Dec. 3, 2007 – Shouldering the ATV burden

By Tom Kaiser
ATV editor
Side-by-sides, special edition models, 2-up machines and, for some, big bore ATVs continue to resist the troubling sales drops that are sending shivers throughout the industry.
In most cases, the bright spots in this period of decline are larger and more expensive vehicles that cater to older, more affluent customers with less exposure to the country’s current economic challenges.
Any way you slice it, there’s no doubt about trouble in the off-road market. As reported in a previous issue, the latest quarterly retail sales report from Motorcycle Industry Council (MIC) members showed a 8.2 percent decline in the United States, on top of the previous year’s similar drop. ATV sales, specifically, are down 11 percent through September. Some pockets of the industry have declined by double digits.
What might be surprising is that, by and large, bigger and more expensive models continue to provide stability to the market.

A Few Bright Spots
Arctic Cat has seen potency in its big bore sales, machines with displacements of 650cc and greater. With pending introductions of a new 700cc H1 EFI and the 950cc Thundercat, the most powerful ATV to date, the company expects a boost in sales during the coming quarter.
John Tranby, Arctic Cat’s marketing and communications manager, said the traditionally older and more affluent buyers of large displacement machines have not been as impacted by the slowing economy.
“Obviously we’re trying to capitalize on that by introducing the Thundercat,” he said. “We also have a couple of special edition models that are going to be coming out shortly, as well … existing models that have winches, brush guards [and] other features put on at the factory.”
Polaris has seen things a bit differently.
Gary Laskin, Polaris’ ATV product manager, said big bore sales have dropped as much, if not a little more than the total industry. The one bright spot are sales of side-by-sides and 2-up ATVs, which he said are up 43 percent year-to-date.
“Two-ups are really the one part of the ATV business that has a very strong upward trend,” Laskin said. “It’s a trend in the United States, and it’s even stronger once you include Canada.”
He added that it extends into the side-by-side business, where people are riding 2-ups, and sales have exploded during the past few years. The company’s sporty Ranger RZR has been particularly successful.
While it is still not the heart of the market, industry sources say sales of big bores, machines above 600cc, are approximately 20 percent smaller than the 500cc class, the best selling displacement category in the industry.
Sales of side-by-sides, which remain excluded from MIC numbers, are estimated to be more than 100,000 units a year, according to industry sources.
At Yamaha, Steve Nessl, marketing manager for the ATV and side-by-side group, said big bore sales, particularly the Grizzly 700 and the Rhino, have bucked the negative trends.
“Big bore sales have definitely been a bright spot for us,” he said. “Despite the economic reasons behind the turn, and the industry-wide reasons, we’re still moving along and doing fairly well.”

In the Showroom
Reggie Poe, sales manager at Hillbilly Cycle Sales in trail-laden southern West Virginia, echoed the strength of the big bore and side-by-side machines.
“If it’s 500cc or bigger, it sells a lot better than anything else,” Poe said.
His store, which sells Honda, Kawasaki, ATK and TGB brands, has seen ATV sales cool off a noticeable amount but said it hasn’t been a big drop. He attributed solid large-displacement sales to the demanding local terrain and increasing popularity of the segment. He suspects it’s a temporary shift, while consumers continue to migrate toward a new generation of side-by-sides.
On the plus side for the bottom line, he said big bore buyers typically spend much more on accessories and modifications, like wheels, tires, winches and exhaust systems.
“The guys who normally come in looking for the smaller ATVs, or just midsize … are more your hunters and farmers looking for something that’s a piece of equipment,” Poe said. “The guys looking for the big bores are jacking them up and putting [big wheels and tires] on them, some bling-bling and are going out in the middle of a mud hole. It’s a different attitude.”
Darren Bajurin, general manager of PCP Motorsports in Sacramento, Calif., said side-by-sides and sport quads have led growth at his dealership, but that big bores like Yamaha’s Grizzly 700 and Suzuki’s KingQuad 700 also have been doing fairly well.
“I don’t think they’re declining,” he said. “They may be a little flat, but I feel the side-by-side market is dipping into that large big bore market, and it’s not really growing.”

Numerous Factors Afoot
Arctic Cat’s Tranby singled out gas prices for decreasing consumers’ discretionary income. He said the company is monitoring news and economic trends but said influence from the housing and credit markets are more nebulous.
“Gas prices are affecting everybody and everything, because everyone is still driving their cars, and they’re spending more money to do so, that’s a fact,” he said. “How does that affects us? That’s really hard to say.”
More expensive credit, he said, has made the company’s financing offers more costly but adds credit is still comparatively affordable.
“As far as history goes, it’s still cheap credit right now compared to years ago when people used to get excited about 9.9 percent financing.”
Polaris’ Laskin, who also noted strength from older and wealthier customers, says the housing problems have contributed to a “brutal” market for ATVs, particularly in the southwest corner of the country.
“There’s a lot of people in the southwest who saw the value of their homes increase dramatically during the past 10 years or so, and they were spending that money on toys,” he said. “Now that situation has changed dramatically.”
To prove his point, Laskin pointed to sport quad sales that are down significantly in some regions, even with several high-profile introductions in the last few model years.
He adds big bore sales at Polaris are a challenge like the rest of the industry but says limited edition models, with pricey painted plastic and cast wheels, are still hot.
Yamaha’s Nessl also says sport quad sales have been particularly alarming.
“I’m not talking about my stuff specifically,” he said. “We’ve got some good stuff out there, and it’s not moving as quickly as in the past, or as quickly as we expected at the outset of this year … it’s a little bit of a red flag, and I think it’s something everybody’s watching.”
Even so, he adds that numerous special edition models have maintained their strength, along with big bores and side-by-sides, which typically cost more to begin with.
“It’s an odd thing … when you’re talking about a somewhat depressed industry,” Nessl said. “The most expensive ones are selling well while the price-point friendly [units] are sitting on the floors a little longer than they should.”

Product Planning
Even with product plans that extend five years out, Laskin said Polaris wasn’t caught by surprise by the changing market and is positioned well to weather the storm.
“If you look at where we’ve invested heavily in the past couple years, it has been in 2-up TVs and side-by-side vehicles, and that’s where the market is going,” he said. “I don’t see that plan changing radically going forward.”
He did say he expects the side-by-side market to move toward further segmentation between utility and recreational models.
On Arctic Cat’s future plans, Tranby says the company sees sales improving because of new big bore introductions and the company’s new 366 utility quad.
“We’re getting that new product out there that seems to move the market the most,” he said.
Upcoming product development also has held steady at Yamaha, which hasn’t changed its plans in light of the market.
“We’re not putting the binders on anything at this point,” he said. “I can’t tell you whether it will have an impact in the future, but as of this point, no.”