U.S. dealers sold about 87,500 PWC units this past season, down slightly from what they sold in 2006. This number is based on our research and includes our estimate for Honda's unreported sales.
We last reported on the PWC market in the July 2007 issue of Dealernews. Year-to-date PWC sales through May were up about 1 percent, and we said a strong summer could boost sales by season end to 2 percent to 3 percent over the 2006 volume. June and July sales, however, were disappointing. August and September sales were pleasantly surprising, but less relevant given their traditionally low sales volumes.
The results would have been much worse if it weren't for factory incentives at the end of the season. Due primarily to these offers, September sales were boosted by more than 40 percent compared to year-ago numbers. Yamaha, for example, had its most generous program ever, offering $700 for accessories with certain models. See-Doo reportedly had two programs for dealers and consumers and offered up to $1,000 on certain models.
Even with this inventory dumping at the end of the season, and throughout the year in the case of one OEM, industry sources say dealer inventories are likely to be up at least 4,000 units this year, to somewhere between 16,000 to 18,000 units of carryover inventory. This seems very high considering that sales are low during the six months following season end.
Regional Sales Mixed
PWC sales in certain Midwestern states such as Michigan, Ohio and Indiana continue to recover slightly from the lingering impact of the automotive industry's woes. Michigan in particular doesn't appear to be any worse off than many other states. Further recovery, however, seems to be hampered by the automotive sector's poor performance.
The weather was good in most parts of the country. Droughtlike conditions in many areas of the South, for example, were a boon for enjoying water-based activities.
Dealers in other parts of the country weren't so lucky. The considerable rain that fell throughout Texas, along with speed restrictions in many affected areas, somewhat hurt sales. The Northeast had a bad start because of poor weather, and never really recovered.
But the major cause of the weak sales performance during the summer was the ongoing fallout from the mortgage crisis, which had a severe impact on the major markets, particularly California and New York. In Florida the high cost of homeowners' insurance to protect against hurricanes also cut into disposable incomes.
Four-Stroke and Three-Passenger PWC Still Most Popular
Three-passenger PWC continue to dominate the overall market. In 1999, about 55 percent of all PWC were three-passenger. Our estimates for 2007 indicate that almost 86 percent of sales are now in this configuration, up from 84 percent in 2006.
Four-stroke models seem to comprise about 94 percent of the PWC market, compared to 90 percent in 2006 and 74 percent only five years ago. It appears that within another year or so all PWC will likely be four-stroke, displacing the remaining two-strokes, including DI, FI and EFI models. Two-stroke carb models have dropped to about 3 percent of all PWC sales compared to about 5 percent for the '06 model year and 24 percent for the '05 model year.
Introductory Models? Popularity Wanes Slightly
The entry-level four-stroke segment, which had been one of the fastest-growing segments in past years, has weakened somewhat, but sales of the more expensive performance models remain robust. About 43 percent of sales through May involved models with an MSRP below $9,000, compared with more than 35 percent during the same period in 2006. By October, however, the "value segment" had slowed somewhat and was unable to sustain that level of growth. At season end value models comprised around 34 percent of total sales, compared to 38 percent the prior year. This does not take into account the effect of the discounting in September.
About 55 percent of PWC purchasers in 2007 were first-time buyers. This segment of the market has been growing steadily over the past few years, rising from 52 percent in 2004, and continuing the recovery from the low point of 40 percent in 2001. The percentage of first-time buyers is now creeping nearer to the historical high of 60 percent, which was achieved in 1996 when the market was in its heyday and PWC sales were at 200,000 units.
Value models are having an impact in bringing new blood into the market, but many new entrants are choosing the more performance-oriented machines. This illustrates how important it is for the manufacturers to continue to offer exciting new products each year. Kawasaki's highly successful Ultra 250X is a prime example of this phenomenon, with its comparatively high price tag of $11,499 not discouraging a good number of buyers in 2007. As a result, Kawasaki increased its market share. The VX Cruiser performed a similar function for Yamaha in the value category.
The PWC market experienced a similar period of lackluster performance from 2001 to 2004 when sales hovered around the 80,000-unit mark. It was not until 2005 that sales rose to the 87,000 mark, where they have now stalled for the past few years. For 2008 it appears that the market will continue to be flat. If it does recover, it will be by about 1,000 units at best.
On a brighter note, a considerable number of PWC owners possess older two-stroke machines that will eventually have to be retired and replaced with newer, better-performing four-stroke machines. This process appears to have started several years ago and could gather headway over the next few years. Still, that elusive 100,000-unit industry sales mark seems a long way off.
Editor's note: 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 powersports analyst with the firm.