Watercraft Market Sinks

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Personal watercraft Personal watercraft sales PWC Ski-doo Jetski

U.S. Dealers sold about 70,000 personal watercraft units this season, a massive 20 percent drop from the 87,500 they sold in 2007. These numbers are based on our research and include our estimate for Honda's unreported sales. (The executive director of the Personal Watercraft Industry Association told a newspaper in October that PWC sales could decline anywhere from 15 percent to 20 percent — ed.)

We last reported on the PWC market in the January 2008 issue of Dealernews. Looking at the 2007 sales, we had expressed some optimism that while the market was flat to slightly down, 2008 might show signs of a modest increase. This obviously did not happen. Particularly poor sales figures for April, May and June were recorded as the ongoing fallout from the mortgage crisis impacted the major markets, and consumer confidence eroded despite the favorable weather.

In 2007, significant inventory dumping and season-end special incentives boosted the sales figures for August and September, but this did not occur this year. September was shaping up to be a good month, but the financial meltdown in the final week seemingly brought the market to a halt.

Last year, despite inventory dumping, industry sources indicated that dealer inventories had increased to such levels that 16,000 to 18,000 units were carried over into the 2008 season. The situation seems to have become more acute through 2008. OEMs have only slightly higher inventory levels. But at least one OEM has the capacity to produce many more units than needed.

Regionally, PWC sales continued to follow the housing market. California and Florida dealers had a particularly bad year. The Midwest held up reasonably well compared to a year ago. But this is slightly misleading because of the low base to which this region had sunk in prior years. Texas appears to have been more resilient to the economic environment in 2008, perhaps because of oil revenues, with sales for a number of brands increasing.

VALUE TRUMPS LUXURY

Three-passenger PWC continued to dominate the overall PWC market. Almost 86 percent of sales were in this configuration, just slightly down from the prior year. Two-passenger PWC sales as a percentage of the market increased to 12 percent.

Four-stroke models now seem to comprise more than 95 percent of the PWC market, compared to 90 percent in 2006. Within another year or so all PWC will likely be four-stroke, displacing the remaining two-strokes. About 35 percent of four-stroke units have electronic fuel injection.

Sales of the more expensive PWC models appear to have disproportionately suffered when compared to the "value" segment, those units with an MSRP below $9,000. This is unusual because the more expensive units are usually more resilient to market downturns. At the end of the 2007 season, value models comprised around 34 percent of total sales, compared to 38 percent the prior year. For 2008 this segment represented more than 39 percent of sales. Yamaha's VX series, Kawasaki's STX-15F and Sea-Doo's GTi SE again proved popular.

Fifty-five percent of PWC customers in 2008 appeared to be first-time buyers, similar to last year. This segment of the market has been growing steadily over the last few years, rising from 52 percent in 2004, and continuing the recovery from the low point of 40 percent in 2001. This percentage may decline in 2009 as the economic situation continues to sour.

2009 PROJECTION

The outlook for the PWC market looks decidedly bleak in the near term — unless the decline in consumer confidence and the mortgage and foreclosure crises are resolved quickly. One positive feature may be that the worst of the economic downturn looks set to occur in the PWC market's off-season. Reports are that well-qualified, credit-worthy powersports enthusiasts are still able to purchase machines at present, but if the credit markets tighten further, this market could be headed for another severe contraction.

Editor's note: Power Products Marketing, a Minneapolis research firm, has been tracking the PWC market for 15 years. This report was prepared by Matthew Camp, a powersports analyst with the firm.