Editor's Note - This report was prepared by Dave Crocker, 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. Crocker may be reached at 952/893-6870 or at firstname.lastname@example.org.
Over the last several years, we have defined each of the powersports markets in terms of its relative U.S. retail sales dollar contribution based upon products sold and services provided by profit center through powersports dealerships and other retail outlets.
The motorcycle industry is the largest and most difficult to compute. It is so large, in fact, that at $21.5 billion it far exceeds the sum of the other powersports markets: watercraft ($1.5 billion), snowmobiles ($3 billion), utility vehicles ($1.1 billion) and ATVs ($7.7 billion).
Altogether, we estimate that total motorcycle U.S. industry retail sales from all products and services amount to about $21.5 billion. Of that we estimate 63% of motorcycle-related retail sales, $13.5 billion, is generated through franchised and non-franchised motorcycle dealerships. Most of the difference comes from estimated used motorcycle sales through private parties.
Our calculations differ from those compiled by the Motorcycle Industry Council (MIC) and reported in their annual statistical abstracts. The MIC includes employee payroll, advertising and promotional expenditures and some other miscellaneous taxes and fees in their calculations, which we exclude.
We include an estimate of used motorcycles sold through other channels such as private parties via the classified ads or over the Internet. Moreover, we include estimates of PG&A sales from other retail outlets that may not be tabulated in the MIC’s definition of a "non-franchised motorcycle outlet."
SALES BY DEALER PROFIT CENTER
For this market analysis, we called 200 U.S. franchised motorcycle dealers across the country, a quarter of which were Harley dealers. These dealers collectively had sold more than 80,000 motorcycles through July, which we estimate represents between 13%-14% of industry sales, a respectable sample. We asked each dealer to provide us with a breakdown of his sales dollar contributions for each of five profit centers: New motorcycles, used motorcycles, service, PG&A and F&I.
According to our analysis, an average of 65% of total motorcycle dealer revenues are generated from new motorcycle sales, clearly the largest contributing sales center. Two years ago when we last conducted our survey, we determined that about 61% of total motorcycle dealer revenues for powersports dealerships was derived from new motorcycle sales.
Used motorcycle unit sales to date in 2004 account for about 10.5% of total motorcycle dealer revenues generated from motorcycle revenues for the average dealership. In our August 2002 survey, this figure was 14%.
The dealer service department only accounts for about 4.5%-5% of total sales from motorcycles, and this hasn’t changed much since our survey of two years ago when service labor represented 5% of total motorcycle revenues.
The collective PG&A reported by dealers through August of 2004 amounted to about 18.5% of total motorcycle revenues for dealers. Of that, parts accounted for about 36%, accessories 32.5% and garments 31.5%.
Only 1.5%-2% of total motorcycle revenues for an average dealership are derived from Finance & Insurance (F&I), which is unchanged from our survey of two years ago.
U.S. MOTORCYCLE RETAIL SALES
Based upon the information provided from our dealer survey and other sources, we have developed an estimate of 2004 U.S. industry retail sales generated by motorcycle-related products.
According to our research, we estimate that new motorcycle sales for 2004 could total about 1.1 million units. Current MIC retail sales published only count sales from member manufacturers. But an increasing number of scooters and motorcycles are being imported from Europe and in particular the Far East, such as China, Taiwan and Korea, over the last few years.
Our calculations are adjusted to include estimates for these OEMs. For example, we believe U.S. scooter sales could total 100,000 units this year, with MIC members accounting for about half of that number. Our estimate for 2004 is for new motorcycle sales to total about $8.8 billion, with the average selling price weighted at about $8,000.
Industry sales of used motorcycles are difficult to determine. Estimates are that 20% are sold through franchised motorcycle dealers, 5% through non-franchised used/service outlets and 75% through private parties via the classified ads or over the Internet. These numbers are based upon estimates from reliable industry sources.
As a result, we were able to determine that franchised dealers are expected to sell about 293,000 used motorcycles this year, based upon our survey average of about one used bike sold for every four new one sold, and the industry as a whole selling about 1.47 million units. If we assume an average used motorcycle price of nearly $4,800 derived from our survey, the market at retail would amount to about $7 billion.
Another estimated $900 million is generated from servicing and maintaining motorcycles, nearly all of which is conducted through authorized OEDs and non-franchised outlets. We did not include any figure for end users who perform their own service, such as changing the oil and filters.
Motorcycle parts, accessories and garments are estimated to account for about $3.8 billion. Of that, an estimated $1.45 billion comes from parts, another $1.2 billion from accessories and $1.15 billion from motorcycle-related clothing. These represent our best estimates based upon dealer surveys for what can be rather ambiguous categories. Most dealers and analysts prefer to lump the three together.
Based upon our 200 dealer sample, franchised dealers we surveyed purchase 67% of their parts from their respective OEMs and 33% from independent suppliers. For the non-Harley dealers the ratio was 60/40, which shifted from 70/30 two years ago. For Harley dealers, the ratio was much higher from the factory at 85/15. For our industry total, we estimate about 80% of all motorcycle parts are purchased through franchised and non-franchised motorcycle outlets.
For accessories, about 54% of purchases are from OEMs and 46% from independent suppliers, according to our franchised dealer sample. For the non-Harley dealers the ratio averaged 42/58 and for Harley dealers, the ratio was significantly higher from the factory at 86/14.
For our industry total, we estimated at least 90% of all motorcycle accessories are purchased through combined authorized dealers and non-franchised motorcycle outlets.
For garments, there was a significant disparity between Harley and non-Harley dealers in our sample. The average of OEM purchased clothing for all authorized dealers in our sample was about 62% compared to 38% from independent distributors.
However, the Harley dealers we sampled collectively purchased 96% of their clothing from the factory and only 4% from independent suppliers while for non-Harley dealers the ratio was 13/87. For our industry total, we also estimated at least 90% of all motorcycle-related clothing is purchased through authorized dealers and non-franchised motorcycle outlet stores.
According to our analysis, Harley Davidson could possibly wholesale about $1 billion worth of PG&A this year, which could be worth about $1.4 billion at retail. Of that, at least $1.15 billion would be U.S. market, which would put their share of the motorcycle industry PG&A at over 30%.
The motorcycle PG&A industry is not only difficult to compute in overall size but also difficult to define because no one has really standardized what constitutes parts, accessory or garment items. For example, some people con sider tires and batteries as parts yet others would argue they are accessories.
Some count helmets as clothing, others claim they are accessories. Also, does a leather jacket and gloves purchased at a local leather shop, such as Wilson’s, and that one might use riding, count as motorcycle apparel? For our analysis, we only included "dedicated motorcycle gear" as opposed to fashion copies or types of clothing, such as the Wilson’s items mentioned above.
It is interesting to note that in recent years, the price for dedicated street motorcycle clothing has come down dramatically with the advent of more affordable nylon replacing much of the more expensive leather gear. For example, some mesh jackets are selling for $99 now compared to leather jackets that had sold for at least several hundred dollars. The result is that there is a lot more motorcycle gear being sold now for fewer dollars with higher turnover than in past years. And, more and more dealerships are stocking and selling this gear than before.
F&I related to wholesale and retail motorcycles is estimated to amount to perhaps $1
billion in revenues, less cash outlays by customers.