An in-depth look at one of the fastest growing segments in powersports
When Can-Am unveiled its Maverick X3 in August, dealers clamored into the showroom at Club BRP to dive into the sport side-by-side, and whenever Polaris releases a new RZR, dealers, consumers and enthusiast media are quick to learn about the unit. But sport side-by-sides only accounted for 36 percent of all side-by-sides sold in 2016, according to CDK Global Recreation data you’ll see in this Focus section.
Instead, the lion’s share — 64 percent — of the side-by-side market goes to multi-purpose and work units, those used by farmers, ranchers, hunters, colleges and universities, fishermen, landscapers and more to complete tasks and tackle small off-road adventures.
Though side-by-side sales numbers aren’t shared by OEMs with any data-collecting group, Wells Fargo estimated 439,000 side-by-sides were sold at retail worldwide in 2015, according to a report run in the 2016 Powersports Business Market Data Book, meaning it wouldn’t be off base to assume that hundreds of thousands of multi-use and work side-by-sides are sold each year across the globe.
“The utility segment is a large volume category that continues to show signs of growth, and savvy dealers are capitalizing on that part of their business to increase sales,” Steve Nessl, Yamaha’s ATV/SxS group marketing manager, told Powersports Business.
Yamaha has been participating in the utility UTV segment since it released the Rhino for the 2004 model year. That tradition continues now with the Viking, which was released in the 2014 model year to replace the Rhino. Of course, a number of OEMs are also in the utility UTV space. Side-by-side market share leader Polaris has the Ranger; John Deere has the Gator; Arctic Cat’s UTV is the Prowler; Kawasaki has produced the Mule since 1988; Honda introduced the Big Red in 2009 and followed it up with the Pioneer in 2014; and Can-Am introduced the Defender for the 2016 model year. Of course, even more OEMs are in the mix when it comes to utility side-by-sides, including Kubota, American LandMaster, Bad Boy Off Road, CFMOTO, Cub Cadet, Hisun and others.
It’s a competitive market that’s growing as OEMs realize the importance of the segment. Can-Am, for example, introduced its recreation/utility Commander in 2010, but just added its work-focused Defender at the November 2015 Club BRP.
“We’ve always been the recreational brand that’s very performance-focused, with innovation, but there was that big white space in our lineup,” before the Defender was launched, explained Marc-André Dubois, director of Global Marketing for Can-Am off-road.
Honda is also a newer entrant in the side-by-side market, only introducing the Big Red eight years ago and not really blossoming until the Pioneer was developed for the 2014 model year.
“The utility side of it is very, very important, just the scale of it and also the scale of all of the accessories and everything that goes with it,” said Chuck Boderman, vice president of sales for American Honda. The release of the Pioneer has helped Honda reach 10 times its side-by-side sales volume, when compared to Big Red results.
When asked who uses utility side-by-sides, representatives from the OEMs and aftermarket companies often referred to those who use them primarily for commercial use, as well as outdoorsmen and recreational users.
The work group consists of farmers, those in the oil and gas industry, ranchers, lawn care professionals, search and rescue teams, colleges and universities, and more. Others are using them for tasks in their spare time, taking utility side-by-sides hunting, fishing and trail riding, or using them on hobby farms. The tasks are often similar to what utility ATV riders use their vehicles for, Boderman explained.
However, the uses for each vehicle often aren’t singular, Dubois said. “When you do research, you realize that they don’t just use it for one purpose. You realize that yes, farming might be the core, but farmers are also hunters, so they end up hunting with the unit, and they also end up just doing some recreational rides on the weekend or their free time, so it’s rarely I see it used for only working purposes.”
Nessl said, “Viking and Wolverine customers are using their vehicles on farms, ranches and around their property in general. They’re using them in fleets on big corporate farming operations, and they’re using them on the weekend to go hunting, camping or just trail riding with friends and family. That’s why this segment is so big — it’s often called ‘utility,’ but we think ‘multi-use’ better encapsulates it.”
There’s little doubt that some utility UTV sales are cannibalizing the utility ATV market. However, as U.S. ATV sales have plateaued around the 228,000 mark, according to the Motorcycle Industry Council, at the same time, side-by-sides continue to trend upward. One reason for this, Boderman said, is because many enthusiasts are keeping their ATVs and simply adding side-by-sides to their garages.
“It’s really clear to us that, while there’s migration from somebody buying an ATV to somebody buying a side-by-side, that same customer is using it for a similar thing. But now they might be adding a side-by-side, when they want to be in that social environment, but keeping that ATV for when they do want to just be doing their own thing and don’t want anybody else around. Not everybody’s abandoning ATVs to go to side-by-sides,” he reported.
Utility side-by-sides are also being sold to commercial customers that in the past used light pickup trucks or tractors to complete the same jobs. Though most utility and multi-purpose side-by-sides are in the five-digit range, prices often pale in comparison to that of a truck or farm equipment, plus side-by-sides are usually more capable off-road, bringing new customers into powersports dealerships.
“I think the migration is where we’re at, especially farmers. They understand that it’s much more versatile to have a side-by-side,” Dubois said.
Of course, with so many different uses for side-by-sides, accessorization is key. Each customer can make his or her side-by-side customized to his or her needs by bolting on even a few accessories.
The average new multi-purpose UTV was sold with $946 in accessories in 2016, according to CDK Global Recreation data on Page 19. Work side-by-sides went out the door with an average of $695 in accessories.
“There’s penetration rates on some items that are truly astounding. Windshields, roofs, winches, mirrors — most of them leave the dealerships with them. If not, it’s a week later that customers have those,” reported Ryan Andreae, director of Product & Customer Experience for Kolpin.
Jason Baldwin, brand manager of QuadBoss said, “I know when the units are getting purchased, we’re doing a good amount of accessories. It usually starts with a top and winches.”
QuadBoss has also seen an uptick in tire sales, and with new tires often come new wheels.
“Tires and wheels are big for us right now,” Baldwin said. “They’re going bigger. Three years ago, a 27-inch tire was a big tire. … Now we’re manufacturing up to 34 inches.”
Kolpin focuses mostly on hunting accessories, gun storage and snowplows, along with the basics like windshields, roofs, mirrors and winches. Recent bestsellers of Kolpin’s are Rhino Grip Pros, which hold anything from firearms to crossbows to rakes or shovels to a side-by-side.
“We’ve had a lot of inquiries from people that are working with their product. They put their lawn mowers in the UTV, and they hang their Weed Eaters on them and rakes, shovels and anything else they use for their business,” Andreae said.
For hobby farmers, Kolpin has seen popularity with its Dirtworks Implement system, which adds a rear blade, cultivator set, landscape rake, disc plow or chisel plow/scarifier to the rear of a side-by-side. And in places like Minnesota, ice fishing products, like the Stronghold Ice Auger Boot and the Stronghold Ice Rod Boot, have moved well.
Of course, as people use their side-by-sides, especially for hard work, replacement parts are also important for sales.
“A lot of our core business is the repair and the replacement parts,” Baldwin said. “These machines are lasting 10-plus years, so it’s a good market for us to be in.”
It doesn’t take more than a few years for some well-used units to need axels and bearings, Baldwin said, so repair and replacement parts often bring already-sold customers back into dealerships.
Utility side-by-side future
Though side-by-sides sales are not growing at the rapid rate they once were, Wells Fargo estimates still project growth through 2017, with 483,474 unit sales projected worldwide this year.
Gerrick Johnson, equity research analyst for the Consumer Group at BMO Capital Markets who puts together the quarterly survey that dealers receive from PSB, forecasts that the total side-by-side market will be up 6 percent
Utility side-by-sides, specifically, are also expected to grow 6 percent, while recreational/utility side-by-sides are projected to be up 3.5 percent. Johnson forecasts that trail-ready side-by-sides will grow 2.5 percent, while the sport segment is estimated to grow 12 percent, mostly due to the Polaris RZR recall that affected sales in 2016.
Johnson pointed specifically to farmers when looking at 2017. According to data he has analyzed from the Association of Equipment Manufacturers, farmers began purchasing more under-40 hp equipment at the end of 2015, and sales of under-100 hp equipment grew in 2016.
“These farmers are finally starting to dip their toe back in the water and starting to replacing some things, starting with the cheaper stuff first — your under 100 hp tractors, your side-by-sides and things like that. So I’m anticipating that demand comes back in the fall for the farm market, which, again, is a huge consumer of these,” Johnson told Powersports Business.
Though the gas and oil industry, another large consumer of UTVs, isn’t performing well right now, side-by-sides are still moving well in other segments.
“It’s always going to be important. You’re never going to get rid of the farm. You’re never going to get rid of parks and municipalities that need these, landscapers and all the work/utility purposes that it serves that are needed that are never going to go away,” Johnson said. “In fact, in some ways, you can probably consider it a little more defensive because they need to be replaced because these are needed machines, as opposed to on the recreation side, those are wants. People want to run around sand dunes and muddy trails; they don’t need to do it. But the guy on a farm needs to do his job. The parks department needs to clean up their trash or whatever they use them for.”
Johnson said that while sport side-by-sides showcase the capability of the manufacturers, the utility segment is the one that sells most vehicles and has become the most profitable for the industry.
“The real meat and potatoes of this market is the utility part, especially with the high attach-rate on parts and accessories. The total gross profit dollars that can go to both a dealer and a manufacturer on utility is probably higher than anything else on the market, except for Harley-Davidson motorcycles,” he said.
The OEM and aftermarket suppliers interviewed are all excited for the growth in this segment and the potential to continue reaching new audiences with side-by-sides.
“It’s continuing to grow, and in my opinion, it’s extremely positive,” Andreae said. “As more OEMs enter each of the segments, there’s more opportunity for accessorizing and taking care of the consumer’s needs. In each segment, really, they have more to choose from than ever before on the UTV side.”