Scooters: Long-Term Investment or Short-Term Remedy?

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This market forecast refers to numbers for on-road gas-powered scooters only. There are differences between scooters and mopeds, although many communities seem to consider them identical for legislative purposes. This article does not include the more traditional mopeds or motorized bicycles such as the Whizzer or Tomos. It also excludes electric scooters, although that niche is growing in popularity as evidenced by the number of distributors that are investigating importing hybrid and electric scooters. Gopeds, g-scooters or foot scooters also are not included in the forecast calculations.

Contrary To Some Earlier Forecasts, the overall scooter market in 2007 actually experienced a slight downturn. Sales of scooter units by the OEMs reporting to the Motorcycle Industry Council (MIC) were flat compared to the volumes sold in 2006, whereas scooter sales by nontraditional brands actually declined. Total estimated sales for last year stood at 149,000 units, down more than 5 percent from the number of scooters sold by dealers in 2006.

However, it appears that last year's market decline was only a temporary dip. By the last quarter of 2007 the scooter market was heating up again, and has been generating considerable growth so far in 2008.

TRADITIONAL VS. NONTRADITIONAL

The OEMs and distributors that compete in the U.S. scooter market can be segmented into two groups: the traditional brands that report to the MIC (see DJB Composite Index) and the nontraditional brands that have emerged in recent years but whose companies do not report sales numbers to the MIC.

Scooter manufacturers reporting sales numbers to the MIC are Honda, Yamaha, Suzuki and Piaggio. Honda and Yamaha continue to be the market segment leaders but the Piaggio group (Piaggio, Aprilia and Vespa) is closing in rapidly, helped in no small part by its MP3 sales. Suzuki continues to rule the 400cc-and-over category with its Burgman series.

Given the increasing weakness of the dollar it's unlikely that we'll see a return to the U.S. by Derbi, Malaguti or Peugeot anytime soon unless someone is willing to sink considerable investment into establishing brand presence. However, in the longer term these brands may become more attractive for a distributor if the willingness of U.S. consumers to hop on a scooter continues to grow.

Piaggio has demonstrated what is possible — with clever marketing, good products and a willingness to persist — as its U.S. scooter sales have increased more than 80 percent since 2002. Piaggio is now a force to be reckoned with in the U.S. scooter market.

The nontraditional brands are comprised of U.S.-based distributors selling Chinese, Taiwanese and Korean products that are often sourced from numerous and different assembly facilities and manufacturers in Asia. Current leaders in this category include CF Moto, Cobra Powersports, Genuine Scooter, KYMCO, Mod Cycles, Roketa, Schwinn, SunL, Tank Sports and Vento. (The figures provided in this article for the nontraditional brands are limited to retail sales in the U.S. and do not include the significant volumes that are being imported into the U.S. and then resold into South and Central America and the Caribbean. This includes Puerto Rico, where the scooter market largely collapsed when the vehicles fell out of favor during the last year.)

Total sales in the U.S. scooter market in 2005 were estimated to have been around 148,000 units, rising to 157,000 in 2006. The nontraditional brands' share of this market increased from 62 percent in 2005 to 65 percent in 2006. We estimate that the market decreased to approximately 149,000 units in 2007 with the nontraditional brands' share declining slightly, to 64 percent. While the traditional brands were able to maintain their sales volume last year, the distributors of Chinese and Taiwanese machines seem to have experienced a sales decrease of almost 8 percent.

Dealers enjoyed large scooter demand in the first half of 2006, but the market cooled for the remainder of the year. It appears that this slowdown in sales continued into 2007, as sales proved lackluster through midyear. However, as gas prices began their upward trend toward the end of 2007, scooter sales picked up considerably and have continued to gather pace in 2008. Still, last year's sales picture was by no means consistent; some distributors reported a difficult year while others, such as Genuine Scooter Co., continued to grow. A number of distributors spent much of 2007 liquidating old inventory and began importing products from different suppliers, so they should be able to reap the rewards of their efforts this year.

SHIFT IN DISPLACEMENT

There has been a change in the market: The once-dominant 50cc category has declined. More people are willing to move up to 125cc and 150cc machines, despite the requirement for a motorcycle endorsement. This slowdown in small-displacement-units-sales caused some of the loss in 2007 sales volumes for nontraditional brand distributors that focused on the 50cc models. There are still wide regional variations in the popularity of larger displacement scooters, but the overall trend seems clear.

The 50cc-and-below class still remains the most popular category, but it shrunk to 52 percent of the market in 2007 from 64 percent in 2005. The 51-155cc category has increased to more than 31 percent of the market. The remaining market segments inched up slightly. Genuine Scooter's 125cc Buddy has been largely responsible for the resilience of the 51-155cc segment, and it should continue to sell strongly this year. The 51-155cc segment could be further strengthened by the introduction of Schwinn's 150cc models and Genuine's International Series 150cc, both of which are expected to perform well in the U.S. market.

The over-265cc class also increased in market share, largely on the strength of the Suzuki Burgman and a strong showing by KYMCO's Xciting 500. This segment could see significant growth if the MP3 400 and MP3 500 prove as popular as their smaller stablemate. Also, Schwinn is preparing to introduce a 400cc scooter, which leads us to believe that other distributors of Chinese brands may be expanding into the maxi category.

'A VERY GOOD YEAR'

Early reports for 2008 are that the market could be up as much as 30 percent compared to this time last year. Sales by traditional brands increased more than 26 percent in the first quarter of 2008. Some distributors of nontraditional brands report 50 percent increases in sales compared to this time last year, and in many areas of the country we're just entering peak season.

Who's riding these machines? If even hard-bitten Harley-Davidson fans can get excited about a nontraditional brand scooter, as we witnessed at a couple of shows this year, then almost anyone of riding age could be within the target demographic. There are consumers from a wide range of ages and income brackets purchasing scooters. Scooters appeal to retirees, RV owners, DUI offenders and undocumented workers, as well as the die-hard scooting enthusiasts. They have been marketed heavily to college students. However, the main appeal seems to be for those who are commuting in urban and suburban neighborhoods or who just want a relatively fuel-efficient and cheap mode of transportation. While some of this interest will be channeled to the motorcycle segment, a large proportion of consumers will consider buying a scooter. Assuming they have the cash to make the purchase or can get financing (within the new stringent requirements), then the market should have a very good year.

More franchised dealers are considering taking on a Chinese or Taiwanese line, and it appears that as more scooter-only stores emerge, their owners are more than willing to carry quality nontraditional lines, perhaps in conjunction with a traditional brand. A number of auto dealers have now seen the benefits of carrying a scooter line, and a few have even started importing units themselves. A more recent trend involves distributors of machines in other powersports segments distributing scooters; TJ Powersports is now a distributor of the Adly brand, and Carter Brothers carries the SYM line. Of course, Pep Boys and Northern Tool have also been selling scooters for a couple of years with some success.

There is much to look forward to this year, including the new Flyscooters line and the return of Italjet via Diamo. Walking around February's Dealer Expo it was evident that many carbon-copy models still exist, but build quality on the whole continues to improve, and more distributors are attempting to provide uniquely styled models.

U.S. distributors (sometimes despite their Chinese and Taiwanese suppliers' misinformed efforts) generally have realized that meaningful warranties, responsive customer service and good parts supplies all lead to a stronger organization. While parts support and performance parts are assumed by companies such as Martin Racing Performance and Parts for Scooters, a number of distributors have strengthened their own offerings. At least two, Genuine Scooter and Diamo, have even established what could be loosely termed their own aftermarket subsidiaries — respectively, Scooterworks Direct and Dragon Customs. The difficulties of finding parts may not have disappeared, but it's a lot easier these days.

THE RUB

There is a fair amount of substitution buying happening in the powersports market — some consumers are happy to purchase lower-priced Chinese- and Taiwanese-sourced brands instead of the higher cost traditional brands. So distributors of the nontraditional brands should have a very good year, but there are clouds on the horizon.

In 2005, many scooter distributors were scrambling to source enough units to meet demand. Many reported experiencing supply bottlenecks and lost sales through lack of on-hand inventory. It will be interesting to see if, three years later, scooter manufacturers and distributors are managing the supply situation more efficiently.

At press time, inflation in China is running at 8.7 percent, compared with 2 percent a year ago. We already have been hearing from many of the largest distributors of Chinese scooters that they will be forced to pass on their increased manufacturing and shipping costs to the consumer by fall 2008; some predict a 40 percent price hike on various units. This will negate much of the price advantage the nontraditional brands historically enjoyed. While their quality has improved, they may lose their price advantage over the traditional brands, assuming Honda, Yamaha, Suzuki and Piaggio are able to absorb their own supply inflation.

This would seem to favor the traditional brands; however, with oil estimated to be overpriced by as much as 100 percent as a result of speculation and the continuing weakness of the dollar, an inevitable price correction will have a considerable impact on the price of gas. This will affect the popularity of the scooter for both traditional and nontraditional brands.

For the short term, high fuel costs and increased awareness of scooters will drive the market to new heights. Major cities in the U.S. might still be a long way off from reaching scooter ridership levels of London or Rome, and it's going to take a sea change in the psyche of the American public to wean itself from the automobile, but it appears that the scooter will be a much more familiar sight on the roads in the coming years.