Power Products Marketing is a Minneapolis research firm that has been tracking the utility vehicle market for more than 10 years. This report was prepared by Dave Crocker, a senior partner, and Michael Brugioni, a market analyst.
Over the last six years, the most impressive-performing U.S. market in powersports retail sales has been side-by-sides such as the Polaris Ranger series and the Yamaha Rhino.
In 2007, the market hit 265,000 units, an 11 percent increase over the previous year. However, sales appear to have flattened out in 2008.
Last year, the market was heading for another record sales year when things came to a grinding halt due to the meltdown of the financial and credit markets. Although there has been some improvement this year, most OEMs continue to have difficulty getting credit approval for customers, despite favorable terms.
As a result, UTV sales in the fourth quarter of 2008 may have dropped as much as 20 percent overall, causing sales to be virtually flat with 2007. Since then, UTV sales have been on a steady decline and aren't likely to improve until late this year, if at all.
Between 2000 and 2002, the UTV market struggled just to maintain its overall 100,000-unit level — whatever gains were made in the consumer segments of the market during 2001 and 2002 were offset by declines in the commercial segments such as golf, resorts and industrial applications that were severely impacted by the existing recession. In 2003, the UTV market jumped to about 121,500 units from 103,000 units the previous year after the U.S. economy bounced back from a prolonged slump. This growth pushed sales to nearly 165,500 units in 2004, 200,000 units in 2005 and 238,000 units in 2006.
Based upon our analysis, consumer sales — which include farmers, ranchers and homeowners segments — represented about 40 percent of North American UTV sales in 2000. By 2002, consumers accounted for just fewer than half of sales and by the next year, they had surpassed commercial applications with a 55 percent penetration. Over the next six years this percentage continued to climb to 72 percent of sales in 2007. They remained about the same in 2008. Over a seven-year period the consumer segment has contributed to nearly 90 percent in the overall growth in UTV sales.
This trend was largely the result of the development of the recreational utility vehicle (RUV) that began when Polaris introduced Rangers that exceeded the conventional 25 mph speed limit. The trend gained momentum with a surge in popularity of the Yamaha Rhino and more recently evolved with the introduction of the Polaris RZR.
Over the last few years, a new category of recreational riders has emerged as a growing customer niche, stimulated by older ATV riders who seem to be switching from ATVs to UTVs. We estimate that in 2005, this category accounted for as much as 15 percent of total consumer sales. This grew to 26 percent in 2008.
UTVs generally are unable to negotiate many of the same public trails ATVs are able to travel because of size restrictions. This presents somewhat of an obstacle, although there is less of a problem in more open riding areas such as the Southwest. In developing the RZR, Polaris appears to have studied the states' trail systems and discovered an opportunity for a vehicle with a 50-inch width that could be ridden on many ATV trails with these restrictions.
MAJOR OEM MARKET SHARES
Up until 2004, five OEMs essentially dominated the UTV market: John Deere, Kawasaki, Polaris, Textron and Ingersoll Rand. In 2003, these OEMs accounted for about three-quarters of the total market. However, during 2004, two new formidable OEMs — Kubota and Yamaha — entered the market with their innovative products. The move changed the competitive landscape. By 2006, the total market share held by the five leading OEMs dropped more than 20 points to 56 percent of sales. In that same year, Kubota and Yamaha together accounted for more than a quarter of total UTV sales, and Yamaha grabbed the top market share from Deere.
In 2007 Polaris surged ahead of Yamaha with the release of the 800 EFI RZR and the continuing popularity of the 500 and 700 EFI Ranger. A year later, the Minnesota-based company introduced the RZR-S, a wider version of the standard RZR aimed at the open riding areas in the Southwest. By our estimates, Polaris' share of golf- and turf-type UTVs was nearly 25 percent in 2008, up from 2007.
Yamaha held onto second place in the market with an estimated share of nearly 15 percent. Through its golf and turf dealer network, the company marketed a completely different golf-type chassis U-MAX utility vehicle series. (We calculated this vehicle into its share estimate.)
Yamaha's share has been on a steady decline since the second half of 2008 with stiff competition from the RZR and Kawasaki's new Teryx. Yamaha recently announced a "Rhino Repair Campaign" to address certain issues it worked out with the Consumer Product Safety Commission, and has suspended all spring 2009 Rhino production. An anticipated four-seater was put on hold until the fall of 2009.
Kawasaki's Mule and Teryx helped the company hold onto third position with an estimated 14 percent market share. The Teryx was given an EFI upgrade late in the year. The introduction of the Teryx was timely, as it offset Mule sales that began to taper off during the year. We expect Kawasaki to move ahead of Yamaha in 2009 and to finish in second place.
Deere's Gator sales continued to decline in 2008, although the company maintained its fourth position in the market with an 11 percent share of golf- and turf-type UTVs. Deere once held about a quarter of the market back in 2004.
Kubota has been giving Deere and, more recently, Kawasaki fits with its aggressive marketing of its RTV-branded products. Holding onto fifth position with about a 10 percent share, Kubota appears to be running on flat sales for the second year in a row. The RTV1100 with integral cab has sold well and a new EFI gasoline RTV500 was introduced in late 2008. A five-seater is expected to be introduced this year, along with improved transmissions for the RTV900 and 1100 models. Expect to see Kubota move ahead of Deere this year and possibly even slip ahead of Yamaha, whose sales are currently in a free fall.
Ingersoll Rand (Club Car, Bobcat and Husqvarna) is considered the sixth-ranked supplier of golf- and turf-type UTVs and also produces a line of shuttle and personnel carriers.
Textron (E-Z-Go, Cushman and Jacobsen), believed to be in seventh place in the North American UTV market, also markets a line of shuttle and personnel vehicles through the E-Z-Go and Cushman labels. E-Z-Go phased out its unsuccessful attempt at a 4x4 UTV during 2008 while Club Car introduced a new low-cost 4x2 and 4x4 XRT950 three-model series near the end of 2008 with automotive styling and independent rear suspension. Both OEMs experienced double-digit sales declines in their UTVs during 2008.
Arctic Cat moved into the eighth position with its Prowler series, having introduced a new EFI version late in 2007 and a 950cc model late in 2008. Brister's is the ninth-ranked brand, having significantly slipped in sales during 2008. The company was acquired in the middle of 2006 by American SportWorks, which earlier had acquired Manco, a major manufacturer of karts.
After many years of studying the UTV market, Honda finally introduced a work-type UTV called the Big Red in the second half of 2008 with minimal sales. The vehicle is produced in El Salto, Mexico, alongside Honda's CR-V.
Late in 2008 Landpride said it was withdrawing from the UTV market, choosing instead to focus on its core farm implements and attachments and ZTR mower businesses. Early this year, Bush Hog experienced financial difficulties and briefly shut down. It appears they also could soon exit the UTV market.
There are more than 30 other minor OEMs competing in this market with a variety of vehicle types, including an increasing number of Chinese brands. Chinese OEMs accounted for more than 12,000 UTV sales in 2008, up from an estimated 3,500 in 2007. In addition, there are now nearly a half-dozen distributors targeting hunters by offering 4x4 electric UTVs sourced in China. This niche was initially carved out by Bad Boy Enterprises.
Another interesting way to analyze the UTV market is by looking at the distribution channels. John Deere and Kubota market their utility vehicle product lines primarily through their farm dealer networks. By contrast, Club Car, E-Z-Go and Yamaha market certain utility vehicle series through their golf and turf distributors. The Cushman, E-Z-Go, Taylor-Dunn and Motrec industrial-type vehicles are generally marketed through industrial channels, such as forklift dealers.
The turf-type vehicles of Yamaha, Polaris, Kawasaki, Arctic Cat and, more recently, Honda, which have been dominating the consumer segment of the market in sales, are sold though their vast motorcycle and ATV dealer networks. We've previously pointed out that other OEMs, such as Deere, E-Z-Go and Club Car, appear to be gradually losing their homeowner UTV sales to powersports dealerships. Homeowners may prefer the powersports channel over other channels.
Consumers have shown a growing preference for AWD and EFI options in their UTVs in recent years, according to our research. UTVs have 2WD, 4WD or 6WD options. Based on our calculations, about 80 percent of UTV sales last year were 4x4, 6x4 and 6x6 configurations among golf- and turf-type UTVs. This trend appears to have been growing each year since 2003 when these vehicles accounted for a bit more than 40 percent. It is apparent that the growing consumer segment has a much higher percentage of 4WD drive, which has contributed to this trend.
Diesel-powered utility vehicles as a percentage of internal combustion engine applications shot up in 2004 as a result of the introduction of the Kubota RTV900 but have been on the decline since 2005. Diesel UTVs have accounted for about 15 percent of total internal combustion engine sales in the last two years.
EFI engines are becoming increasingly more popular with consumers along with 4WD, independent suspension, bench seats and speeds exceeding 25 mph. According to our research, current estimates are that EFI accounted for more than 45 percent of turf-type UTV sales in 2008. Expect this penetration to continue increasing over the next few years.
As we mentioned at the beginning of this report, UTV sales have been in a prolonged slump along with other powersports markets since the fourth quarter of 2008. It's quite possible we could see sales plummet 25 percent or more this year, depending on when conditions improve in the financial and credit markets. Most economists predict that this could occur as early as the fourth quarter of this year.
Beyond that, look for a slow-but-sustained recovery for at least several years, barring the possibility of what some economists warn could be pending hyperinflation, high unemployment and interest rates that would choke off the recovery after a year, not unlike what happened in the early 1980s.
What's in a Name?
Ever since the first side-by-side ATVs were introduced almost a decade ago, the industry has struggled to describe these vehicles. The situation has gotten more confusing as specialty segments developed and as OEMs rushed to identify the areas in which their particular models operate.
To make things more difficult, the MIC's OEM reporting members don't include retail sales of UTVs when they report their sales figures to the organization. However, many of the OEMs do combine ATV and UTV sales when they report corporate sales figures.
Polaris, for example, combines sales of ATVs, Rangers and RZRs when reporting sales of its off-road division.
Another point of confusion is that some OEMs chose to call their UTVs something else to give their models a different position in the marketplace. For example, an OEM may use the term SSV when marketing its UTVs to give them a unique identification with the consumer.
We've prepared this brief primer to describe this industry segment. This is how we at Power Products Marketing define and use these common terms.
An ATV is a four-wheel off-road vehicle designed to be ridden by one person who straddles the machine in the same way that a rider straddles a motorcycle. Some machines have been designed to carry a passenger on a rear seat, again, similar to that of a motorcycle.
UTV, or utility vehicle, is a generic term for a four-wheel vehicle designed to carry at least two persons seated side-by-side, and built primarily for work purposes. The Kawasaki Mule and the John Deere Gator are examples of UTVs. UTVs typically have either bench or side-by-side bucket seats for one or more passengers as opposed to ATVs where single passengers sit astride the machine like a motorcycle.
UTVs encompass a broad number of vehicle types. UTVs typically have rear dump beds, although some have additional seating to transport passengers. UTVs can be either gas-, diesel- or electric-powered.
There are four distinct vehicle types: beefed-up golf car chassis, industrial-type vehicles with heavy-plated steel bodies, mini pickup trucks typically imported from China, and dedicated turf-type trucks, the latter category comprising the vast majority of the market. UTVs can also range in payload capacity from as little as 500 lbs. to several thousand lbs.
Certain OEMs have used different monikers to identify their own brand of utility vehicles. For example, Yamaha (Rhino), Polaris (Ranger) and Arctic Cat (Prowler) refer to their products as a side-by-side vehicle or SSV. Kawasaki has termed its Teryx a RUV, or recreational utility vehicle. E-Z-Go renamed its Workhorse UTV series MPT, and now Honda refers to its Big Red as a MUV.
For many years, UTVs were primarily known as work vehicles, but in recent years with the advent of the newer sport designs, they have become increasingly known as alternative recreational vehicles. In fact, many 50-and-older men have been trading in their large-displacement 4x4 ATVs in recent years for the more comfortable and accommodating UTVs with bench seats for spouses or grandchildren or hunting mates. An increasing number of these are now four-seaters.