April 5, 2010: Twists and Turns

If you’re at all invested in the scooter market then you’ve personally experienced the adage, “What goes up, must come down.”
Dealerships and OEMs alike saw the gas price hikes and resulting scooter sales surge of 2008 followed last year by a tremendous downturn in retail sales.
So could what went up, then dived down, possibly climb back up again? There are certainly some indications of that in the early going of 2010. First off, a number of scooter-only manufacturers are reporting a healthy March after a slow start to the year. Secondly is what appears on the immediate horizon: increasing prices at the pump.
In mid-March, gas prices were already 47 percent higher than a year ago, with a national average of $2.79, according to the insurance agency AAA’s Web site, www.fuelgaugereport.com. Much of the West Coast, meanwhile, already was at more than $3 per gallon, with a high of nearly $3.50. Federal officials are predicting average U.S. pump prices will exceed the $3 threshold by this summer, if not before.
For those reasons, plus a better availability of retail lending in many instances, scooter manufacturers are expecting sales number to be on the rise again.
“I am very optimistic about 2010 compared to 2009,” KYMCO USA CEO Eric Bondy said. “I really think we’re in for a very good year, comparatively speaking.”
The past two volatile years were preceded by three relatively stable years, where the Motorcycle Industry Council (MIC)-reported retail sale volume hovered in the mid-50,000s. Where will 2010 fit within that scenario?
Without gas prices soaring higher than predicted or some other external factor, Bondy of KYMCO doesn’t see the industry reaching the 2007 levels of 54,000 units. Last year, the MIC retail count, which does not include a number of scooter-only manufacturers including KYMCO, reached 31,000 units.
“Between 2009 and 2007 is someplace where I think the market is going to be,” Bondy said. “That’s a pretty hefty rebound from 2009 to 2007. You’re talking 40-45 percent increase, and I don’t see the market rebounding that fast.”
Bondy does think a 25-30 percent increase over last year’s sales is a possibility for the coming selling season. He’s not alone in his optimism.
Ed Buckle, director of operations for the Tomberlin Group, which acquired Schwinn Motor Sports last year, also sees positive momentum. “The industry has been soft so far in 2010, but the weather has improved, and we are seeing retail sales picking up in March,” he said. “Our outlook for the remainder of the year is positive.”
Philip McCaleb, founder and president of Genuine Scooters Co., also has seen a pickup in recent retail activity. “March has been a huge improvement,” he said.
However, McCaleb points out the consumer is still being very selective with their spending.
“Parallel to the motorcycle and powersports business, the average guy is now making four visits (before purchasing)” he said. “The dollars are being spent carefully and the customer is changing a little bit from this year from 2009.”
McCaleb believes half of the market’s consumers still enter the segment because of its lifestyle opportunities.
“They’re still enthusiastic to join the culture and be part of the whole community, but they’re seriously looking at scooters now as a way to ditch the SUV,” he said of consumers. “The mileage cost of driving from ‘A’ to ‘B’ inexpensively and with really inexpensive insurance has really changed things.”
What hasn’t changed in the market, according to several officials, is the market’s reliance on the small-displacement segment, traditionally the largest volume segment.
“Small stuff is our best seller,” said Bill Peirce, founder of Peirspeed, a U.S. distributor of scooters and small-displacement motorcycles. Peirce notes the overall industry sales downturn last year did not impact the percentage of smaller-displacement scooters that were sold compared to the higher-displacement models.
McCaleb sees a similar retail sales picture.
“The big hitters are still going to be 50cc-125cc,” he said.
Unlike in other two-wheel segments, there promises to be a fair amount of 2010 and even 2011 product on showroom floors this selling season.
Peirce of Peirspeed notes his dealers have 2010 product on the floor now and 2011 units will be available in two months.
Buckle of Schwinn provided a similar picture, noting the company will have three 2011 models available between May and December.
What type of promotions are dealers likely to see for these models? Special retail financing offers — something more prevalent than a year ago — figure to be key.
“In talking with our retail lending partners, we’re seeing that and hearing that,” Bondy of KYMCO said of the availability of retail lending.
KYMCO, in fact, started a 3.9 percent, 36-month promotion in March, a program that will run through April. Bondy said the company saw an almost immediate effect from the new offer, as 60 percent of its new unit buyers who financed a vehicle in the first couple weeks of March choose the new program.
Both KYMCO and Genuine also offered accessory packages last year with the purchase of new units and both reported positive results from it.
“We had very good success with our value-add accessory program last year,” Bondy said, “and we’re taking a really good look at it for this season as well.”
— Neil Pascale