KTM inventories down, market share on the rise

After Vinnie Amato listened to KTM North America president Jon-Erik Burleson’s state of the company speech, the multi-line dealership owner felt he had reason to be optimistic. Amato, a KTM dealer since 2003, owns Hanover Powersports in East Hanover, N.J.

“It’s been up and down, but I’m glad I’m a KTM dealer,” Amato said while attending the meeting at the Crowne Plaza hotel on the banks of the Mississippi River in St. Paul, Minn. “This year has been better. We moved out pretty much all of our noncurrent inventory. Our inventory is as low as it’s been since we’ve taken on KTM. Their programs really helped us. They paid all our flooring this year, so we’re happy to be with KTM. It’s a bright spot. They’re constantly coming out with new product, which is driving customers in.”

Mike Mahoney owns MotoFIT Motorsports in Danbury, Conn., and sells about 190 KTM motorcycles per year. Just as thousands of bikers flock to the Marcus Dairy in his hometown, he knows the draw of the Spring Creek MX Park, a 75-minute drive south of St. Paul in Millville, Minn., to passionate riders like himself.
“It’s always a great time and you get to see the new product line at the dealer meeting, but I come to ride ’em, pretty much to ride ’em. That’s what it’s all about here,” Mahoney said. “We feel it’s the best brand out. The real racing enthusiast — racers, riders — really love the brand.”

Both approaches were in step with Burleson’s assessment that KTM dealer inventory is at an all-time low, while the passion of KTM dealers has helped move the Austrian OEM to the top market share position among off-highway competition brands. Burleson described how KTM dealer inventories had reached their current status. KTM’s leap to No. 1 in market share in the off-road competition segment was a similar success story. Both positive steps were made primarily with extensive progress during a period of recession.

“In November 2008, we had 17,000 units in U.S. dealer stock, which was not healthy,” Burleson told the dealers. “In June 2011, we had [7,173] in U.S. dealer stock. And in Canada we went from 2,300 to 1,109.”

The combination of a reduced dealer inventory and an improvement in the quality of the dealer stock “is the absolute single most important business metric of the year,” Burleson later told Powersports Business. “Having the pipeline flowing in and flowing out at the same rate is what matters. We’re at a really good place now and we’re proud of what the dealers accomplished and proud of what we were able to help them accomplish.”

Despite the economic difficulties of the country, KTM continued to introduce in-demand products to the marketplace, and used dealer incentives to help encourage lower principals.

“You have to still bring new innovative products to the market to keep the retail movement going, but you have to trim back the production numbers to a point that allows the old stuff to still move through,” Burleson said. “Some of our competitors, in a couple of cases, decided not to bring anything in, and I think that stalemates the brand inside the dealership. Some of our competitors maybe in 2009 and 2010 and even ‘11 brought in too much of the new product and they’re still moving through it.

“Step two was we had a lot of dealer incentives that we put together, whether it was retail finance, or registration credits of sorts. We did something that was very specific and focused for two years during the spring. During March, April and May — the three biggest retail months — during those three months this year and last year, we had a program where we took the registration credits and applied them to the principal balance of a dealer’s GE account, because what we wanted to do was ultimately pay down their GE debts. We wanted to really help them get out from under that gorilla, so to speak, which was high principal balances due on their GE line. That enables them to break free of it.”

KTM continued to make strides over the past year in ensuring that they provided dealers with products that were on the move. A popular test-ride program also influenced sales. KTM and its dealers provided potential customers with 16,000 demo rides last year to keep sales high.

“In June 2009, 44 percent of the model-year 2009 production had been retailed by the time we introduced new product. So less than half the bikes we built had been retailed. That was an all-time low, and a point of shame to be honest,” Burleson said in his address to dealers. “In June 2011, 63 percent of the model-year 2011 production has been retailed by the time we brought out the 2012 models. That’s an all-time best for us. Compare that to any of our competitors. That’s an industry benchmark to beat, absolutely at the top of the list.”

KTM’s ride to the top of the off-highway competition segment in market share reached its pinnacle this year. Burleson said that from January to May 2008, KTM sat in fourth with 18.8 percent. KTM now sits at 28.2 percent and ranks first in market share, he said.

KTM’s upsurge in the segment was even stronger in Canada, where the brand sat in the No. 4 hole with a 20 percent market share in 2008. KTM is also No. 1 in Canada now in the segment, with a 33 percent market share.

In the superbike category, the RC8 helped KTM increase market share by 300 percent from a year ago, and motocross bikes saw a 70 percent increase in market share. Overall, KTM has outperformed the market the last five years, growing in market share from 2.5 percent to 5 percent since 2006.

The march to No. 1 in the off-highway competition market share comes after dozens of products and years of advancements. KTM estimates that it has 190,000 riders in the U.S. and Canada.

“It’s been a long time coming. We’ve been gaining market share for about 10 years, step by step by step,” Burleson said. “The most important issue is we have product line, which ranges from 50s to 500s. Inside of that we have motocross, cross country and enduro racing segments. Some of out competitors may have three to five models. We have 43 models. We’ve really built the product. We reach out to all of the niches with specific products for specific needs, from the 4-year-old racer to the 64-year-old racer.”

Burleson credits the company’s market knowledge for being able to produce many specialty products.

“It’s what the market wanted,” he said. “We built products that we believe the market wants. One of the benefits KTM has had is it’s been able to see both side of the country and the racing trends that go on, which are quite different. We’ve seen the differences from enduro, to GNCCs to desert racing to motocross. We saw all of those needs because we’re a company of professionals that are also riders. We built what customers asked for.”

Prior to departing for the much-anticipated demo day at Spring Creek, Burleson admitted that there was an air of optimism surrounding the annual gathering.

“I feel positive about the dealer attitudes toward KTM,” he said. “The dealers’ attitude toward the market is not as pessimistic as it has been for the past two or three years, but it’s still not perfect. I would say the optimism seems to be around. I can’t remember a dealer meeting in past three or four years that the attitude about their wholesale lines has been as low key as it is today.”