Company serves as U.S. subsidiary of Chinese firm
Steve Claybourn knows there is a negative stigma surrounding imported vehicles from China, but that’s something he hopes to change in his role as president of XY Powersports.
With an extensive background in importing from China, Claybourn has seen what works and what doesn’t for the American market and is determined to provide a quality product at a lower cost.
Cincinnati-based XY Powersports, which distributes UTVs exclusively, started operations on Jan. 1, 2010, after about four years of research and preparation on Claybourn’s part.
“The focus was on reliability, quality and obviously the price advantage was important, but I didn’t want to buy the cheapest thing out there,” Claybourn said. “Reliability and support from the factory was really the most important thing.”
As the business model developed, an opportunity presented itself with a Chinese company looking to open a U.S. subsidiary. Claybourn had found the ideal match.
“We’ve been pursuing to scale the business up to a reasonable level and that’s been harder than we expected, partly due to the stigma with China product and partly due to the economy,” Claybourn said.
“This year we’re on track to surpass $3 million in sales. We went from bare walls to where we are today in two years. I think that that’s a far cry from where we want to go, but it’s a pretty good progress path considering the challenges.”
Claybourn feels that the negative reputation connected to Chinese products has just as much to do with who is importing them to the United States.
“Little by little, we’re overcoming the China stigma,” he said. “The importers in America are the ones that should take as much credit for the bad rap that China gets. They specify what they want, which has been historically focused on price. A lot of those companies have come and gone.”
XY Powersports brings a focus on quality, and its staff has a long history of selling Chinese products, according to Claybourn.
“Our reputation and the fact that our team has combined about 60 years of experience in selling Chinese product into the domestic market is substantial,” he said. “We don’t see the need to mislead dealers to do business. We have to sell a serviceable product. We have to stand behind the product.”
“We have been steadily improving our quality, to the point where the 2012 product, we really don’t get that many warranty claims,” Claybourn said. “We’ve had only about 25 percent of the warranty claims that we had in 2011. That’s a huge improvement. That’s the benefit we have because we’re vertically integrated with the factory. We’re one of only a couple of companies that can say that.”
Claybourn said there is a clear benefit to carrying XY’s UTVs for dealers.
“The major brands will sell to about 20 percent of the people that come into their store shopping for a particular product,” he explained. “That leaves 80 percent of the market out there shopping for a used product or some other product. We see our opportunity in that 80 percent that leaves without paying the price for that major brand of product.”
Claybourn said that XY’s products are about 30 percent less than the price of major brands.
“To put it in numbers, if a major-branded unit is $12,000, we are going to be $3,000 to $4,000 below that for a comparably-equipped product. That’s substantial upside for the dealer. What the dealer can realize in real numbers is a 40-50 percent incremental profit made by carrying a product like ours. That’s annual.”
Claybourn said dealers can expect 20-30 percent profit margins on XY products, and the company works with all types of dealers, from multi-line franchise dealerships to independents.
“Dealers don’t have to resort to discounting because we don’t really have any competition. They can sell it at full margin and make substantial money on our product,” he said.
The other advantage XY’s machines have over the competition is that, even with the lower cost, they have features like windshields, alloy wheels, winches and a powered lift dump bed that come standard with the vehicle, as opposed to being available as upgrades, Claybourn said.
XY ships all of its products, including a full inventory of parts, out of its 250,000 square-foot warehouse in Cincinnati.