Editor's note: Power Products Marketing, a Minneapolis research firm, has been tracking the U.S. scooter market for more than six years — including manufacturers that don't report to the MIC. This report was prepared by Matthew Camp, a powersports analyst with the firm, with contributions by Greg Boeder, a senior partner.

THERE'S NO DENYING that 2008 was a great year to be selling scooters in the U.S., but sales for 2009 don't look too promising. Many distributors of nontraditional brands are carrying high inventory levels, and the Motorcycle Industry Council reported very weak sales in the first quarter.

But we'll discuss the outlook for 2009 in more detail later. First, let's recap how 2008 was a breakout year for scooter sales. Sales of scooters made by MIC reporting OEMs increased 41 percent to about 77,000 units, but this still was dwarfed by sales of the nontraditional brands. Some early estimates of the total scooter market were close to 222,000 units. Power Products Marketing, however, now estimates that the nontraditional segment actually grew by 155 percent, to 250,000 units. We estimate the scooter segment's total retail sales for 2008 to be 327,000 units, an increase of more than 114 percent from the prior year.

The OEMs and distributors competing in the U.S. scooter market can be segmented into two groups: the traditional brands that report to the MIC and the nontraditional brands that don't. The latter were arguably the driving force in the scooter market in 2008. The former are Honda, Yamaha, Suzuki and Piaggio. Honda and Yamaha have maintained their market segment lead but the Piaggio Group of the Piaggio, Aprilia and Vespa brands continues to edge closer to overtaking them. Suzuki looks to be having a difficult time with its emphasis on the more expensive maxi scooters which often require financing.

The nontraditional brands are comprised of U.S.-based distributors selling Chinese, Taiwanese and Korean products often sourced from numerous assembly facilities and manufacturers in Asia — some of which also supply parts or machines for the reporting OEMs. Our research identified the following companies as the current leaders in the market: Chuanl USA, Galaxy Motorsports, Genuine Scooter, KYMCO, Lance, Roketa, SunL, Supermach, Sunright and Womoto. To the extent possible, the figures we provide for the nontraditional 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 resold into South and Central America, Mexico and the Caribbean. We also account for units impounded for noncompliance and those which distributors or dealers cannibalize for parts.

2008 MARKET REPORT

Total sales in the U.S. scooter market that come from published reports and Power Products Marketing estimates appear to have increased to about 327,000 in 2008. The nontraditional brands account for 64 percent to more than 76 percent of the market — a recovery from the slight decline of the prior year.

In last year's report we mentioned the threat of higher production costs facing distributors. These costs increased considerably through 2008, but were counterbalanced by increased demand. We have studied the MSRPs of many of the leading nontraditional models sold through the more reputable distributors, and it's clear to us that these distributors are losing their competitive price advantage in some areas. Their MSRPs are getting closer to those of the traditional brands.

We also wondered whether the nontraditional scooter distributors had improved their inventory controls. In 2005 they experienced supply bottlenecks and lost sales through lack of on-hand inventory. After reviewing the data and speaking to the distributors, we think that scooter sales in 2008 had a strong start to the year, and demand outstripped supply by midyear. We heard reports that arriving containers were being pre-sold to dealers. It appears that many distributors saw fairly early in the year that ATVs were not going to sell well and put all their resources into scooters.

The problem came midyear when most distributors were unable to manage their supply channels effectively. In some cases there was limited capacity at the most popular Chinese producers, and in other instances these same producers didn't have sufficient funds on hand to purchase the parts and raw materials needed to manufacture units. This situation was less apparent with Taiwanese-built products. Quite a few industry sources feel that the market could have topped 400,000 units if the supply situation had been resolved sooner. It appears that some distributors tied in to long-term distribution contracts with specific suppliers even sourced from rival suppliers to meet their dealers' demand for scooters.

Many distributors of nontraditional brands felt they were losing significant sales volumes because they couldn't source products quickly enough and consumers were looking elsewhere. The MIC reporting members seem to have been able to manage their supply channel better and may have picked up some sales because of the low inventories of Chinese products in July and August. The nontraditional brand distributors were able to get their second wave of shipments finally in August and September, just as the main scooter season ended and the economy took a severe downturn.

SMALL DISPLACEMENTS JUMP

According to our research, the 50cc-and-smaller class rebounded to more than 55 percent of the market in 2008, up from 52 percent in 2007. This reversed the downward trend of the last few years. There is still some way to go to get back to the 65 percent market share this class held in 2005. These scooters remain popular with riders who have limited requirements (like commuting short distances) and want the ability to park in bike racks. They also appeal to those who don't want to obtain a motorcycle endorsement. The 51cc-to-155cc category continued to increase to more than 32 percent of the market, with most distributors expanding their offerings in this category (for example, the debut of the retro-styled Symba from SYM). It will be interesting to see if the U.S. is finally ready for machines similarly styled to the Honda Cub.

The top two segments of the market, which represent only 8 percent and 4 percent, respectively, grew considerably, albeit at a steadier pace, than the market as a whole. The traditional brands in these categories were impacted to some extent by the credit crunch, but as more models have become available from China and Taiwan, options have increased. (Look for KYMCO's 700cc machine in the near future.) We've also noticed that there is a small but growing segment of motorcycle riders who are shifting from large-displacement cruisers to maxi scooters.

CHANGES IN RIDERSHIP

Scooters continue to appeal to retirees, RV owners, DWI offenders and "undocumented" workers, as well as die-hard scooterists. Power Products Marketing has undertaken research confirming that there is a limited appeal for college students, but most dealers felt this was an extremely short window of opportunity at the start of a school year. Some distributors have found this out the hard way.

It now appears that the ridership is split almost 50-50 between males and females. This may be a reason why the nontraditional brands are doing so well, as they are not as intimidating to potential female consumers as the male-oriented traditional brands. Dealers have seen more middleclass and lower-middleclass customers drawn into the market to save money on gas. Last year's gas prices expanded the scooter demographic dramatically, but it is uncertain whether this was a one-time occurrence.