High Gas Prices Fuel Scooter Popularity

Scooters have continued to increase in popularity with U.S. consumers. Total estimated sales for 2006 were over 157,000, up more than 6% over the prior year. More people are impacted by the soaring price of gas so the appeal of flex-fuels, alternative power, lower emission vehicles and more fuel-efficient modes of transportation increases, and as a result the scooter market is experiencing a renaissance of sorts. Scooters are no longer a preserve of scooting enthusiasts alone as the machines are finding favor with commuters, college students, retirees, RV owners, individuals with DWIs and even “undocumented” workers. In this article we will examine this market and analyze the trends that are occurring.

Scooters Defined

In analyzing the scooter market for this particular article, we will be concerned only with on-road gas-powered scooters. There are differences between scooters and mopeds, although many communities seem to consider them identical. However, we will not be including the more traditional mopeds which are similar to motorized bicycles as exemplified by some of the products of Whizzer, Tomos or Indian companies such as Avanti or Hero. We are also excluding electric scooters, although that niche is growing in popularity as well. Finally, we are not including gopeds, g-scooters or foot scooters in our calculations.

Traditional & Non-Traditional OEMs

The OEMs and distributors that compete in the U.S. scooter market can be segmented into two groups: the traditional brands who report to the Motorcycle Industry Council (MIC) and the non-traditional brands that are not reporting members and have only emerged in recent years.

The scooter manufacturers who report sales numbers to the MIC are Honda, Yamaha, Suzuki, and Piaggio. Yamaha and Honda continue to be the market segment leaders. Piaggio, with its various brands, also has a healthy share of this market. Suzuki’s dominance of the “maxi”, 266cc and above, large displacement segment of the market continues.

The non-traditional brands primarily are comprised of U.S. based distributors selling Chinese, Taiwanese, and Korean products which are often sourced from numerous different OEMs, although “assemblers” might be more appropriate terminology for the functions of these Asian producers. European brands such as Malaguti, Derbi and Peugeot were distributed in the U.S. in the early part of the decade but unfavorable exchange rates continue to make it unfeasible to import these brands.

To the extent possible the figures we provide for the non-traditional brands are limited to retail sales in the U.S. and do not include the significant volumes that are being imported into the U.S. and then re-sold into South and Central America, Mexico and the Caribbean or the scooters that U.S.-based distributors are shipping direct to other markets. Reportedly as much as 65% of some U.S. distributors’ total scooter sales are made in these markets, particularly Puerto Rico.

2006 Market Report

Total sales in the U.S. scooter market in 2004 were estimated to have been around 115,000 units, rising to 148,000 in 2005. The non-traditional brands’ share of this market increased from 58% to 62% in this timeframe. It appears from published reports and Power Products Marketing estimates that the U.S. scooter market increased to over 157,000 units in 2006 with the non-traditional brands’ share reaching 66% and thereby passing the 100,000 unit mark for the first time. While the MIC reporting brands suffered a decline of around 5% in their sales last year as reported by the MIC, the distributors of Chinese and Taiwanese machines seem to have increased their sales volume as a whole by over 13%. There are signs that the rate of increase in these brands’ sales is slowing however, as the prior year they had increased by over 37%.

By our estimates in 2006 there were at least 55 offshore OEMs selling scooters in the U.S. through approximately 100 distributors. Of these distributors, KYMCO, CMSI, TGB, Schwinn and Genuine have continued to maintain a good reputation from the reports we have heard. Roketa, Baja Motorsports, Vento, Tank, Powersports Factory and United Motors also proved to be very popular with consumers. The trend towards smaller distributors becoming dealers of the larger distributors has continued as the market begins the process of consolidation, although there are still several distributors in the market whose core business is something other than powersports, such as auto sales.

In 2006, a number of non-traditional brand OEMs, when their sales to all their distributors are compiled, continued to rival the established MIC OEMs in sales volumes. Zhejiang Qianjiang has been achieving this for a number of years now but in 2006 they were joined by the JMStar/Jonway Group. Conceivably one of these suppliers could take the premier spot in the scooter market in 2007 from one of the more established OEMs.

Many distributors reported to us that the 2006 market was characterized by a large demand for products in the first half of the year while the market pace cooled significantly towards the end of the year. This was the reverse of the previous year, which had been characterized by steady if measured growth in the first half of 2005 followed by dramatic sales growth for those distributors who could react quickly enough. Notwithstanding the apparent slowing down in the market in the final few months of 2006, most distributors were able to regulate their inventory so that they did not have excessive unwanted carryover into 2007.

A number of distributors reported that as in prior years they were having difficulties sourcing products quickly enough from across the Pacific, which significantly hindered their ability to grow their market base. Conversely, at least one major distributor was confronted by emissions compliance and customs issues which severely curtailed sales volumes. There were also reports coming out of Indianapolis that a number of the leading distributors have been pressuring their dealers to take more inventory than the dealers actually wanted to carry as the market slowed towards the end of the year.

The Market in 2007

Early reports for 2007 are that the market has continued to grow at a steady pace, at least as far as the non-traditional brands are concerned, with forecasts of $4 a gallon gas spurring more consumers to consider a scooter for commuting purposes. The picture is not quite as good for the MIC brands in general, with some forecasts predicting a decrease of 7%, although this might be overly pessimistic.

Even so, the gap between the overall performance and quality of MIC OEMs and the non-traditional brands continues to close. Today, more and more franchised dealers are at least considering taking on a Chinese or Taiwanese line. Many distributors certainly felt that better quality dealers were eager to talk to them this year at the Indianapolis Dealer Expo.

In 2007 we should witness the return of the Italjet brand with Diamo USA, albeit probably manufactured in India or China, and the possibility of a return of the Lambretta in the guise of the L-Series with CMSI; two very different styles of scooter which are emblematic of the diverse nature of this market. We should also see the continued expansion of the larger displacement scooters as more consumers appear willing to bypass or step up from the smaller machines.

Increased Popularity of Larger Displacement Scooters

The 50cc and below class, while still overwhelmingly the most popular category, has shrunk from a market share of 64% in 2005 to just under 53% last year. The biggest gain in market share has been in the 51-155cc class which is now over 30% of the market.

Significantly, the 156cc-265cc class also showed strong growth in 2006 to comprise over 10% of the market. This is primarily due to the increased availability of 250cc Chinese-produced machines which did not reach U.S. distributors in any great numbers until last year. The over 265cc class also showed some increase in market share to over 6% of total sales, due almost totally to the continued success of the Suzuki Burgmans, although there were some modest gains in this segment for Piaggio’s BV500 and the newly released KYMCO Xciting 500.

One of the major changes in the 2006 scooter market was emissions regulations which made it increasingly difficult for a 2-stroke to comply with the new standards. Many distributors attempted to load their inventory pipeline with 2-stroke machines at the end of 2005 to sell through 2006, as they dealt with these new regulations. Despite these measures the share of 2-stroke machines fell to around 14% of 2006 scooter sales, compared to a market share of over 37% in 2005. This is a trend that had been apparent for a number of years and, although there are some compliant 2-strokes still available such as the TGBs, it appears that most OEMs and distributors have determined to go the 4-stroke route. The 2-stroke market segment is only likely to decline further.

Parts and Warranties Situation Improving

Parts supply, servicing capabilities and warranty support have long been key issues in the long term viability of a distributor’s operations. Many of the non-traditional brand distributors have taken this onboard and extended warranties are now more prevalent. The parts situation continues to improve with regard to the non-traditional brands, as some manufacturers are finally beginning to understand the U.S. consumers’ demand for parts. Parts support and performance parts are also catered to by companies such as Martin Racing Performance and Parts for Scooters, as well as the distributors’ own efforts. This has helped close the gap in the supply chain between the Chinese suppliers and the U.S. dealers, many of whom have been frustrated by parts availability issues.

With prices at the pump set to continue to rise for the foreseeable future, so the popularity of scooters will continue to grow, at least in the urban and suburban areas of the U.S. At present it appears that consumers are buying more on price than brand reputation alone. With distributors contending with stricter regulation and enforcement of existing rules in conjunction with a reduction in the subsidies that China provides to its manufacturers, so the prices of the non-traditional brands will have to rise closer to those of the established quartet of scooter-producing MIC OEMs. This may take some time to have an effect so the non-traditional brands look set for another good year in 2007.

Editor’s note: Power Products Marketing, a Minneapolis research firm, has been tracking the U.S. Scooter market for over 4 years. This report was prepared by Matthew Camp, a powersports analyst with the firm.