U.S. Go-Kart Market in Serious Decline

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EDITOR'S NOTE: Power Products Marketing is a Minneapolis research firm that conducted research into the U.S. kart market during 2008. This report was prepared by Matthew Camp, an analyst with the firm. (Click on chart to make larger.)

It's been a couple of years since we last looked at the U.S. go-kart market in an article, but according to our research, the market continued its downward trend, and dropped below 40,000 units sold in 2008 (see chart). The market leaders include American SportWorks, Baja Motorsports, Carter Brothers, Roketa, Runmaster USA, SunL, Thunder Motorsports and TJ Powersports.

Data collected by PPM from distributors, OEMs and dealers appear to show that the total market size for fun karts was around 38,000 units in 2008. This represents a decline of about 46 percent from 2007, and a fall of more than 65 percent from its high point of 109,000 in 2004.

The entry-level segment was less than 15 percent of the market in 2008, compared to 37 percent in 2004. The intermediate segment accounted for 65 percent, compared to about half in 2004. The remainder of the market goes to the advanced segment, which has grown from about 8 percent in 2004 to 20 percent last year. Many of these changes are due to the marketplace being saturated by Asian products, mostly in the intermediate and advanced segments. The lower end of the kart market has been affected by increased sales of inexpensive mini-ATVs and the recent lead law.

We asked market insiders why sales have declined, particularly at the big-box retailers. It appears that demand for more sophisticated karts has led to higher production costs and prices. With the ongoing financial crisis and tight credit conditions, many people are unwilling or unable to finance or buy any form of powersports product.

Big-box retailers with their slim margins discovered in 2006 and 2007 that people would rather buy a cheap mini-ATV than a slightly more expensive kart. Now those customers aren't buying mini-ATVs, either.

The perception that all "Made in China" products have quality issues may have damaged the kart's image in general. By our estimates more than 94 percent of the units sold in 2008 were made in China and Taiwan, including those imported by the major domestic OEMs. This compares to fewer than 19 percent in 2004.

HIGHER TECHNOLOGY

For the past few years kart OEMs not including ATV technology in their machines have been left behind. Those that have included it have seen costs increase. These units often possess a manual gearbox, and are approaching what could be called sandrails.

There once was an opportunity for an OEM to reintroduce a Honda Pilot-type product. Polaris was able to do this with its RZR, which has blurred the line between a kart and a utility vehicle. No other major manufacturer has stepped into this niche, but expect at least a couple of traditional and nontraditional OEMs, such as Can-Am and CFMoto, to do so in 2010.

In the last couple of years several domestic manufacturers have left the market. Brister's was absorbed by Manco, which was then taken over by American SportWorks. KenBar may close this year. In 2005 there were more than 80 kart distributors in the U.S., but as of 2008 there were only 24.

These companies are either adopting Chinese-built frames for most of their models or importing entire units. Many distributors have decided not to offer karts for the present. Many kart distributors — such as Hammerhead/Adly and Carter/SYM — have focused their attention on scooter sales.

BLEAK OUTLOOK

The kart business is being squeezed by the ATV and UTV markets' encroachment on its territory. The arrival of Polaris' Mini RZR in 2009 is likely to add to these woes.

Many big-box retailers have cut back on their orders from distributors, which are hardly importing any units at present. It may be hard for Chinese suppliers (assuming they're still in business) to react quickly enough if demand suddenly increases.

We may see signs of the market bottoming out in 2009 if the economy picks up by Christmas. Based on conversations we've had this year, the market will be hard pressed to exceed retail sales of 20,000 units. The forecast doesn't look good.

Go-Karts Defined

Often called fun karts, recreation karts or off-road buggies, go-karts are sold to consumers for general recreational use. We divide the kart market into three segments: entry-level, intermediate and advanced. Our research did not include concession and circuit racing karts, sandrails or the Polaris RZR.

ENTRY-LEVEL: Traditional karts, powered by low-horsepower utility engines with centrifugal clutch drive from companies such as Tecumseh, Robin-Subaru and Jiang Dong. They are aimed at 3-to 14-year-olds.

INTERMEDIATE: Powerful karts with higher-horsepower engines displacing from 70cc to 200cc. They usually have some form of suspension and are commonly torque converter drive versus centrifugal clutch. They are marketed to those 12 years old and older.

ADVANCED: Full-suspension models with larger displacements and greater legroom. Increasingly these bridge the gap between fun karts and sandrails. The target market is those 14 and older.

This article is from the October 2009 issue of Dealernews.