Polaris CEO Tom Tiller says the Minnesota-based manufacturer's ATV division had a "solid" quarter in a "sluggish" core ATV yet "vibrant" side-by-side market.
Polaris says ATV shipments for the quarter increased by 15%, driven by strong Ranger sales. Company leadership says North American dealer inventories of core ATVs, measured in units, are more than 25% lower than they were at this time last year.
"In terms of the industry, on a year-to-date basis, the core ATV industry is down about 10% versus last year while Polaris is down mid-single digits. So we've gained market share as a result of our efforts to be more competitive," Tiller says.
He says dealer ATV orders at the dealer business meeting in July "exceeded expectations."
"While dealers are concerned about the economy and the overall ATV industry, they came into the meeting in a better frame of mind as a result of the inventory reduction which has occurred over the first half of this year."
For 2008 Polaris introduced some innovations to its base Ranger line, as well as a six-passenger Ranger Crew, and despite four increases in production rate and modest price increases, the RZR remains in an over-sold condition.
"Dealers continue to report very strong consumer interest in the new RZR, and we expect to remain oversold though the first quarter (of 2008)," Tiller says. "As has been the case for quite some time, the side-by-side market continues to be strong. While we don't have quantitative industry data, we believe based on dealers reports that the overall market continues to grow double digits. As such, retail sales for the Ranger line of side-by-side continue to be much higher than a year ago, and are certainly the bright spot for the company."
So, are side-by-side sales taking utility quad sales?
"One question we've continuously been asked since the RZR's introduction concerns "cannibalization" — that is, are RZRs simply replacing another Polaris unit that a consumer would've purchased has the RZR not been available, or are the sales truly incremental? Well, we have some early data from the customers who've actually purchased RZRs, and it looks like about 80% of the sales are incremental and about 20% of the sales cannibalize either another Ranger or a Polaris full-size ATV. The 80%, these non-cannibalized sales, are coming from competitive product and represent big share gains.
"All in, I would suspect the RZR to be the most successful new product we?ve introduced in the past 10 years."
In regards to dealer inventory, Tiller says Polaris now is "more or less" flowing product into dealerships at the same rate it is being sold — with exception of the RZR.
"I would say the inventory is about balanced. You know, you have individual dealers and individual models and that kind of thing, but certainly the vast majority of the inventory reduction is behind us at this point. ATV unit inventory at dealerships is down in excess of 25% compared to the same time last year."
Despite the oversold RZR, Tiller says Ranger capacity is "right on track," and that the pent-up demand for the RZR suits the company.
"On the one hand, we want to capture demand. However, on the other hand, we're talking about a durable and the last thing we want to do is put in too much capacity, getting the channel full and overshooting significantly. So we don't want to put so much capacity in place that we wind up hurting ourselves next year," he says.
For a rundown of Polaris' recent financial results, see the article here.