Editor’s note: Power Products Marketing, a Minneapolis research firm, has been tracking the PWC market for more than 12 years. This report was prepared by Matthew Camp, a powersports analyst with the firm.
The best-case scenario for 2010 is that the U.S. PWC market will find some stability and record flat sales of around 49,000 units. But according to our estimates, which includes a season-end year-over-year decline of more than 13 percent, it appears that retail sales of PWC will continue the downward trend of the last few years.
The 2010 season opened with a weak fourth quarter of 2009 followed by a better-than-expected first quarter, meaning that the six-month market was basically flat compared to the same period in the 2009 season.
An acceptable April was followed by a disappointing May, and June was just as bad. This put the year-to-date market down 13 percent versus 2009, which was better than the 30 percent fall the market was exhibiting that time the previous year compared to the 2008 season.
The trend continued throughout the remainder of the season, and the market at season end remained more than 13 percent down on 2009, at around an estimated 43,000 units retailed. This number was reached despite OEMs making a last-ditch push to clear inventory in September, which resulted in that month’s sales ending up 40 percent higher than September 2009.
The market has now contracted well over 50 percent since 2006.
There had been some hope for 2010 sales because the worst of the recession occurred during traditionally weak sales months. But it now appears that the hostile credit markets and fears for job security continued to have a severely curtailing effect on consumers’ ability, or desire, to purchase a watercraft. Watercraft recreation is still very expensive for many new entrants given the current economic climate, and even with good discounts on offer on many machines, the market numbers are disappointing.
The PWC market does seem to be outperforming the ATV market, which was down more 23 percent through September, according to reporting members of the MIC.
The oil spill in the Gulf of Mexico had a considerable impact on the PWC market, both in terms of restricting riding opportunities and depressing the local economy of the affected states further than would have otherwise been the case. Florida had been showing signs of rebounding sales, but the uncertainty over the oil spill, cancellations at resorts and hotels, and the continuing decline in the real estate market stifled any attempts at recovery.
The other states which have had significant declines in PWC sales in recent years — California, Michigan and New York — did show some signs that the declines had largely stopped and possibly hit bottom. Michigan had been performing surprisingly well in 2010 considering the issues in the auto industry and seems to have found some stability at least, if not great sales figures. Texas, which performed relatively well in 2009 compared to most other states, continued to do comparatively well in 2010, although it seems that Yamaha’s sales were stronger there than those of Sea-Doo or Kawasaki.
Four-stroke and three-passenger PWC remain most popular
According to our estimates, three-passenger PWC continue to dominate the overall PWC market so far in 2010 with more than 88 percent of sales in this configuration, slightly up on this point in 2009.
Four-stroke models still seem to comprise 96 percent of the PWC market, but estimated figures are slightly down on 2009.
Fuel injection continues to dominate the market with just over 96 percent of units now having some form of this technology, but the percentage of retail sales using it is still down slightly from this time a year ago. It appears that all the older technology segments, two-stroke or DI/Carb, gained a small amount of market share in the early part of the 2010 season as dealers liquidated some of their older inventory.
Introductory models maintain popularity
“Value” models with MSRPs under $9,000 continue to sell well but currently comprise 36 percent of the market according to our estimates. This is a significant drop from where this segment was at season end in 2009, with over 38 percent of the market. But this trend is probably only temporary because the Value segment was competing with deeply discounted noncurrents in 2010. The Value segment should rebound considerably in 2011 as consumers continue to look for the best value for their investment.
Chinese still considering entering the market
About a year or so ago, we postulated that the Chinese might be preparing to enter the PWC market. On a visit to China in October 2008 we had seen some PWC offerings that were ready to export, but the manufacturers admitted they were unable to meet the stringent U.S. emissions regulations. To date there has been little further movement by the Chinese, although we keep hearing rumors that certain quality OEMs are seriously looking at the market.
While at first glance it seems like a good move on the part of a Chinese OEM to enter the market with a cheap unit that could undercut the Value segment, the reality may be that to support such an entry the distributor would have to set up a reliable and comprehensive network of service centers. So far this has proved to be beyond any U.S. distributor of Chinese powersports equipment, and would appear to be a significant barrier to entry in the PWC market where product support is key. Having stated that, we have heard that at least two current U.S. distributors of Chinese products are seriously looking into entering the PWC market in the next few years.
Inventory issues improve considerably
There has been no word yet on whether Honda is going to restart producing PWC, but with the market continuing to contract and the economy set for very slow growth, it doesn’t appear likely that the “mothballing” strategy will be abandoned anytime soon. Honda dealers were continuing to offer great deals to unload their remaining units and estimates are that they are down to a handful of units for 2011. Sea-Doo has reportedly been liquidating inventory and running incentives at a fast pace and, as a result, significantly increased its market share, reclaiming top spot from Yamaha through the mid-2010 season. However, Yamaha ultimately reclaimed top spot by season end.
Most of the market share gains that Sea-Doo and Yamaha have enjoyed in 2010 have been, unsurprisingly, at the expense of Honda. However, Kawasaki’s market share appears also to have declined from last year, possibly as a result of its liquidating old inventory in 2009, which artificially boosted its market position that year. Sea-Doo and Yamaha have been conversely liquidating their older inventory in 2010.
Sea-Doo earlier in the year had reportedly been buying up unsold inventory from some of its Gulf States dealers for resale elsewhere. Some industry sources have contended that the market could have decreased inventories by over 60 percent. This is quite an improvement over the previous few years, and most manufacturers are now at inventory levels not seen since before 1995.
2011 season projection
Given the very low inventories of noncurrents and with Honda effectively out of the market, most consumers next season are going to be confronted with no option but attempting to buy a full-price current model. With few bargains available, there will likely be considerable sticker shock next season, and the market seems set for a further decline, even if the economy continues its weak recovery. Sales in the Value category should continue to increase, but the more expensive models will be significantly harder to retail, and the market could conceivably be down an additional 5 percent for 2011.