Sales of traditional brand ATVs in the United States are in their third consecutive year of decline. While some analysts might attribute this to the increasing number of Chinese imports that have flooded the market, another trend is having a significant impact: UTVs, or side-by-side vehicles (SSVs).
An increasing number of older buyers are trading in their ATVs and opting for more appealing side-by-side vehicles. As much as 10 percent of annual ATV sales are lost to UTV sales, according to results from surveys conducted by Power Products Marketing.
UTVs encompass a broad number of vehicle types. Probably the two most important considerations are that UTVs typically have bench seats for one or more passengers, as opposed to an ATV, where a single passenger sits astride the machine; and that UTVs typically have rear dump beds. There are four distinct vehicle types: the beefed-up golf cart chassis, industrial-type vehicles with heavy-plated steel bodies, mini pickup trucks typically imported from China, and dedicated turf-type trucks (the majority of the market). UTVs also can range in payload capacity from as little as 500 lbs. to several thousand pounds.
Between 2000 and 2002, the North American utility vehicle market struggled to maintain its overall 100,000-unit level, for whatever gains were made in the consumer segments of the market back then were offset by ongoing declines in the commercial segments — golf, resort and industrial applications — which were severely impacted by the recession.
As the nation's economic recovery kicked in starting in 2003, the UTV market increased 17 percent, to 121,500 units from 103,000 units a year earlier. Growth accelerated another 36 percent in 2004, to 165,500 units. The market topped 200,000 units in 2005. Last year, the market jumped nearly 15 percent, to 231,000 units, with turf-type trucks accounting for nearly 85 percent of sales.
Consumer sales, which include farmers, ranchers and homeowners (large-acre estate owners, hobby farmers, hunters and recreational riders), represented about 40 percent of North American UTV sales in 2000. By 2003, consumers accounted for 47 percent of sales; by 2004 they surpassed commercial applications, increasing to a 55 percent market share. Over the next three years the consumer market continued to climb further, making up 70 percent of sales in 2006.
So since 2002, consumer purchases have been accountable for more than 90 percent of the overall growth in UTV sales. This trend was the result of several developments: the recovering economy, new competitors entering (and penetrating) the market through separate channels and customer bases, and established OEMs introducing upgraded series and brand-new models.
Consumer surveys conducted by PPM indicate that there are distinct differences between consumer and commercial UTV end-user buying preferences. Commercial customers generally tend to focus more on work activities and corresponding features, and they want their vehicles governed at 25 mph or less.
"We don't want our employees getting too comfortable or joy riding on the vehicles — we want them working," noted one municipal fleet manager surveyed by PPM.
By contrast, consumers want the smooth ride on their 4x4 models that independent rear suspensions provide. In addition, they want UTVs that look appealing, and they want their vehicles ungoverned so they can exceed 25 mph. This theory is reinforced by the overwhelming acceptance among recreational riders of the Yamaha Rhino, Polaris Ranger and Arctic Cat Prowler.
Over the last couple of years, a new category of recreational riders has emerged: older ATV riders switching from ATVs to side-by-sides. In 2006, this older rider group may have accounted for as much as 20 percent of total consumer sales.
UTVs are generally unable to negotiate many of the public trails ATVs use; however, with the advent of the new Polaris RZR, which appears to traverse most ATV trails, it will be interesting to see whether the other OEMs downsize some of their models to present more kart-type features.
THE TOP 10 OEMS
Up until 2004, five OEMs dominated the North American UTV market: John Deere, Kawasaki, Polaris, Textron and Ingersoll-Rand. Back in 2002, these five OEMs accounted for nearly 82 percent of the total market; but their combined share slipped to 74 percent in 2003.
In 2004, two formidable OEMs, Kubota and Yamaha, entered the UTV market with some innovative products that would alter the future competitive landscape significantly. By 2006, the first five leading OEMs accounted for only 56 percent of the market, and Kubota and Yamaha had 28 percent of total UTV sales.
The leading OEM supplier (and brand) of UTVs changed in 2006 — from Deere to Yamaha. Since then, the Rhino and its variants have remained the most popular gasoline engine UTV in the market (estimated share: 17 percent to 18 percent).
Note: Yamaha and others prefer to refer to the Rhino and similar products as side-by-side vehicles. Yamaha also markets a completely different G-MAX and U-MAX utility vehicle series through its golf and turf dealer networks.
Deere fell to second place in the market, with an estimated share of 15 percent from what had been 19 percent in 2005. It appears Kawasaki and Polaris will bypass Deere in 2007.
Sales of Kawasaki-branded Mules have increased significantly over the last two years, and it's now considered the No. 3 brand. Polaris continues to be successful with the Ranger EFI series introduced in 2005, with total sales increasing more than 20 percent last year, just behind Deere and Kawasaki. With Polaris' introduction of the RZR in 2007, the OEM is expected to increase its sales considerably.
Kubota has maintained its position as the No. 5 manufacturer/brand with an estimated 10 percent share of the market. The vehicle continues to benefit from being marketed through Kubota's compact tractor dealer organization. With Kubota's introduction of the RTV1100 in 2007 and perhaps a new gasoline engine model, the company should be able to keep pace with Yamaha and Polaris.
Ingersoll-Rand (primarily Club Car) is considered the sixth-ranked supplier. Although Textron (E-Z-Go) has been able to maintain its sales volume, it has been unable to sustain its share of market, dropping to seventh place.
Brister's is now believed to be the No. 8 brand, having increased its sales dramatically in 2006 largely due to its contract with Tractor Supply. Manco, a major kart maker, acquired Brister's in mid-2006.
Taylor-Dunn was the ninth-ranked brand in sales volume for 2006. Rounding out the top 10 is Arctic Cat, which has been able to increase the proportion of its dealer network carrying the Prowler.
There are more than 30 other minor OEMs competing in the UTV market with a variety of vehicle types. One example, the Bad Boy SUV, has demonstrated that there is a market for an electric four-wheel-drive vehicle for hunting applications (at least), and it's conceivable that more OEMs will emulate this model. The rising cost of gasoline may also spur development in alternative fuel units or more efficient batteries, although such technology may not be available and affordable until well after 2010.
Another interesting way to analyze the UTV market is through distribution channels.
John Deere and Kubota, and to a lesser extent Landpride and Bush Hog, market their utility vehicle product lines primarily through their farm dealer networks. By contrast, Club Car, E-Z-Go and Yamaha market certain UTV series through its golf and turf distributors. The Cushman, E-Z-Go, Taylor-Dunn and Motrec industrial-type vehicles are generally marketed through industrial channels, such as forklift dealers. The turf-type vehicles from Yamaha, Polaris, Kawasaki and Arctic Cat, which dominate the market in combined sales, are sold through the motorcycle and ATV dealer networks.
One perception is that the ATV OEMs — Yamaha, Polaris, Kawasaki and Arctic Cat — are more responsive to consumer needs, given the annual changes made to their motorcycles, and ATV and UTV consumer product lines. They compare favorably to other OEMs that serve primarily the commercial segment while trying to appeal to consumers. This could be compounded when Honda, Suzuki and BRP ultimately enter the UTV market over the next year or two. As a result, the other OEMs, like Deere, Textron and Cub Car, may be in danger of losing the consumer, who could increasingly associate powersports dealerships (over other channels) as the source for utility vehicles.
There are a growing number of people in the industry who believe that within five years China will be a major source for inexpensive engines in ATVs and UTVs, and possibly even complete products. In fact, China and Taiwan are supplying a growing number of ATVs with locally sourced engines and other components to the U.S. market. Initially, this began with the 50cc and 90cc mini or youth ATVs; lately it has expanded up the displacement range, as 250cc and higher ATVs are being sold in growing numbers.
True, much of the quality in the past was poor, but indications are that it's improving considerably. Not only are ATVs, motorcycles and karts threatened by the Chinese, but many wonder if the threat will spread to the UTV market.
Anyone who attended Dealer Expo in February would have seen the numerous Chinese-built UTVs showcased by distributors and OEMs. Most of those exhibiting the UTVs claimed the units would be ready in 2007; however, the consensus around the show was that most of the OEMs were still a couple of years away from having a reliable and quality product. Some of those that have been developing units for a number of years are much further along in the development cycle, and their build quality is markedly superior to these newcomers. Although there is some evidence of Rhino-cloning to date, no units appear to have made it into the United States so far.
UTVs have 2WD, 4WD and 6WD options. Based on PPM's calculations, about two-thirds of UTV sales last year involved vehicles with 4x4, 6x4 and 6x6 configurations. That compares to about 61 percent in 2005, 54 percent in 2004, and 37 percent in 2003. Clearly, 4WD vehicles are increasing as a percentage of sales, and the trend should continue as more OEMs introduce models with 4WD features.
Also, the consumer segment buys a much higher percentage of all-wheel-drive vehicles, perhaps nearly 80 percent in 2006 versus 55 percent of sales in 2003.
Diesel-powered utility vehicles as a percentage of industrial/commercial applications shot up in 2004 as a result of the introduction of the Kubota RTV900, but declined slightly in 2005 and 2006 as increasing sales of the gas-powered Yamaha Rhinos counteracted its effect. Diesel vehicles are expensive, and generally used in work applications; most are sold to farmers and ranchers, hobby or horse farms, municipalities, and the military. A growing number of diesels go into industrial applications and other turf markets.
Based on research to date and the expectation of a continued strong economy, the industry could see North American UTV sales reaching 262,000 units this year, and possibly topping 300,000 units by 2009 — with consumers making up 77 percent of sales.
Dave Crocker is a senior partner with Power Products Marketing, a Minneapolis-based research firm that has been tracking the UTV market for more than 10 years. Send questions and comments to Crocker via firstname.lastname@example.org.