Consumer Sales Boost Utility Vehicle Market

U.S. sales of traditional brand ATVs are currently in their third consecutive year of decline, and while some analysts might attribute this to the increasing number of Chinese imports that have flooded the market in recent years it has also become apparent that another trend is having a significant impact on ATV sales.

Over the last three years an increasing number of older buyers are trading in their ATVs and opting for the more appealing utility vehicles, or “side-by-side vehicles” as they are often called. Surveys conducted by Power Products Marketing indicate that as much as 10% of annual ATV sales are lost to competing utility vehicles.

UTVs encompass a broad number of vehicle types. Probably the two most important considerations are that UTVs typically have bench seats for one or more passengers as opposed to ATVs where single passengers sit astride the machine like a motorcycle.

Another consideration is that UTVs typically have rear dump beds, although other shuttle vehicles instead of cargo beds have utility space for additional seating to transport passengers. UTVs can be either IC engine 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 later category comprising the majority of the market. UTVs can also range in payload capacity from as little as 500 pounds to several thousand pounds capacity.

Historical Sales Analysis

Between 2000 and 2002, the North American utility vehicle market struggled just to maintain its overall 100,000 unit level as whatever gains were made in the consumer segments of the market during 2001 and 2002 were offset by ongoing declines in the commercial segments such as golf, resorts and industrial applications that were severely impacted by the recession.

During 2003, the UTV market increased 17% from 103,000 units to 121,500 units as the U.S. economic recovery kicked in during the second half of the year after a long two-year slump. This growth accelerated another 36% to 165,500 units in 2004 and topped 200,000 units in 2005.

Last year, the market jumped nearly 15% to 231,000 units with turf type trucks accounting for nearly 85% of the sales.

Consumer versus Commercial UTV Sales

Based upon our analysis, consumer sales, which include Farmers & Ranchers and Homeowners (large-acre estates, hobby farms, hunting and recreational riding), represented about 40% of North American UTV sales in 2000. By 2003 consumers accounted for 47% of sales and by the next year they had surpassed commercial applications with a 55% penetration. Over the next three years this percent continued to climb to where it topped 70% of sales in 2006. Since 2002, consumers have contributed to over 90% of the overall growth in UTV sales.

This trend was a result of several developments: the recovering economy, new competitors entering and penetrating the market through their separate channels and customer bases and established OEMs introducing new upgraded series and brand new models. Examples of these were Kubota, Yamaha, Deere, Club Car, E-Z-Go, Polaris and Kawasaki.

Our consumer surveys indicate that there are distinct differences between consumer and commercial UTV end user buying preferences. Commercial customers generally tend to focus more on work activities and corresponding features and want their vehicles governed 25 mph or less. As one muni fleet manager said, “We don’t want our employees getting too comfortable or joy-riding on the vehicles…we want them working”. By contrast, many consumers want a smooth ride on their 4x4 models that independent rear suspensions provide. In addition, they want UTVs with appealing looks and many want vehicles ungoverned so they can exceed speeds of 25 mph. This theory has been reinforced by the overwhelming acceptance among recreational consumers of the Yamaha Rhino, Polaris Rangers and Arctic Cat Prowler with other competitive models being introduced such as Deere’s new XUV and Kawasaki’s new Teryx.

Over the last couple of years, a new category of recreational riders has emerged as a growing customer niche, particularly as older ATV riders appear are switching from ATVs to UTVs. In 2006 this category could have accounted for as much as 20% of total consumer sales. It has been pointed out that UTVs are generally unable to negotiate many of the same public trails ATVs are able to travel so this presents somewhat of an obstacle, although there is less of a problem in more open areas. However, with the advent of the new Polaris RZR, which appears should be able to traverse most ATV trails, it will be interesting to see if other OEMs downsize some of their vehicles to reflect more kart type features in order to compete.

Major OEM Shares

Up until 2004, five OEMs essentially dominated the North American UTV market: John Deere, Kawasaki, Polaris, Textron and Ingersoll-Rand. Back in 2002, these OEMs accounted for nearly 82% of the total market, which slipped to 74% in 2003.

However, during 2004 two new formidable OEMs – Kubota and Yamaha – entered the market with their innovative products, which significantly impacted the future competitive landscape. By 2006, the above five leading OEMs in 2003 comprised 56% of sales while Kubota and Yamaha together accounted for 28% of total UTV sales.

The leading OEM supplier and brand of UTVs changed in 2006 from Deere to Yamaha. The Rhino and its variants has remained the most popular selling gasoline engine UTV in the market, with an estimated share between 17-18%, although Yamaha and others prefer to refer to the Rhino and other similar type products as side-by-side vehicles. Yamaha also markets a completely different G-MAX and U-MAX utility vehicle series through their golf and turf dealer network.

Deere fell to second place in the market with an estimated share of 15% from what had been 19% in 2005 and it appears almost inevitable that they will be bypassed by both Kawasaki and Polaris this year.

Sales of Kawasaki branded Mules have increased significantly over the last two years to where they are considered the third ranked brand. With this increase Kawasaki extended their lead over Polaris and narrowed the gap to Deere, but was bypassed by Yamaha.

Polaris continues to be very successful with the Ranger EFI series introduced in 2005, with total sales increasing over 20% in 2006, just behind Deere and Kawasaki, although the introduction of the RZR in 2007 is expected to boost sales considerably.

Kubota has maintained their position as the fifth leading manufacturer and brand with an estimated 10% share. The vehicle continues to benefit from being marketed through Kubota’s compact tractor dealer organization, and with the introduction of the RTV1100 in 2007, and perhaps a new gasoline engine model, it should help them keep pace with Yamaha and Polaris.

Ingersoll-Rand (primarily Club Car), considered the sixth ranked supplier, has been able to maintain their sales volume during 2006 but Textron (E-Z-Go) has been unable to sustain theirs and dropped into a solid seventh place in the North American UTV market.

Brister’s is now believed to be the eighth ranked brand, having increased their sales dramatically in 2006, largely due to their contract with Tractor Supply. They were acquired the middle of last year by Manco, a major manufacturer of karts. Taylor-Dunn is the ninth ranked brand in sales volume for 2006, with Arctic Cat entering the top ten OEMs now that they have been able to increase the proportion of their dealer network carrying the Prowler.

There are over thirty other minor OEMs competing in this market with a variety of vehicle types. One example, the Bad Boy SUV, has demonstrated that there is a market for an electric 4WD vehicle for the hunting application at least, and it is conceivable that more OEMs will emulate this model. The rising cost of gasoline may also spur development in alternative fuel units or more efficient batteries, although that technology may not be available and affordable until well after 2010.

Distribution Channels

Another interesting way to analyze the UTV market is through distribution channels. John Deere and Kubota, and to a lesser extent Landpride and Bush Hog, 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 and Arctic Cat, which have been dominating the market in sales, are sold though their vast motorcycle and ATV dealer networks.

One perception is that ATV OEMs Yamaha, Polaris, Kawasaki and Arctic Cat are more responsive to consumer needs given their annual enhancements to their motorcycle, ATV and utility vehicle consumer products lines compared to other OEMs serving primarily the commercial segment of the utility vehicle market that are trying to appeal to consumers. This could be compounded when Honda, Suzuki and BRP ultimately enter the UTV market over the next year or two. As a result, these other OEMs, such as Deere, Textron and Club Car, are in danger of losing their consumers who could increasingly associate powersports dealerships as the source for utility vehicles over other channels.

Chinese OEMs

There are a growing number of industry insiders that believe within five years China will be a major source for inexpensive engines in ATVs and UTVs and possibly even the complete products. In fact, currently China and Taiwan are supplying a growing number of ATVs with their locally sourced engines and other components to the U.S. market. Initially this began with 50cc and 90cc mini or youth ATVs. Lately this has expanded up the displacement range where 250cc ATVs and higher are currently being sold in growing numbers. True, much of the quality in the past was poor but indications are this has been improving considerably. Not only are ATVs, motorcycles and karts threatened but many wonder if this will escalate to UTVs.

Anyone who attended the 2007 Indianapolis Dealer Expo would have seen the numerous Chinese-built UTVs which distributors and OEMs were showcasing. Most of those exhibiting claimed that the units would be ready in 2007 but the general consensus around the show was that the vast majority of OEMs are still a couple of years away from having a reliable and quality product. Some of those who have been developing units for a number of years are much further along in the development cycle and their build quality is markedly superior to these newcomers. Although there is some evidence of Rhino-cloning to date, no units appear to have made it into the U.S.

Other Trends

UTVs have 2WD, 4WD or 6WD options. Based upon our calculations, about two-thirds of UTV sales last year were 4x4, 6x4 and 6x6 configurations. That compares to what was 61% in 2005, 54% in 2004 and 37% in 2003. So clearly 4WD vehicles are increasing as a percentage of sales and we believe this trend will continue as more OEMs introduce models with 4WD features. Also, it is apparent that the consumer segment has a much higher percentage of all-wheel drive, which we estimate at perhaps nearly 80% in 2006 versus 55% in 2003.

Diesel-powered utility vehicles as a percentage of ICE applications shot up in 2004 as a result of the introduction of the Kubota RTV900 but declined slightly in 2005 and 2006 as increasing sales of the gas-powered Yamaha Rhinos have acted to counteract its effect when comparing gas with diesel models. Diesel UTVs are estimated to represent about 17% of total ICE sales. Diesel vehicles are expensive and are generally for work applications. Most are sold to farmers & ranchers, hobby or horse farms, municipalities and the military. A growing number of diesels go into industrial applications and other turf markets.

Future Market

Based upon our research and expectation of a continuing strong economy, we could see North American UTV sales reaching 262,000 units this year and possibly topping 300,000 units by 2009 with consumers comprising 77% of sales.

Dave Crocker is a Senior Partner with Power Products Marketing, a Minneapolis research firm that has been tracking the Utility Vehicle market for over 10 years. Send comments to Crocker via editors@dealernews.com.