, a moderate decline from the 6.7 rating in July 2003, however still higher than the 4.5 in September 2002.
Dealers noted that there is continued demand for new 4-stroke engine models (which, according to Polaris, are expected to account for 50% of industry sales in 2004).
The most dramatic decline in sales rating was experienced in the Northeast region with a sales rating of 5.0 versus 8.3 in July 2004. As with ATV’s, northeast dealers cited rainfall as most likely cause for the decline in sales.
Year over year dealer sales rating declines were also experienced in the South/Southeast (6.0 versus 8.2) and Mountain/Pacific (4.1 versus 5.3) regions. The Upper Midwest did experience a modest increase in dealer sales rating to 5.9 versus 5.6.
Following last year’s positive announcement that three national parks reopened to personal watercraft in time for the boating season, Lake Mead (AZ/NV), Lake Powell (AZ/UT), and Assateague Island National Seashore (MD/VA); three additional parks Lake Roosevelt (Wash DC/ID), Amistad Nat’l Recreation Area (TX), and Lake Meredith (TX) have allowed PWC back on the lake.
In addition, two other positive developments for the industry have occurred in 2004: A proposal to ban PWC on Keoka Lake (MN) has been denied, and proposed legislation that would single out PWC and potentially grant individual municipalities the authority to ban three-four passenger watercraft also has been defeated.
Inventories still remain at reasonable levels according to our dealer indications. However, given a weak start to the season, dealer comfort with inventories has declined. Our dealer inventory rating moderately declined to 6.7 from 7.9 in July 2003 and 7.4 in January 2003.
As indicated in prior surveys, we feel the “age” of the units in the field has continued to improve year-over-year, especially considering the positive industry growth in 2003 and continued shift to newer 4-stroke engine technology. This should lead dealers to take on a modest number of additional units for 2005.
Dealers still remain somewhat cautious on new orders as the precipitous decline in sales from the market peak in 1996 (233,000 units) to its trough in 2002 (122,500 units) still remains in the back of their minds.
Dealers rating on order estimates indicated that they would likely order “flattish” units in 2005 with a rating of 2.8 versus 3.1 in July 2003 and 2.9 in January 2003. The 4-stroke models will account for a majority of the increase in orders, or at least offset a decline in 2-stroke models.
Continued positive economic outlook, improving regulatory environment, and favorable demographics lead us to believe that growth in 2005 is achievable.
From a market share position, we believe Bombardier will continue to lead the PWC market in 2004/2005, though Polaris should pick up some share lost in 2003 with 4-stroke MSX now in the market and improved product offering for 2005 (all models are now using MSX platform).
Honda should also continue to gain share at a substantial pace, likely surpassing Kawasaki as #4 player in the market in 2005. PSB

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