The industry is well through the scooter season and it’s becoming abundantly clear that 2010 is going to be a disappointing year for retail sales, at least for certain OEMs and distributors.
Sales for MIC-reporting brands were off 12 percent through June, although there are reports that sales picked up slightly through the summer. Distributor sales of non-traditional brands are off 20 percent. Sales in the early part of the year were being driven by rebates and special financing, and many leading distributors were forced to reduce MSRPs.
The hoped for rise in gas prices, at least if you were a scooter dealer, didn’t happen: Gas prices have hovered nearer to $3 than the $4 needed to spark a scooter-buying frenzy. Piaggio recently announced that its sales were down 75 percent in the first half of 2010, after overtaking Honda for second place in the scooter market in 2009.
The problem of non-current inventory for the non-traditional brands has worsened since the start of the 2009 season. Back then, distributors had over 100,000 units on hand, around 30 percent of 2008 sales. As we entered the 2010 season, distributors had an estimated 67,000 units, 37 percent of 2009 sales, in their warehouses. Three-thousand SYM scooters in the warehouse destroyed in the Carter Brothers fire may be an extreme example of the scale of the problem.
Still, scooter import numbers are significantly down from a year ago because few distributors need, or can afford, much new product. The issue is compounded by the failing of many dealerships and the unsold units either being returned to the distributor or liquidated at vast discounts.
Indeed, in 2009 it was difficult for distributors to get their imports through customs -- but 2010 has been even more challenging. It seems an order to crack down on Chinese imports in particular has come from the highest levels in government and the result has been a rise in the number of issues with the increased enforcement of regulations by U.S. Customs and the Environmental Protection Agency. While it is good for the scooter market as a whole to force the disreputable out and ensure that only decent operations can flourish, it seems that most Chinese and even Taiwanese distributors are getting tarred by the same brush.
The 2009 year was an effective one for reducing the number of distributors involved in the market, and 2010 seems set to continue the trend. The market appears to be in the midst of a shakeout where those distributors who have OEM backing or sole rights to distribution are more likely to survive and the distributors who shop around each year for the best deals but can’t support their product are dwindling.
The days of small-scale operations -- importing a couple of containers and retailing them at flea markets or by the side of the road -- are being consigned to history; the scooter market is maturing. Parts support has been an important issue for Chinese and Taiwanese makes, and in these times when consumers are careful with their hard-earned dollars, the ability to receive service and parts support could mean the difference between a getting a sale or not.
In another year it’s going to be interesting to see how things have developed. Will Kawasaki enter the market by sourcing from KYMCO as they’re doing with ATVs and UTVs? How many of the current Chinese and Taiwanese distributors will have survived and grown stronger as their competition falls by the wayside? Will electrics finally have lived up to the hype and been embraced by consumers?
But for 2010 it seems that sales will still continue the downward trend of 2009, albeit in a less severe fashion. We can only hope that 2011 provides a turnaround for the scooter market when the U.S. economy begins to recover and gas prices inevitably rise again.