Power Products Marketing, a Minneapolis research firm, has been tracking the PWC market for nearly 10 years. This report was prepared by Matthew Camp, a power-sports analyst with the firm.
THE FINANCIAL MELTDOWN in the final week of September 2008 effectively brought the PWC market to a halt for the 2008 season. It appears that the 2009 season has continued this downward trend, with sales estimated to have been down 30 percent through May. The outlook for the PWC market looks decidedly bleak in the near term, unless the decline in consumer confidence and the mortgage and foreclosure crises are resolved quickly. In fact, it's possible that Honda will drop out of the market this year.
There had been some hope that sales wouldn't suffer too much during the traditionally weaker sales months, but it appears that people just aren't making discretionary purchases. A hostile credit market and job security worries are curtailing consumer spending.
Regional PWC sales have been bleak across the nation. The Chicago and Michigan area had posted significant improvements in mid-2007, but the credit crunch and the failure of the U.S. auto industry in mid-2008 hit this region hard. California and Florida continue to be the hardest-hit areas in the 2009 season, which is to be expected, as they have been the most drastically affected by real estate woes. It's hardly surprising that the PWC market is diminishing so rapidly when the three most important areas in the segment are having such a difficult time. New York has been faring reasonably well considering the market, but only Texas (of the larger PWC-oriented states) is performing well at all. The state didn't feel the full sting of the housing collapse and has oil revenues to bolster its economy.
At the end of the 2008 season most manufacturers appeared to have significant inventory issues, but by May reports show that these levels have been significantly improved. Sea-Doo seems to have managed its inventory situation well during the season, cutting production by more than 50 percent leaving the company in a much better position than at this time in 2008. It appears, however, to be losing market share to Yamaha and Kawasaki. These manufacturers seem to be gaining most of their increased market share with their "value" units which appear to comprise about half of their sales.
HONDA SAYING GOODBYE?
Yamaha may become the market leader by the season's end after increasing its market share at the expense of Sea-Doo and Honda. Kawasaki may be less affected by the current economic downturn than its competitors as the OEM's sales are down considerably less. Reports are that Kawi didn't wholesale much product in 2009, meaning that it's been selling mainly noncurrents.
It appears that Honda may be preparing for an exit from the market. It has heavily discounted units for a number of years, and some of the deals available in June were outstanding. We've heard reports that Honda is heavily discounting the Aquatrax product line, some units by as much as 50 percent, and has now scaled back to just two models for the 2009 season. From our research it appears very few new 2009 models were actually produced and wholesaled, and in February Honda closed the South Carolina plant where watercraft and ATVs were manufactured. After significant staff reductions at the facility, production resumed several months later, but only on the ATV lines. We anticipate some announcement later in the year.
UPDATE ON CHINESE PWC
In a previous article, we raised the possibility of Chinese-built units entering the market. On a recent trip to China we noticed that a few companies had models available for export. However, upon further inquiry we discovered that these units would not be making their way to the U.S. because they are unable to meet emissions standards.
According to our calculations, if sales for the final four months of the season continue on their current trajectory, the market appears to be struggling to top 50,000 units for the season. It would seem that the only way the market is going to avoid such a dire performance is if big rebates are continued for the remainder of the season and cash buyers can be found. Certainly the banks and other lenders don't seem to be doing consumers, dealers or manufacturers any favors at present. Reports at the end of 2008 were that well-qualified, creditworthy powersports enthusiasts were still able to purchase machines, but as the 2009 season has progressed even these consumers have been squeezed out by draconian lending criteria.
As the economy slowly recovers in 2010 it looks likely that the PWC market will rebound somewhat, but growth in this sector of the powersports market is likely to be sluggish. Most dealers are likely to be cautious when reordering for next year, and manufacturers will continue to watch inventory levels closely and will be limiting production unless there are early signs that the market is improving.