The Market is Taking A Breath, Not Quite Gasping for Air

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Notice that the DJB Composite Index has increased to 1317 this month from 1311 last month. While a modest increase of the Index, which measures our analysis of annual trends, it nonetheless provides some measure of hope. Even though our forecasts indicate that sales generally are slowing, we have spoken with several dealers who have indicated that industry sales seem to them to be holding steady — not declining. Still, sales need to increase significantly before reaching a break-even point with the final Index for 2006.

Despite this slowing, many dealers are staying positive, and in fact, they believe they will meet or beat their 2006 sales numbers. Of course, I cannot rule out the possibility that these dealers happen to be in good markets or excel at the art and science of selling. Even our Index advisory board members are positive about the sales outcome for this year. Generally, they believe that the current slump in vehicle sales is a short-lived thing, and that there is a good chance that this "correction" will not last much beyond 2007. Maybe; but I am not quite so sure.

While the slight increase in the Composite Index is encouraging, I still caution: Do not take this relatively minor "hop" as a significant sign of positive change. Yet anything of a positive nature is welcome given the sales trends so far this year.

My concerns are in several areas, the most apparent of which is the unusually large used-motorcycle population in the United States. Half of these used vehicles are cruisers, and roughly a third of total used streetbikes in use are of the old-style cruisers of the Harley-Davidson marquee. When too many used bikes are in use, the price spread between new and used bikes widens, and used bike prices drop. As long as there are so many used motorcycles out there, retail customers will be tempted to trade among each other — leaving dealers out of the sales chain completely.

Interestingly, Suzuki has introduced a sales training course for used bikes designed by Gart Sutton & Associates, which is certainly a good idea.

What the Numbers Say

Looking specifically at our forecasts for each major product segment in 2007, the current sales numbers tell us the following:

  • Our analysis of motorcycle trends brings us to a forecast of 941,000 units compared with estimated sales last year of 968,000 units. This reflects a 3 percent (27,000 units) downturn in the overall two-wheel market.
  • Our forecast for streetbikes is 660,000 units, also a 3 percent drop from last year.
  • Touring bikes have slipped to 145,000 units, down 2 percent from 2006.
  • Even sportbikes are running sluggish: a 184,000-unit forecast for 2007, a drop of 0.6 percent from last year.
  • Cruisers also are down to 316,000 units, minus 5 percent.

Don't jump out of the window yet. Despite the "red" percentages, the numbers really just indicate a light brake applied to an otherwise historically galloping market. When an industry has churned out so many years of double-digit sales increases, it is natural for it to take a breather. But when a period of correction appears, it also usually means "change" — sometimes of a major nature.

During this period of change, there are, and soon will be, even more exciting new models to show your customers. No single model is dominating the scene anymore. Take advantage of what you have to sell, and get your customers in to see all of the new — and used — vehicles.

Finally, remember that right around the corner is a brand-new customer challenge: Gen Y! — 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. Questions concerning this index should be addressed to the author, c/o Dealernews, or the author via e-mail at djb-llc@cox.net. Copyright © 2007 DJB Associates LLC, All Rights Reserved. Composite Index Advisory Board: Lindsay Brooke, Motorcycle Historian and Analyst • Tom Hicks, Owner/President, Southern California Motorcycles • John Matherson, Owner/President, Mission Motorsports • Paul R. Puma, GE Commercial Finance • Lenny Sims, Vice President, Operations, NADA Appraisal Guides