The economy shows few signs of recovering and consequently all powersports markets are suffering, to varying degrees. The PWC market has continued its downward trend, with sales estimated to be down 30% by season-end, and the near future doesn’t look much better.
2009 Season End PWC Sales
When we wrote our May year-to-date U.S. PWC retail sales report we indicated that sales were down 30% compared to the same period for 2008, and that the market was unlikely to break 50,000 units. Now that the 2009 season has ended it appears that the market remained on its disappointing trajectory and was 30% off the 2008 Season-end figure at just over 49,000 units sold. The market has now fallen around 45% from its height of 88,000 in 2006. The credit markets have not improved as far as consumers are concerned and job insecurity and dwindling investments and nest-eggs are all playing their part in curbing consumer demand for PWC amongst other powersports products.
Regional Sales Continue Mixed, Dealer Numbers Down
Our research indicates that little has changed since May with regard to the regional sales picture. California and Florida continued to be the worst affected, with only Texas of the important PWC states performing slightly better than expected. The generally weak demand for PWC has had a significant effect on dealer levels, with some estimates of up to 15% of dealers either exiting the market or being culled by the OEMs. And this is before considering the future of Honda’s PWC dealers.
3-Passenger PWC Still Most Popular
According to our estimates three-passenger PWC continued to dominate the overall PWC market in 2009 with over 87% of sales in this configuration, slightly up from 2008. Four-stroke models comprise 97% of the PWC market, compared to 95% in 2008, while fuel injection is also the standard in the market, with over 97% of units now having some form of this technology.
Introductory Models Maintain Popularity
“Value” models with MSRPs under $9,000 continue to sell well, currently comprising over 38% of the market, up from 37% the previous year. Historically sales of more expensive units are usually more resilient to market downturns, but it appears in the current recession the value-priced units, which Yamaha in particular has recently been focusing on, are slightly more recession-proof than See-Doo’s more expensive performance machines.
From surveys Power Products marketing has conducted it appears that the older buyers, those in their 50s, who form the mainstay of the PWC consumer base have been down-scaling their purchasing habits. They still want a three-seater, but they don’t necessarily see the need for a GPS and all the ‘bells and whistles” when a “Value” unit will do. It appears that this development has played a large part in allowing Yamaha to close the gap on See-Doo and they are now neck to neck in terms of market share. Kawasaki also appears to be weathering the economic storm slightly better than their competitors as their sales continued to decline at a slower rate, although much of their sales appeared to be non-current units.
Inventory Issues Worsen
At the end of the 2008 season most manufacturers appeared to have significant inventory issues, but by May reports were that levels had been considerably improved. At season end it now appears that the lackluster sales through the summer reversed the spring trend and inventory has become an issue again for many of the OEMs, although not on a scale of 2008. It now seems that there is at least 4 months worth of inventory on hand, excluding Honda’s inventory. Sea-Doo cut their production by over 50% entering the 2009 Season and by May and was in a much better position than at the same time in 2008. But even with this significant cut in production reports are that See-Doo is sitting on considerable inventory as season end. Yamaha is reported to be in a much better position inventory-wise and Kawasaki has very low inventory rates. As a result of the prevailing market conditions expect all manufacturers to slash production next year to try to accommodate a forecast of weak sales and lowering of inventory levels.
Honda’s Future in PWC
In our mid-season review we mentioned that Honda had temporarily closed their Timmonsville, S.C. ATV and PWC plant and had been heavily discounting units. From our research it appears very few, if any, new 2009 models were actually produced and wholesaled and nothing has been produced for 2010. Honda appears to have sufficient ’07 and ’08 units in inventory to supply PWC for another year under the current market conditions. Timmonsville appears to be going to exclusively focused on ATV production and PWCs will in theory be manufactured at another undisclosed plant some time in the future.
While this is being presented as a “mothballing” strategy until the market conditions improve, given the costs of relocating, retraining and retooling, it certainly seems more like a graceful way for Honda to exit the market completely. Honda initially entered the PWC market as part of a strategy to appoint sole supplier Honda dealers who would cover all powersports markets. But this strategy has been largely abandoned, so the rationale for Honda to have continued involvement in a PWC market representing less than 100,000 units annually would not appear to be sound.
2010 Season Projection
With projections for anemic economic growth in 2010 it seems that the best we can hope for from the PWC market is flat sales. That certainly appears to be how the OEMs are planning as they attempt to adjust production. Any return to the heights above 80,000 units where the market had been for most of this decade seems a long way away unless there are dramatic changes in the economy and credit conditions.
Three-Passenger PWC Sales
as a percent of Total Sales
Season End
2009 87%
2008 85%
2007 84%
2006 84%
2005 80%
2004 77%
2003 79%
2002 74%
2001 65%
2000 59%
1999 55%
1998 51%
1997 44%
1996 42%
1995 30%
1994 20%
Editor’s note: Power Products Marketing, a Minneapolis research firm, has been tracking the PWC market for 10 years. This report was prepared by Matthew Camp, a powersports analyst with the firm.
