SUMMARY
Even though the U.S, powersports reail sales market was soft last year, with most segments declining, there was a bright spot: UTVs, those side-by-side, off-road vehicles that can carry up to six passengers. Retail sales of UTVs climbed again last year, finishing the year at about 263,000 units, up nearly 11%. The big winner last year was Polaris, boosted by the overwhelming success of its 800 EFI RZR. Polaris was the leading supplier of UTVs in North America last year, grabbing nearly 20% of the golf and turf type UTVs.
Other important developments last year identified by research conducted by the Minneapolis research of Power Products Marketing, included:
1.Since 2002, consumers have provided nearly 90% of the growth in the UTV market. Consumers accounted for 73% of UTV sales last year, up from 47% in 2002.
2.In the market share race last year, Yamaha fell to second place behind Polaris with about 18% of the market. John Deere dropped all the way to fourth, behind Kawasaki, with about 13% of the market. In 2005, Deere held a 20% share.
3.Chinese-made UTVs began showing up in significant numbers last year, and Chinese manufacturers could be a major source of inexpensive UTVs sold in the North American market within five years. Last year, about 3,500 Chinese made UTVs were sold in North America. This number is expected to climb to about 10,000 units this year.
4.More than 70% of UTV sales last year were 4x4, 6x4, and 6x6 configurations. This compares to 37% in 2003 and 60% in 2005.
5.The consumer UTV niche, which includes homeowners and famers and ranchers, should continue to grow this year in the high single digit range.
U.S. sales of traditional brand ATVs are currently in their fourth 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 and worsening economic conditions, it has also become apparent that another trend is having a significant impact on large displacement utility 4x4 ATV sales.
Over the last four years an increasing number of 50-and-older buyers are trading in their ATVs and opting for 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 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.
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 and 237,000 units in 2006.
Last year, the market jumped nearly 11% to 263,000 units with turf type trucks accounting for nearly 85% of the sales and golf type another 10%.
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 2002 consumers accounted for 47% of sales and by the next year they had surpassed commercial applications with a 55% penetration. Over the next four years this percent continued to climb to where it topped 73% of sales in 2007. Since 2002, consumers have contributed to nearly 90% in the overall growth in UTV sales.
This trend was largely the result of the development of the recreational utility vehicle (RUV) that started when Polaris introduced Rangers that exceeded the conventional 25 mph speed limit, gained momentum with surge in popularity of the Yamaha Rhino and more recently evolved with the introduction of the Polaris RZR.
Over the last few years, this new category of “recreational riders” emerged as a growing customer niche, particularly as older ATV riders appear are switching from ATVs to UTVs. In 2005, this category could have accounted for as much as 15% of total consumer sales. This grew to 20% in 2006 and 25% in 2007. 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 such as the Southwest U.S. However, with the success 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 2003, these OEMs accounted for 77% of the total market.
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 29% of total UTV sales.
The leading OEM supplier and brand of UTVs changed in 2006 from Deere to Yamaha. Yamaha and others prefer to refer to the Rhino and other similar type products as recreational utility vehicles or RUVs.
However, in 2007 there was another changing of the guard as Polaris surged ahead of Yamaha as a result of the overwhelming success of the 800 EFI RZR and growing popularity of the 500 and 700 EFI Ranger series introduced in 2005. By our estimates, Polaris was the leading supplier of UTVs in North America during 2007 with an estimated near 20% share of golf and turf type UTVs. The new Polaris EFI Crew, a four-seater that can be converted to six seats, began selling late last year and reportedly has been selling at a brisk pace this year along with the RZR.
Yamaha fell to second place in the market with an estimated share of nearly 18%. Yamaha also markets completely different golf type chassis G-MAX and U-MAX utility vehicle series through their golf and turf dealer network, which we calculate into their share estimate. Yamaha’s share is somewhat understated as they introduced the 700 EFI Rhino late in the year while phasing out the old 660 carb Rhino. Expect Yamaha to rebound this year after a weak first half with new products coming on stream.
Kawasaki moved up into the third position with their Mule product line, slightly ahead of Deere with an estimated 13-14% share. A new 750 carb Teryx was introduced in January, which is Kawasaki’s first entry into the RUV segment that should help offset an expected decline in the other Mule models.
Deere fell all the way to fourth place in the market with an estimated share of 13% from what had been 20% in 2005 and after having been passed by both Kawasaki and Polaris last year, as predicted. The XUV with EFI, IRS and a 30 mph top speed has been a success displacing the old disappointing HPX series and another higher speed XUV model is expected to be introduced in November.
Kubota has maintained their position as the fifth leading manufacturer and brand with an estimated near 10% share on near flat sales last year. A new RTV1100 was introduced last year with integral cab that sold very well and reports are that Kubota will introduce a new EFI gasoline RTV500 later this year that should sell well.
Ingersoll-Rand (Club Car, Bobcat and Husqvarna), considered the sixth-ranked supplier, has been able to maintain their sales volume during 2006 and 2007 but Textron (E-Z-Go, Cushman and Jacobsen) has been unable to sustain theirs and dropped into a solid seventh place in the North American UTV market. E-Z-Go has effectively phased out their unsuccessful attempt at a 4x4 UTV at the beginning of this year while Club Car plans to introduce a new Kingfisher low cost 4x4 series later this year.
Brister’s is now believed to be the eighth ranked brand, having increased their sales dramatically in 2006 and 2007, largely due to their contract with Tractor Supply. They were acquired the middle of 2006 by American SportWorks (sic) which earlier had acquired Manco, a major manufacturer of karts. Arctic Cat moved into the ninth position of the top ten OEMs as they continued to increase sales of their Prowler and introduce a new EFI version late in 2007. Taylor-Dunn is the tenth ranked brand in sales volume for 2006, although they are strictly an industrial type UTV. They are believed to have a 55% share of the industrial vehicle niche, which is believed to have dropped to under 10,000 units last year.
There are over thirty other minor OEMs competing in this market with a variety of vehicle types, including an increasing number of Chinese brands. One example, the Bad Boy SUV, has continued to demonstrate 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, such as Rough & Tuff. 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 consumer segment of 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 product lines compared to other OEMs serving primarily the commercial or utility segment of the UTV market that are trying to appeal to homeowners. This could be compounded when Honda, Suzuki and BRP ultimately enter the UTV market over the next year or two. We’ve previously pointed out that these other OEMs, such as Deere, E-Z-Go and Club Car, appear to be gradually losing their homeowner UTV sales to powersports dealerships, perhaps as a result of this perception among homeowners that the powersports channel is preferred over the 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 utility vehicles. 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 rapidly. Not only are ATVs, motorcycles and karts threatened but many predict this will escalate to UTVs.
Anyone who attended the 2008 Indianapolis Dealer Expo would have seen the numerous Chinese-built UTVs that distributors and OEMs were showcasing, many of which appeared to strongly resemble the Yamaha Rhino. Most of those exhibiting claimed that their units were already selling in 2007 with more to come in 2008. Several distributors had impressive products such as SunL (Chongqing Huansong), Thunder Motorsports (Changzhou Joiner) and Sunright International (Linhai). Chongqing Huansong, a.k.a. Hsun, is currently distributing 500cc, 600cc and 700cc models through no fewer than a dozen distributors.
According to our research, there were about 3,500 Chinese-built UTVs that were sold into the North American market in 2007 and this is expected to approach, if not surpass, 10,000 units in 2008, not including Taiwanese KYMCO that has introduced a 500cc 4x4 unit. One report was that U.S. Titan had won a bid contract to distribute 4,800 700cc UTVs during 2008 produced by Hsun.
Other Trends
UTVs have 2WD, 4WD or 6WD options. Based upon our calculations, over 70% of UTV sales last year were 4x4, 6x4 and 6x6 configurations. That compares to what was 67% in 2006, 60% in 2005, 54% in 2004 and 37% in 2003. 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 over 80% in 2007 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 between 2005 and 2007 as increasing sales of the gas-powered Yamaha Rhinos and Polaris Rangers have acted to reverse its effect when comparing gas with diesel models. Diesel UTVs are estimated to represent about 15% of total ICE sales.
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 Polaris, Yamaha, Arctic Cat and Deere are the only manufacturers that were selling EFI models during 2007, excluding mini pickups. They will be joined later in 2008 by Honda when they introduce their Big Red, Kubota with their first gasoline entry and Kawasaki with an EFI Teryx. Current estimates are that EFI UTV sales accounted for nearly a quarter of turf type UTV sales, up from an estimated 10% in 2006, and this could easily exceed 50% by 2009.
Future Market
Over the last year, the powersports markets have been confronted with a new challenge…a severe downturn in the U.S. economy brought on by the collapse in the housing market and subsequent tight credit conditions that are not likely to ease for another two years, according to many economists. This has been compounded by soaring gasoline prices and increasing unemployment and inflation. Most economists predict a recession this year followed by a bottoming in 2009 with a slow recovery thereafter. We may not see an upturn in the core motorcycle and ATV markets until 2010, if then.
For utility vehicles, we predict a downturn in the commercial segment that includes golf, other turf, non-turf and industrial markets by as much as 5-7%. The consumer niche, which includes farmers & ranchers and homeowners, should continue to experience increased growth in the high single digits as these older consumers with higher income levels are less impacted by the downturn and more are trading in their large displacement utility 4x4 ATVs for more sportier and accommodating UTVs.
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.
Note: Other includes industrial, mini pickups and personnel carriers.