EDITOR'S NOTE: Power Products Marketing, a Minneapolis research firm, conducted research into the U.S. kart market during 2007. The research suggests that the market is undergoing a decline in sales with several major changes in segmentation taking place during the last 12 months. This report was prepared by Matthew Camp, an analyst with the firm.
The influx of Chinese ATVs appears to be putting a damper on kart sales, especially in the entry-level fun kart segment. This comes even as manufacturers are now using more powerful engines, advanced transmissions and better suspension, says Power Products Marketing, which has been tracking the sales of fun karts for four years.
Often called fun karts, recreation karts or off-road buggies, these machines are sold to consumers for general recreational use. We categorize the market into three segments: entry-level, intermediate and advanced. We did not include concession karts and circuit racing karts in our research.
The entry-level segment is comprised of traditional karts, powered by small-horsepower engines with centrifugal clutch drive. They are aimed at 3- to 14-year-olds.
The intermediate level consists of more powerful karts that displace 70cc to 200cc, have some form of suspension and commonly feature torque converter drive versus centrifugal clutch. These are marketed to people aged 12 and up.
The advanced segment consists of full-suspension models, with more power and greater legroom. These are increasingly bridging the gap between more traditional fun karts and high-end sand rail buggies. The target market is people 14 and older.
Market Size in 2006
From data collected by Power Products Marketing from distributors, OEMs and dealers it appears that:
- In 2004 the total market for fun karts was around 109,000.
- In 2005 this dropped to fewer than 100,000 units.
- In 2006 around 81,000 units were sold at retail.
The market leaders include Baja Motorsports, Carter Brothers, Manco Powersports and Tomberlin Product Group, but some of the newer distributors such as Newstar, Roketa, SunL and TJ Powersports are also on the move.
The entry-level segment was around 22 percent of the market in 2006, down from a high of 43 percent in 2003. This segment will likely continue to decrease to around 15 percent of the total market over the next few years. The intermediate segment accounted for 56 percent, and the advanced sector comprised the remaining 22 percent. The advanced segment has grown from around 15 percent of the total market in 2005 and 8 percent in 2004. It's expected to increase to more than 30 percent of the overall market in the coming years.
These changes are caused mainly by the steady penetration into the market of Chinese-produced karts, which are concentrated primarily in the intermediate and advanced segments. As mentioned, the rise in sales of inexpensive small-displacement ATVs also is having a significant effect on the lower end of the kart market.
Trends in the Market
Seemingly being left behind are manufacturers that do not have ATV technology such as live axles and suspensions, more durable engines, and a reverse gear.
Top-end units often feature a manual gearbox, partially because the engine and drivetrain have been ripped from a small car or mini truck, but also because consumers in this category want more torque and speed. Manual gearboxes could make their way down the displacement scale into the sportier 250cc-to-300cc units in the near future.
We've asked numerous kart market insiders why sales have declined, particularly at big-box retailers. It appears that many consumers are demanding more sophisticated karts, thus leading to higher costs of production. Ironically, this results in prices many people aren't willing to pay. Despite slim margins, many big-box retailers are finding that consumers would rather purchase a cheap mini-ATV than a slightly more expensive kart. (In past years the influence of mass merchandisers such as Sam's Club, Sears, Northern Tool and Pep Boys helped boost the numbers of karts sold. But the collapse of once-dominant Yerf-Dog when it lost these type of key accounts points to the dangers of these contracts.)
As with most Chinese-produced powersports products at the bottom end of the market, it appears that price is the main consideration. Quality seems to be secondary.
- In 2004 there were 67 distributors selling kart products in the United States.
- In 2005 this jumped to more than 80 distributors.
- In 2006 the number dropped to 43.
Other distributors that claim to be importing karts and display them on their websites actually have no inventory and will order some only if they see a dealer demand.
By our estimates more than 64 percent of the units sold in 2006 were manufactured in China and Taiwan, including those imported by the major domestic OEMs. This compares to fewer than 8 percent in 2003. We anticipate that the share produced in these countries will increase to around 75 percent in 2007, particularly as Manco and Carter appear to be increasing the proportion of their products manufactured overseas.
Within the past few years many distributors of Chinese-made karts have introduced mini versions of full-size karts for the entry-level segment. Most of the growth has occurred in the intermediate and advanced segments, particularly in the 90cc-to-250cc range. Some distributors are venturing into displacement categories over 650cc. While this is likely a niche, the technology could trickle down to the smaller-displacement units.
The introduction of water-cooled 250cc engines into kart models has been well received, and the more powerful 650cc to 1000cc karts are also water-cooled. More than 12 percent of sales involve water-cooled karts, compared to 6 percent in 2005 and 1 percent in 2004.
More than 80 percent of karts sold in 2006 were two-seat models, a figure that's been mostly static for the last four years. Some distributors, however, report increased sales and renewed interest in single-seat 150cc models.
Parts availability for the kart market is improving, but is still patchy. Some distributors can source parts easily, but others are having problems. The market is placing an ever-increasing importance on parts support, innovation and reliability as a way to differentiate the various brands.
Problems have been reported with the transmissions and engine parts originally designed for scooters but regularly used on karts. They often don't provide great performance in a kart application. There are some dedicated parts distributors, most notably MRP, offering alternative parts designed solely for kart applications.
We are also beginning to see signs of U.S.-based distributors using Chinese manufacturers to provide frame-only karts and then installing U.S.-built engines.
Carter Brothers has been successful with its line of Chinese-produced Talon and Maxxam karts and has been expanding and developing that line, and its new GTR series appears to be attracting attention. Manco PowerSports has also enjoyed success with its line of advanced karts, although it too has begun importing some models from China. Ken-Bar introduced a new line of suspension karts for 2006 that improved on many of the features that are standard on Chinese-produced karts. There are only four domestic manufacturers producing U.S.-built karts.
The major powersports OEMs aren't ignoring this market. The Yamaha Rhino and Arctic Cat Prowler have been around for years, but the launch of the Kawasaki Teryx and the Polaris RZR this year are indications that the recreation segment is heating up. Polaris' new vehicle blurs the line between kart and utility vehicle, and is set to do well this year, with reports that Polaris has increased its production goals in light of initial demand, even at a price of $9,999.
With much the market dependent on production in China it is going to be interesting to see whether the current hype around "dangerous Chinese products" will have a lasting effect. This should not have a big impact on die-hard buggy enthusiasts who want affordable, reliable machines they can tinker with, but it could affect the lower end of the market.
The change in tax policy that the Chinese government recently announced, whereby it is cutting rebates to exporters, may also have an effect in pushing prices up further. This might exclude consumers on fixed budgets who are already hurting from the general credit crunch.
The potential for a successful kart market is there, with enthusiastic dealers, improved support, more advanced technology and a fun product. Many dealers are doing well in their local area, but it seems that competition from cheaper, more disposable ATVs is largely to blame for the market decline.