Despite warm weather and inventory dumping, economic woes provide weak summer sales
In our previous PWC article looking at the May year-to-date sales for 2007 we had expressed some optimism that while the market had only posted about a 1% increase over the same period last year, a strong summer could boost sales by season end to 2-3% over the 2006 volume. It is now evident that the expected boost as we entered the most important summer months did not happen and sales were flat to slightly down by season end.
2007 Season End PWC Sales
Based upon our research, season end U.S. PWC retail sales declined slightly from a year ago, including our estimate for Honda’s unreported sales. June and July proved to be disappointing months for the industry. Although the closing months of August and September were pleasantly surprising, given their traditionally low sales volumes, the market appears to have declined slightly compared to the 2006 market number and ended at around 87,500 units.
The results could have been much worse, but the season end special incentives several of the OEMs instituted had the desired results. The September 2007 sales numbers were boosted by over 40% compared to the September 2006 levels, primarily by these offers. For example, Yamaha had their most generous program ever, offering $700 on accessories with certain models while See-Doo reportedly had two programs for dealers and consumers offering up to $1,000 on certain models.
Even with the inventory dumping that occurred at season end, and throughout the year in the case of one OEM, industry sources have indicated that dealer inventories are likely to be up at least 4,000 units this year, to somewhere between 16-18,000 units of carryover inventory. This seems very high considering that sales in the next six months are seasonally low.
Regional Sales Mixed
Regionally, PWC sales continued to recover slightly from the lingering negative impact of the automotive industry’s woes, which over recent years have depressed the market in certain Midwestern states such as Michigan, Ohio and Indiana. Further recovery seems to be hampered by the poor performance of this sector of the national economy however, but Michigan now does not appear to be any worse off than many other states.
Although the weather was good in most parts of the country, throughout Texas there was considerable rain which somewhat dampened sales through inclement weather and speed-restrictions in many affected areas. The Northeast had also undergone a poor start of the season contributed to by the poor weather and never really recovered. Conversely, the good weather in the South with drought-like conditions in many areas was a boon for enjoying water-based activities.
The major cause of the weak performance during the summer, however, remained the ongoing fallout from the mortgage crisis which had a severe impact on the major markets, particularly California and New York. In Florida the high cost of homeowners’ insurance premiums to protect against hurricanes also adversely impacted consumers’ disposable incomes.
Four-Stroke and 3-Passenger PWC Still Most Popular
Three-passenger PWC continued to dominate the overall PWC market. Back in 1999, about 55% of all PWC were three-passenger, but our year-end estimates for 2007 indicate that almost 86% of sales are now in this configuration, up from 84% in 2006.
Four-Stroke models seem to now comprise about 94% of the PWC market, compared to 90% in 2006 and 74% only five years ago. It appears that within another year or so all PWC will likely be four-stroke, displacing the remaining two-strokes including DI, FI and EFI models. Currently two-stroke carb models have dropped to about 3% of all U.S. PWC sales compared to about 5% for the ’06 model year and 24% for the ’05 model year.
Introductory Models’ Popularity Wane Slightly
Sales of the entry level four-stroke models which had been one of the fastest growing segments in past years have weakened somewhat, but sales of the more expensive performance models remained robust. About 43% of sales in the 2007 season up to the end of May were on models with an MSRP below $9,000, compared with over 35% at the same time in the 2006 season. However, by October it became apparent that the “value” segment had slowed somewhat and was unable to sustain that level of growth. At season end “value” models comprised around 34% of total sales, compared to 38% the prior year. This does not take into account the effect of the discounting in September.
It appears that the industry percentage of PWC purchasers who were first-time buyers was running at about 55% in 2007. This segment of the market has been growing steadily over the last few years, rising from 52% in 2004, and continuing the recovery from the low point of 40% in 2001. The percentage of first-time buyers is now creeping nearer to the historical high of 60% which was achieved in 1996 when the market was in its heyday and PWC sales were at 200,000 units.
The “value” models are certainly having an impact in bringing new blood into the market, but many new entrants are choosing the more performance–oriented machines. This illustrates the importance of having manufacturers continue to offer exciting new products each year to maintain sales volumes. Kawasaki’s highly successful Ultra 250X is a prime example of this phenomenon, with its comparatively high price-tag of $11,499 seemingly not discouraging potential buyers in 2007, and as a result provided Kawasaki with a welcome boost to their market share. The VX Cruiser performed a similar function for Yamaha in the “value” category.
2008 Projection
The PWC market experienced a similar period of lackluster performance in 2001-2004 when sales hovered around the 80,000 unit mark and it was not until 2005 that sales rose to the 87,000 mark where they have now stalled for the last few years. For 2008 it appears that the market will continue to be flat and might recover some lost ground, but perhaps only 1,000 units over 2007 sales at best.
On a brighter note, there are considerable numbers of PWC owners possessing older 2-stroke machines which will eventually have to be retired and replaced with newer, better performing 4-stroke machines. This process appears to have started several years ago and could gather headway over the next few years, but that elusive 100,000 unit industry sales mark seems a long way off.
Editor’s note: Power Products Marketing, a Minneapolis research firm, has been tracking the PWC market for nearly 10 years. This report was prepared by Matthew Camp, a powersports analyst with the firm.
Arlo- Here’s some data you can use for a few graphs or tables.
Three-Passenger PWC Sales
as % of Total Sales
Season End 2007 86%
2006 84%
2005 80%
2004 77%
2003 79%
2002 74%
2001 65%
2000 59%
1999 55%
Two-Stroke Carb PWC Model
Sales as % of Total Sales
Season End 2007 3%
2006 5%
2005 17%
2004 24%
2003 33%
2002 53%
2001 70%
2000 75%
1999 85%
