FOCUS – Utility Vehicle market Growth Continues

Utility vehicles are the hottest items on the floor at many powersports dealers. As ATV sales begin to show signs of leveling after years of tremendous growth, the utility vehicle (UTV) segment is in an explosive growth mode. And sales are no longer limited to agricultural or industrial customers. Dealers say they are seeing more and more consumers purchasing the machines for use around their homes or small acreage. Regardless of who is buying the machines, or how they are being used, it's clear that the recent surge is showing no signs of slowing down any time soon.
The recent growth of the segment is reminiscent of the growth the ATV market experienced in the 1980s and `90s. “With ATVs, what really kept them going was agricultural use,” said American Honda's Lee Edmunds. “People would buy them for the farm, but the actual use would be for a lot of other things too. I think you're seeing that in the Utility vehicle market.”
Multi-rider capability, an aging population, and the exodus of city dwellers to rural areas are all factors why the vehicles are gaining popularity, as well.
CHICKEN OR EGG
Has the recent popularity of UTVs brought on increased manufacturers, or have the increased manufacturers brought about the sudden rise in popularity? No one can say for certain, but it's obvious that the consumer is becoming more aware of the units.
When Kawasaki was the primary player, its possible that consumers walking through the door of a Kawasaki dealer may have never known the Mule existed. The machine wasn't marketed particularly strongly when it arrived in dealers in 1988.
“I think it was a learning process for Kawasaki as a manufacturer in addition to our dealer network when we first started,” said Kawasaki's Russ Brennan. “As we went along [and discovered] potential uses, we were able to fine-tune our marketing to be more focused.”
MOVING FORWARD
What was once a very specialized utility-only market is now breaking down into several categories.
“I see there to be three distinct segments in the marketplace,” said Dan Micka, owner of Essex Manufacturing, an aftermarket UTV accessories manufacturer. “Some of them are overlapping in the golf cart industry, for groomed terrain. There have always been hundreds of thousands of golf carts sold every year and they still are out there. Those companies are trying to come up with utility vehicles.”
Then there are units that function purely as a utilitarian machine. These have higher payloads, less capable suspensions and lower top speeds. Lastly, there are the recreational machines with some built-in utility capability.
The competition is getting fierce. New players are entering the marketplace. Aside from Kawasaki, Polaris and Yamaha, Suzuki is now offering its own version of the Mule as part of the Kawasaki/Suzuki alliance, though it recently announced that it would no longer sell any Kawasaki product after 2005; Honda told its dealers last fall that it would offer a machine; BRP's alliance with John Deere produced crossover in both ATVs and UTVs; and Arctic Cat showed a prototype of a side-by-side machine at its last dealer meeting.
Plus, there are entries from the industrial equipment and agricultural side. Kubota, Cub Cadet and Bobcat all have working-class machines available. Micka predicts we haven't seen the last of these vehicles, either. “All the implement dealers are going to offer a complementary line,” he said. “Bush Hog has a unit out there, and they're in farmyards. You're going to see the Allis line, which is part of the Agco line, and you're going to see New Holland.”
John Deere, which has always been a major player with its Gator turf machines, has redefined its line in the past few years to cater to different customers. Finally, there are the “small-independents” offering UTVs. These include companies such as Landpride, Yerf-Dog and Brister's ChuckWagon.
Looking at the numbers, its no wonder that the market is growing so rapidly. According to Powersports Business' most recent analysis, in 2003 consumers overtook industrial buyers with 52% of sales going to consumers. The numbers have been growing steadily for the past several years. For example, in 1995 consumers only made up 22% of sales. By 1998 that percentage was up to 29; then grew to 36 in 2000 and 45% in 2002.
AT-RISK SALES?
One of the questions that ATV manufacturers must consider is how increasing UTV sales affect ATV sales. “ATVs, which I think have gotten ridiculously large, you know, 600, 700, 800 soon to be 1000cc four wheelers, cost more than utility vehicles,” Micka said. “So what does it take when you are in the showroom and you go, 'I can get all that? I don't need to buy packs and racks? I've got multi-passenger capability. I can be fully enclosed. I can have a heater.' It's a drop-kick to me.”
If a customer chooses a two-rider UTV over a pair of ATVs, the manufacturer and dealer sells one machine instead of two - and often, the two individual machines sell at a comparable price point, essentially cutting revenue in half. Manufacturers contend that the customers are different and that few crossover customers make the 2-for-1 a detriment.
“I know from our research that we do here, that they are two different customers,” said Kawasaki's Brennan. “I'm not saying that we don't get some crossover. There are certainly people who are ATV riders who have gone and become Mule buyers [because] they understand the capability better. I can't speak for the other manufacturers who offer side by sides and ATVs, but we don't see a lot of cannibalization between the two product lines.”
Micka believes that at least one manufacturer is concerned with a UTV cutting into its ATV sales. “Why [Honda] haven't introduced [a UTV] is pure market-mechanics,” he said. “Why would the number one vendor, with probably 40% of the high-end ATV unit sales want to cut unit volumes in half and kill it's revenue [when] it's got the most to lose? Now Yamaha is a 20% player, Kawasaki is an 8 or 10% player in that market, so they don't have much to lose.”
LIMITED ACCESS
For years, there were few players in the market. If we look purely at the major powersports companies, Kawasaki appeared to stand alone with its Mule product. A true truck-type vehicle, the Mule used automotive technology that made it a dependable, strong, utility-focused machine. Its leaf spring and McPherson strut suspension; along with rack-and-pinion steering provided a long service life.
The first vehicle that hit the market that appeared tailored for both work and play was the Polaris Ranger. The Ranger was largely ATV based. It had higher ground clearance, and it went faster than the original Mule.
Rangers sold well and the market started to get more specialized. People were finding new uses for the vehicles. What used to be popular only with farmers or ranchers, now was gaining a foothold with hunters and industrial/institutional users.
When Yamaha introduced its hugely successful Rhino 660 in 2003, it sent a shot across the bow of anybody who played in the UTV market. The machine leapfrogged the line between utility and recreation. With its 660 engine sourced from the flagship Grizzly ATV, plus four-wheel, independent, long-travel suspension and high ground clearance, the machine could go anywhere an ATV could go. The Rhino has been a gigantic success, outselling even Yamaha's predictions. “We were surprised by the amount of success and we are encouraged by some of the assumptions we made, that people want to work and play,” said Yamaha's Steve Nessl.
“[The Rhino] is a machine that can work and play. If you have to move 2,000 pounds, the Rhino is not your vehicle. But if you have to move 2,000 pounds over rocks and stumps on your farm, and you're willing to make a few trips, [it works].”
Other companies recognize the trend for people who want to use machines recreationally. Polaris recently introduced its Ranger XP machine, powered by its fuel-injected 700cc ATV engine. The machine also boasts 4WD, independent rear suspension, and the ability to carry 1,000 pounds in the bed.
Kawasaki, which left the Mule unchanged for so long, is also making changes to its lineup. The company's recently-introduced 3010 TransMule 4x4 now offers seating for four people - something that was only available as an aftermarket add-on previously.
INDUSTRIAL ROOTS
Just as there are companies building products aimed on the recreational side of the equation, there seem to be as many who are squarely focused on the utility side. New products from industrial equipment and tractor manufacturers are making a big impact as of late.
The Kubota RTV900, which started production with a serial number of 10,000, was reported to have reached serial number 35,000 by the end of the first year of manufacture, more than doubling the estimated first-year penetration of the Rhino.
Bobcat, a division of Ingersoll-Rand (who also owns Club Car), offers several products. These range from light-duty UTVs to machines with full-hydraulic capability, allowing users to attach most of the traditional “Bobcat” accessories.
John Deere, which leads the category with its Gator series, revamped its lineup with several new UTV lines. Deere's strategy is to specialize machines to expected uses to better targets potential customers. Another unique piece of the Deere equation is the placement of some of the consumer models at The Home Depot, a departure from forcing customers to the outdoor power equipment or implement dealer.
JUST THE BEGINNING
The biggest question out there is when will the growth stop? Estimates put the number of UTV manufacturers at around 30, with more on the way. As some point, the consumer is going to be overwhelmed with choices. However, sales have grown every year since 1995 and are expected to top 200,000 units in 2005, so it's clear that there is a market - a market that is growing each year. And lots of manufacturers are trying to catch the wave. Only time will tell who is going to be around when the tide starts to ebb.

- Blake Stranz
Contributing Writer

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