Analyst: Side-by-side growing at a 6 percent CAGR since 2006
Side-by-side has outpaced ATV, growing at about a 6 percent compound annual growth rate since 2006, during which time ATVs declined at about a 14 percent CAGR, RBC analyst Joseph Spak reported.
In “Full Throttle — A Powersports Primer,” a research note provided to Powersports Business, Spak reported the following:
Off-road vehicles. Overall, ORVs (US+Canada) remain ~40% below peak levels reached in 2006. However, the story within the story is that the mix shift that has occurred from ATV (all-terrain vehicles) to SxS (side-by-sides). ATV’s have declined at a ~14% CAGR (compound annual growth rate) since 2006 while SxS have grown at a ~6% CAGR over the same time frame. While there may be some fundamental reasons that the SxS shift has occurred (safety and comfort come to mind), it is hard to ignore the fact that Polaris aided this trend by coming up with a variety of new, differentiated products. We believe there is some concern about heightened competition in SxS with the introduction of new product. The risk of a price war is always real, but in our view, current actions in the marketplace appear targeted. In general, we believe industry pricing is currently fairly rational.
Motorcycles. While motorcycles are certainly a mode of transportation, in our view they fall more on the recreational side of the spectrum (versus light vehicles). Therefore, it is not surprising to see US motorcycle volume dependent on the economic cycle. US heavyweight motorcycles (651+cc) remain ~47% below the 2006 peak. Our RBC US Motorcycle econometric based demand model suggests that industry unit sales may increase at a 6% CAGR through 2016, but to get back to anything close to peak we likely need a significantly stronger economic backdrop. The industry is dependent on the Baby Boomer demographic, which presents problems. The older they become, the less likely they are to ride and buy new bikes, and even if they still can and/or want to ride, fixed income based retirees may not be able to spend as much as the working population. It remains unclear whether younger generations are as predisposed to motorcycles as Baby Boomers. Furthermore, the younger generations remain, as a whole, economically challenged.
Snowmobiles. We view this segment as relatively mature in North America and as such it should roughly grow with GDP. That said, weather can play a meaningful role and impact demand in a given season. Growth in snowmobiles is expected to stem from international regions, with overall international sales growth averaging a nearly 27% CAGR from 2010 through 2013.
