WHEN THE U.S. ECONOMY BEGAN TO DEPRECIATE, I said that I expected the recession to last maybe two years — maybe three. Now the signs are still not good, and we are into what some are calling a worldwide depression on the order of the Great Depression of 1929, which lingered on for several years.
To have a handle on when this mess will turn around I have been monitoring a list of indices that have served me well when it comes to calling an end of economic dislocations before the general public has become aware. We aren't there yet, and I am not saying that the reports of the continued sales slide are telling me this. Housing is still losing value across the nation, but there is some sign that it is nearing an end. I am not one that believes in spending trillions to bring an end to the banking problems that are tied to the housing problems. I hate to see my four grandkids face paying off the debt that will accumulate from Congress's posting of the so-called earmarks that are designed more to gain re-election than to fix roads and bridges in the states. We are probably inexorably fixed on this direction set by our new president. (Click on charts for larger view.)
Now to sales: You can see our scary predictions by looking at the charts on this page and the next. We predict that motorcycle sales of all types will be down 17 percent, which would be the first double-digit annual drop in several years. This negative percentage includes a big forecasted drops for cruisers (15 percent) and sportbikes (17 percent), which will be among the worst hit. But one shining light has been the under-500cc sportbike class, which brought our forecasts up. This class includes what I call the "Baby Ninjas" kept in the market among the favorites for many years by Kawasaki. I am forecasting them to be up 10 percent in the face of a negative market.
Then there are the ATVs that we are currently forecasting to be down 15 percent. We predict Kawasaki quad sales will be down 8 percent, which is almost the same drop we forecast for Honda. Nobody has been that close to Honda in ATVs for quite a while.
Among the most serious downward pressures on the powersports industry is the debt our country has accrued. What this means is our dollar has and will continue to lose its intrinsic value. And even more to the point is that there doesn't seem to be any way to reverse the trend toward inflation. It will be hard to prevent or combat the stiff price increases in motorcycles and imported parts.
And because aftermarket companies rely heavily on imports, prices of aftermarket products will on balance increase to the point of being too high for many younger customers who need access to more inexpensive products.
This is a resilient industry with companies that have a lot of practice at ferreting out sources of competitive products while holding their reputations for being competitive. Still, while the powersports business hasn't been this bad since the '80s, many of the more knowledgeable dealers seem to be weathering this "perfect storm" as if none existed. But it's just that they refuse to accept their vulnerability, and just keep on keeping on! — DJB
Editor's note: Economic conditions are affecting the powersports industry, as they are affecting many other industries. Some of the significant declines in our sales forecast could be the result of a very slow start in the first two months of 2009. This slow start could be the result of manufacturers depleting stock at the end of 2008, then not being able to have the right models for early sales. In the end, we won't know enough about what this year may do for another two or three months. Our forecasts are made with the best of efforts and techniques, but given these economic pressures, we must advise the greatest care in evaluating these forecasts. Stay tuned! — DJB
INTERPRETING THIS INDEX
Index is based on the author's analysis of the MIC Retail Sales Report, SEC filings of quarterly and annual reports, and other information provided by publicly traded companies (such as Harley-Davidson and Polaris). Readers are cautioned that these estimates are subject to error, which can result from changes in seasonal patterns due to unexpected weather conditions and fluctuations in the economy. Interruptions in the supply of popular models can also affect these forecasts. Forecasts are not intended for investment purposes. Questions concerning this index should be addressed to the author, c/o Dealernews, or the author via e-mail at firstname.lastname@example.org. Composite Index Advisory Board: Lindsay Brooke, Motorcycle Historian and Analyst • Tom Hicks, Owner/President, Southern California Motorcycles • Paul R. Puma, GE Commercial Finance • Craig Southey, COO of Cycle Barn MotorSports Group
* The DJB Index is the square root of the total of our sales forecasts for motorcycles, ATVs and scooters. This index allows readers to look at (and keep track of easily) one number that is a summary of our predictions.