Consumers want power, but often buy on value
ARCTIC CAT IS BEGINNING deliveries on the largest engine displacement SSV ever produced: the 951cc Prowler XTZ 1000 H2 EFI. It's a vehicle Arctic Cat representatives say could exceed 60 mph. At the same time, Polaris is advertising that its forthcoming RZRs will be able to reach a top speed of 63 mph, and Kawasaki is claiming that its Teryx has the largest, most powerful engine in its class.
Another few hundred cubic centimeters of engine displacement and these vehicles will look like small pickup trucks. Where is design headed? Straight for the consumers' wallets. "Consumers are demanding more power on the recreational side, and I would expect that to continue," says Robb Zavitz, SSV product manager at Polaris.
But as prices for big-bore units escalate, there are sales to be made in smaller displacement, "value" SSVs like the Polaris 500 series (MSRP $7,999), the Kawasaki Mule 600 ($6,299) and Yamaha Rhino 450 Auto 4x4 ($8,499). "That's something we're kind of concerned about," acknowledges Vince Iorio, product manager for Kawi's Teryx, ATV and Mule lines. "As long as the vehicle chassis can handle the power, we don't really need to throw a 1,000cc unit in," he says. "We don't want to get into a speed race with these things. Power is real important for responsiveness, and we'll always look into that."
Having a compact vehicle, which can serve as an entry-level vehicle, has propelled the smaller displacement market niche, Iorio says. They're easy to transport and have a capable four-wheel drive. "The difference between a 750cc and 1000cc, depending on the chassis, may not always equate to speed," he notes. "A lot of these machines use CVTs. The power is down low, in torque, and could take a long time to get to a top speed. I've heard of people modifying the Teryx to get 75 or 80 hp out of it." So it depends on how much capacity an engine has as to what people will do with the vehicle, he says.
ARCTIC CAT: "MOTORS WILL ALWAYS GET BIGGER"
Cat is offering five models of SSVs in 2009, including two all-new units. The biggest kitty arrives in the form of a 951cc SSV dubbed the Prowler XTZ 1000 H2 EFI, which offers the largest engine displacement of any machine in its class. "We wanted to have the most powerful ROV," says Ron Solberg, ATV/ROV product manager. "When we entered the ATV market in 1996 we introduced the largest-bore ATV in the industry, a 454cc Bearcat. Now we are over double that displacement offering. Motors will always get bigger and we are prepared for that."
To tame the power, designers lowered the unit and incorporated the OEM's Ride-In suspension that was introduced on last year's Thundercat 1000 quad. The new Prowler has visual cues, like a hood scoop and a sunset orange metallic paint job with flame graphics, that resemble graphics from 1960s-era muscle cars. Other sporty touches include 14-inch machined-aluminum wheels and a ProGrip steering wheel.
Solberg says Arctic Cat will advertise heavily on TV and in enthusiast publications, and has unveiled sales programs to help dealers move new and noncurrent units. He remains optimistic. "The ROV market continues to grow as OEMs offer more new models that attract buyers, and we expect this to continue even with the current economic conditions," he says. "Several other OEMs have developed variations of their existing models to be more recreation-oriented, or [have] developed all-new models. Asian brands are starting to offer ROVs, and I won't be surprised to see others enter the market."
KAWASAKI: TERYX SALES JUST OK
Kawi introduced the Mule in 1998. Now, 20 years later, it splits its SSV offerings into two categories: utility vehicles and recreational utility vehicles (RUVs). For 2009, the utility vehicle category includes 10 variations of the Mule, with prices ranging from $6,299 to $11,599, while the RUV category includes five variations of the Teryx 750, priced from $9,799 to $11,349.
"We could see the market was changing," says Iorio. "We had known for seven or eight years that a certain percentage of our utility vehicle customers were buying Mule purely for recreation. Since the Mule is a 25 mph work vehicle, we wanted something to compete in the recreational side a little more thoroughly. We wanted something consumers could embrace — kind of like the Yamaha Rhino — so we set our sights on using one of our V-twin engines and building something more capable and fun, yet with a good value."
Iorio says Teryx sales are good, "but they're not quite where we would want them to be.
"Certainly the economy is having an effect," he says. "The subprime lending problem has had a big impact and slowed down a lot of categories. Until the banks can lower their interest rates, we're probably going to be in a little bit of a slowdown. The Mule, being that it supports work, is probably going to hang tough and do a lot better than the recreational side." Kawasaki is still forecasting sales growth on both the recreational and utility markets.
Will Kawasaki follow Polaris's lead with a more "just-in-time"-type ordering system? For now, Team Green plans to stick to an allocation program, but will take open orders. "With the RUV, we let [dealers] order as many as they could sell," Iorio says. "It's all looked at very carefully by the district manager."
POLARIS: MONEY IN ADD-ONS
For 2009, Polaris debuts a new Ranger 4x4, XP and HD, and re-engineers the remainder of the line to feature more rugged styling, improved ergonomics, easier steering and more cab space. The RZR, which is still difficult to obtain, returns with improvements for '09 and is joined by the new, hopped-up RZR-S.
Indeed, retail sales of the RZR have exceeded expectations, according to Robb Zavitz, SSV product manager at Polaris. First-quarter quad sales shot up 19 percent, mostly due to SSV sales, and the OEM expects a total increase of 6 to 9 percent by year-end. "We see the SSV market continuing to grow, but at a slower rate than it has been over the past few years," Zavitz says, predicting healthier sales for the recreational side of the market. "Obviously, there are a number of new players entering the segment, so it's going to be competitive. And the economy is a real wild card."
There's more money to be made in add-ons. Like other OEMs, Polaris offers a variety of accessories, and consumers who have the bucks to purchase an SSV usually aren't shy about investing even more to personalize their vehicle. "Accessory purchases are a huge part of the business, and we see dollars-spent-per-unit-purchased at an unmatched level, versus our other product lines," Zavitz says.
And inventories? "We're pleased with our dealer inventory position on both Ranger and RZR," Zavitz says. "We're still working to catch up to demand and build some inventory in the field on the RZR product line, and are told daily by our dealers that we need to build more. We've been proactive in managing the Ranger inventory in the field, and closely monitor it on a regional level to make sure it doesn't get beyond comfortable levels. We're in very good shape on Ranger, and a little short on RZR."
YAMAHA: INCREASING PRODUCT VARIETY
The Rhino, in its 700cc form, remains the best-selling 4x4 SSV on the market. Originally intended to be a vehicle offering more utility capabilities than an ATV, the Rhino's use in sporting endeavors came as a pleasant surprise. "To be honest, we originally positioned it as more of a utility machine," says Van Holmes, ATV/SSV PR manager at Yamaha. "It's safe to say the Rhino spurred the growth in the SSV market during the past few years."
Yamaha's SSV sales for 2007 were up 7.15 percent from the previous year (42,000 versus 39,000 units). The company anticipates demand to remain high. "The increase is attributable to the freshness of this product category, customers' growing attention to SSVs, and the introduction of new products by competitors, which helped spur overall demand in the segment," says Takashi Kajikawa, president and CEO of Yamaha Motors.
The OEM has developed more than 100 Genuine Yamaha P&A for the Rhino, everything from limited custom paint body kits for sport riders to gun boots, boxes and other products for the utility-minded. And that's part of the plan. "We intend to appeal to the superiority of our SSVs in this sector by increasing product variations and further differentiating our products from the competitors' models," Kajikawa says.
For now, Yamaha seems content with its dealer inventory levels for the SSV line. "Dealer inventory is always in flux," Kajikawa says. "Historically, it's been hard to keep dealers in stock because of the high demand, but we continue to look at the numbers and market conditions to make sure we produce enough machines to meet demand."
HONDA: BIG RED HITS SHOWROOMS
Honda's first UTV, the Big Red, begins retailing this month, but most Honda dealerships won't be carrying it. The manufacturer is rolling out the vehicle at 400 select stores chosen, among other things, for their available floor space. The OEM is shipping the side-by-sides fully assembled, so dealers must have a loading dock. (Honda's trucks will not be equipped with ramps.)
The last time Honda entered a new product category was several years ago with personal watercraft. Honda required each PWC dealer that carried other lines to sign an agreement saying it would build a Honda-only store within certain time period. This is not the case with the Big Red. All dealers could apply.
Tim Patnode of Honda's press department tells Dealernews that final specs for the Big Red are embargoed until a media launch in late August, when a host of accessories will be unveiled as well. Big Red reportedly has a 675cc engine, fuel injection and independent rear suspension. It's more of a utility model than a recreational model. "We have a great reputation with the farming industry," Patnode notes, "so it's probably only natural that our first entry into this market is more on the utility side. This matches up nicely with our customer base."
Honda's initial distribution plan is an exercise in caution. "We don't know what we don't know," Patnode explains. "We're just thinking long-term. We want everything to go smoothly, and we have a long-term mission for expansion. The reason we had the gradual rollout is [because] we're new."
Robert Kay, owner of Star City Motor Sports in Lincoln, Neb., guesses that Honda may be a little worried about the vehicle itself. "They don't know for certain how it's going to be received," he says. "They don't know for certain if they're going to have problems with it. You test it as best you can, but the customers become your beta test."
Eric Holt, owner of Allsport Honda Polaris in Liberty Lake, Wash., has mixed feelings about what he's seen so far. "Honda's products are always the best quality. They always sell," he says. "But that's a pretty competitive market to be in, and the Big Red doesn't quite have the features some of the Rangers have, as far as performance goes and styling. But quality sells."
One multiline Honda dealer not receiving the Big Red (who asked not to be identified) is unhappy with the gradual rollout plan. "They won't have enough distribution in product, and the buzz will just melt away," he says. "About the time they figure the distribution out, the demand won't be there. I think they'll get the same results they got with watercraft."
Jeff Johnson, owner of MidAmerica Motoplex in Sioux Falls, S.D., agrees somewhat. "Honda tried to be that selective with their watercraft, and that turned around and bit them in the butt," he says. "Maybe this will happen with side-by-sides as well."
So what will happen? Our anonymous dealer in Washington says he'll be forced to convert customers walking in for the Big Red to a Rhino instead. "You're going to have a Honda dealership essentially selling against a Honda product to sell something else. That isn't good for Honda. But the dealers are going to sell what they have. I think if you're going to play in the big time, you need to have the production. You have this wonderful distribution network, and then you don't use it. That doesn't make sense to me." — Honda story by Arlo Redwine