July 2, 2007 – Finding growth opportunities

After weathering a 4 percent decrease in U.S. sales in 2006, MIC-reporting ATV manufacturers reported a disappointing 10.7 percent downturn in sales in the first quarter of 2007. The negative numbers have prompted concern that the ATV market might have finally hit its peak.
But according to manufacturers, the ATV market is far from flat. In fact, the emergence of Chinese manufacturers importing product into the U.S. has proven to many companies that there is a healthy market for the taking, and it has them working harder than ever to pinpoint market growth areas, focus on new product development and create marketing strategies to capture back lost market share.
Chinese Competition
With the influx of low-priced, Chinese ATV products available to consumers, it’s hard to ignore the effect their presence is having on sales from traditional OEMs. So how much of a threat are Chinese products to established manufacturers, and what impact do they believe these vehicles are having on overall sales numbers?
Glenn Hansen of America Suzuki Motor Corp. says the sales growth that Chinese manufacturers have experienced has only enforced the belief that the ATV market is still thriving.
“The reality of the current situation is that there are a whole lot of companies selling ATVs in the U.S. that are not reporting members of the MIC,” Hansen said. “So we have recently seen some reports that have tried to quantify those sales of non-MIC companies. And it shows to us the ATV market has not topped out. We’re just having to work a little harder to get the most accurate numbers on the entire industry.”
Donna Beadle, external relations specialist for Polaris, says the growing interest in Chinese products will be a benefit for U.S. manufacturers in the long run, as it will help get more consumers into the market, and then once the machine stops running, they will want to purchase a product with a proven brand name and greater durability.
“You’re always concerned with your competitors, but we know the quality of our products, and we think the consumer also can see that as well,” she said. “We’ve been in the ATV market a long time, and we have a lot of brand name behind us. We’re known as a very good, reliable ATV, so we feel consumers will see the difference between our products and the competitors.”
Ole Tweet, vice president of new product development for Arctic Cat’s ATV Group, agrees that consumers who buy Chinese product will enter the market for a lower price-point vehicle but will stay in the market because of a brand name.
“I see the market still providing growth and expanding, and will those continue to be the unreported manufacturers? I don’t believe so because you can only buy marginal equipment for so long, and if you like it you’re going to go buy something better.”
Market Growth Opportunities
Conceding that they can’t compete on price point with Chinese manufacturers, established manufacturers are looking at developing segments of the market to grow sales, including two-up models, high-performance vehicles and entrance into adjacent markets.
“What we see at Polaris is that the two-up market is alive and well, as well as the side-by-side,” Beadle said. “There’s a lot of interest from consumers in both categories, as the concept of enjoying the riding experience with a passenger has become more important.”
Suzuki’s Hansen says that besides looking into the UTV market, his company sees growth potential in youth machines and added features to complement their products.
“We’re of course looking at the side-by-side market, but as we try to delve into these other segments and figure out what the entire industry picture looks like, we certainly see some areas of growth and ways to help our dealers remain profitable,” he said. “Whether that’s new and improved youth machines or delivering new and better features in categories that already exist, there are all kinds of opportunities. We’re even considering a value-priced vehicle as a potential growth avenue.”
Hansen also says the high-performance market is a great sales avenue for a company like Suzuki, which can market product based on the company’s heavy involvement and success in racing.
“We’re taking full advantage of our success as a company that’s into racing to talk about Suzuki’s high-performance edge. So there’s certainly some opportunity in the ATV market from that standpoint.”
Adjacent Markets
One potential growth area that has garnered a great deal of interest from major manufacturers is finding adjacent market opportunities to enter into. One area companies are attempting to gain a foothold in is the military market, and many see it as a big opportunity.
Polaris, which has a partnership in place with the U.S. military to build specially designed machines, says it believes there is even more they can do to broaden their share of that market.
“Although we already deal with the military with some of our vehicles, it’s an area we certainly see as providing even more growth in the near future, and I think you’ll see that,” said Polaris’ Beadle.
Other companies such as Arctic Cat and BRP have discussed the potential to enter into that market, and Arctic Cat recently unveiled two concept military vehicles at its dealer meeting in Las Vegas.
The trike segment is another area companies are looking into. With the launch of BRP’s Spyder, the industry is keeping a close watch on sales to see if consumers respond positively to the new design.
Arctic Cat’s Tranby says what BRP did with its development of the Spyder is a great example of how ATV manufacturers will continue to think forward in terms of creating product for consumers that goes beyond what would be considered a traditional ATV.
“I would say BRP is a great example of how you can enter into an adjacent market through product development, and that approach is always something we’re looking into,” he said. “With the technology available today, there really is a wonderful opportunity for manufacturers to develop products that can attract a whole new segment of customers.” psb

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