Dealer Sentiment Index: Sled sales warm up a chilly Q4

Publish Date: 
Feb 7, 2014
By David Kopf

AN EARLY WINTER bumped up snowmobile sales, which prevented declining dealer outlook from snowballing as sales in other categories felt the winter chill, according to results from the Q4 Powersports Dealer Survey conducted by Baird Research and Dealernews.

54.0

Dealer Sentiment Index Q4 2013

New product introductions also continued to drive demand (which was a key trend highlighted in the Q3 survey).

Some concerns emerged that a prevalence of higher-end models could be priced too high for many consumers. But overall, most dealers are concerned over rising inventories, according to Craig Kennison, senior research analyst at R.W. Baird.

After a brief period of gains, overall dealer satisfaction declined in Q4, both in terms the current market conditions as well as dealers’ three- to five-year outlook. The quarter’s index for current conditions was at 49, and index for dealers’ three- to five-year outlook was at 54. While down, it’s worth noting that dealer sentiment was still in or near favorable territory, Kennison stated. (View the third-quarter Dealer Sentiment Index HERE.)

New, innovative OEM products continue to bolster dealers' moods while concerns about product affordability, dealer profitability and some still-sleepy product lineups temper their outlook. Also, new frustrations over government policies -- especially the recently implemented Affordable Care Act -- influenced dealer sentiments.

Of big concern: Increased competition over diminished volume.

  • “Lots of discounting by competitive dealers is impacting profits,” a multiline dealer noted. “With the industry off 65 percent to 70 percent since 2008 and only a 25 percent reduction in dealers, plus an excess of non-current product, we are experiencing rock-bottom pricing. It is very difficult for a metric dealer to make much of a margin on new units,” the dealer added. “Used units were profitable in 2012, but even used sales and margins are heading south. Harley-Davidson continues to erode metric cruiser sales and sportbikes are extremely soft.”

RETAIL WEATHERING A COLD SNAP

While many in the Northeast, Midwest and even the Southeast might be cursing the polar vortex, snowmobile dealers have been pretty happy. The early onset of cold weather late last year pushed demand for snowmobiles while other non-snow dealers were left counting the days until a spring thaw.

Of all inventory levels, snowmobiles were at the lowest, according to the survey. Notably, Ski-Doo sales were at the fore of the Q4 snowmobile surge.

  • “BRP products have been softer for the second half of 2013 with the exception of Ski-Doo,” a BRP dealer responded.
  • “With early snow on the ground in the Midwest, it really catapulted our end-of-year sales overall,” a Kawasaki, Polaris and Yamaha dealer commented. “We were market driven.”
  • “Snowmobile business was very strong in fourth quarter,” a multiline dealer stated. “We were even able to maintain some net profit on new snowmobiles, which was a very welcome change from the last few years.”

Of course, not all dealers are able to capitalize on winter weather. While parts and service categories warmed a bit, demand in off-road and on-road categories felt the chill. If anything, the frosty off-season gave some dealers time to consider what they’d offer in spring and summer months. Many noted the strong interest in the Sea-Doo Spark PWC, specifically, and in fact, dealers indicated that PWC sales were up in comparison to the same period in 2012.

  • ‟At our dealership, we can see the economy slowly recovering,” one dealer stated. "If our spring weather gets off to a better start than last year, the PWC and bikes sales should be stronger.”
  • ‟If we have good weather and consumer confidence improves, there's a chance [of improvement], but at this point it’s a long shot,” another dealer responded.

Dealers closed out Q4 saying that they were less comfortable with inventory levels compared to the Q3 survey. Many noted their inventory was “too high” across all categories, with PWCs and motorcycle inventories showing the biggest spikes.

  • “Inventory is too high again, and there are no margins left, no matter what brand,” a motorcycle and scooter dealer responded.
  • “Price trends seem to be stabilizing, not as deep a discount is necessary over a year ago,” a BRP and Kawasaki dealer explained. “Inventory of P&A is turning faster on most items; major unit inventory is turning quicker than anticipated, at least to this point.”

Dealers say some brands need updating (continued on next page)