Scooter market contracts in 2007 but high fuel prices driving sales in 2008

Contrary to some early reports you may have read, the overall scooter market in 2007 actually experienced a slight downturn. Sales of scooter units by the OEMs reporting to the Motorcycle Industry Council (MIC) were flat compared to the volumes sold in 2006, whereas scooter sales by the non-traditional brands actually declined. Total estimated sales were 149,000 units, a decrease of over 5% from the prior year. However, it appears that this surprising decline was only a temporary dip as even by the last quarter of 2007 the market was heating up again, and has been generating considerable growth to date. In this article we will examine the market and analyze the trends that are occurring.

Scooters Defined

In analyzing the scooter market for this particular article, we will be only referring to on-road gas-powered scooters. There are differences between scooters and mopeds, although many communities seem to consider them identical for legislative purposes. However, we will not be including the more traditional mopeds or motorized bicycles such as the Whizzer or Tomos. We are also excluding electric scooters at present, although that niche is growing in popularity as well, as evidenced by the number of distributors who appear to be investigating importing hybrid and electric scooters. Finally, we do not including gopeds, g-scooters or foot scooters in our calculations.

Traditional & Non-Traditional OEMs

The OEMs and distributors that compete in the U.S. scooter market can be segmented into two groups: the traditional brands who report to the MIC and the non-traditional brands that are not reporting members and have significantly emerged in recent years.

The scooter manufacturers who report sales numbers to the MIC are Honda, Yamaha, Suzuki, and Piaggio. Honda and Yamaha continue to be the market segment leaders but the Piaggio group of the Piaggio, Aprilia and Vespa brands are closing in rapidly, helped in no small part by their MP3 sales. Suzuki continues to rule the 400cc and over category with their Burgman series.

Given the increasing weakness of the dollar it’s unlikely that we’ll see a return to the U.S by Derbi, Malaguti or Peugeot any time soon unless someone is willing to sink considerable investment into establishing the brand presence. However, in the longer term these brands may become more attractive for a distributor if the willingness of U.S. consumers to hop on a scooter continues to grow. Piaggio have demonstrated what is possible with clever marketing, good products and a willingness to persist as their U.S. scooter sales have increased over 80% since 2002 and they are now a force to be reckoned with in the U.S. scooter market.

The non-traditional brands are comprised of U.S. based distributors selling Chinese, Taiwanese, and Korean products which are often sourced from numerous different assembly facilities and manufacturers in Asia. Current leaders in the market include, in no particular order; SunL, Schwinn, Genuine Scooter, KYMCO, Vento, Tank Sports, Roketa, Cobra Powersports, Mod Cycles and CF Moto.

To the extent possible the figures we provide for the non-traditional brands are limited to retail sales in the U.S. and do not include the significant volumes that are being imported into the U.S. and then re-sold into South and Central America, Mexico and the Caribbean. This includes Puerto Rico, where in the last year we have been hearing numerous reports that the scooter market largely collapsed in 2007 as scooters fell out of favor.

2007 Market Report

Total sales in the U.S. scooter market in 2005 were estimated to have been around 148,000 units, rising to 157,000 in 2006. The non-traditional brands’ share of this market increased from 62% in 2005 to 65% in 2006 but it appears from published reports and Power Products Marketing estimates that the U.S. scooter market decreased to approximately 149,000 units in 2007 with the non-traditional brands’ share declining slightly to 64%. While the traditional brands were able to maintain their sales volume last year, as reported by the MIC, the distributors of Chinese and Taiwanese machines as a whole seem to have experienced a decrease of almost 8%.

We originally identified in our 2006 scooter market review that distributors were reporting the 2006 season had been characterized by large consumer demand in the first half of the year with market cooling through the rest of the year. It now appears that the slowdown in sales continued into 2007 with sales proving lackluster through the middle of the year. However, as gas prices began their upward trend towards the last quarter scooter sales picked up considerably and have continued to gather pace through 2008. The sales picture was by no means consistent throughout the market, with some distributors reporting difficult years while others, such as Genuine Scooter Co, continuing to experience significant growth. A number of distributors spent much of 2007 liquidating old inventory and began importing products from different suppliers, and they should be able to reap the rewards through the current year.

Smaller Displacement Scooters losing market share

Our research has shown that there has been a change in the market with the once dominant 50cc category declining and more people willing to move up to 125cc and 150cc machines, despite the need for a motorcycle endorsement. This is undoubtedly causing some of the loss in sales volumes which many of the non-traditional brand distributors experienced in 2007 as they have historically been focused on the 50cc models. There are still wide regional variations in the popularity of larger displacement scooters but the overall trend seems clear.

The 50cc and below class, still remains the most popular category, but has shrunk from a market share of 64% in 2005 and almost 53% in 2006 to under 52% last year. The 51-155cc category has increased to over 31% of the market, while the remaining market segments inched up slightly. Genuine Scooter’s 125cc Buddy has been largely responsible for the resilience of the 51-155cc segment in a down market, and all indications are that it is going to continue strongly this year. This segment should also be strengthened further by the introduction of Schwinn’s 150cc models and Genuine’s International Series 150cc which are expected to perform well.

The over 265cc class also showed some increase in market share, largely on the strength of the Suzuki Burgmans and relatively strong showing by the KYMCO Xciting 500. This segment could see significant growth if the MP3 400 & MP3 500 prove as popular as their smaller stable mate in 2008. Schwinn is also preparing to introduce a 400cc scooter so we may be on the cusp of other distributors of Chinese brands expanding their lines into the ‘maxi’ category.

Diverse Ridership

Who is riding these machines? If even hard-bitten Harley Davidson enthusiasts can get excited about a non-traditional brand scooter, as we witnessed at a couple of shows this year, then almost anyone of riding age could be considered to be within the target demographic these days. From research that we’ve undertaken over the last couple of years it seems there are consumers from a wide range of ages and income brackets purchasing scooters. Scooters continue to appeal to retirees, RV owners, DWI offenders and “undocumented” workers, as well as the diehard scooting enthusiasts. They have been marketed heavily to college students but this has met with mixed success given the pervasiveness and convenience of bicycles in a campus setting. However, as in the rest of the world, the primary appeal seems to be for those who are commuting in urban and suburban neighborhoods or who just want a relatively fuel efficient and cheap mode of transportation.

The Market in 2008

Early reports for 2008 are that the market could be up as much as 30% from this time last year. Sales by the traditional brands have increased over 26% in the first quarter of 2008 and some distributors of non-traditional brands we’ve spoken to report 50% increases in sales compared to this time last year, and in many markets we’re only just entering peak season.

There are many signs that there is a growing interest in alternative means of transportation, and while some of this will inevitably be channeled to the motorcycle segment, a large proportion of consumers will be considering a scooter. Assuming they have the cash on hand to make the purchase or can get financing within the new stringent requirements, then the market should have a very good year.

Today, more and more franchised dealers are at least considering taking on a Chinese or Taiwanese line, and it appears that as more scooter-only stores emerge into the marketplace their owners are more than willing to carry quality non-traditional lines, perhaps in conjunction with a traditional brand. A number of auto dealers have now seen the benefits of carrying a scooter line, while a few have even gone to the lengths of importing units themselves. A more recent trend, though, has been distributors of machines in other powersports segments now distributing scooters. TJ Powersports became a distributor of the Adly brand and Carter Brothers now carry the SYM line. Pep Boys and Northern Tool have also been selling scooters for a couple of years now with some success.

There is much to look forward to in 2008, such as the Andretti line of scooters distributed by Powersports Factory, the new Flyscooters line and the return of the Italjets via Diamo. While walking around Indianapolis at the Dealer Expo it was evident to us that there were many carbon-copy models still in evidence, but build quality on the whole continues to improve and more distributors are attempting to provide uniquely-styled models.

U.S. distributors, sometimes despite their Chinese and Taiwanese suppliers’ misinformed efforts, have generally realized that meaningful warranties, responsive customer service and good parts availability all lead to a stronger organization. While parts support and performance parts are also catered to by companies such as Martin Racing Performance and Parts for Scooters, a number of distributors have strengthened their own offerings in this area. At least two, Genuine Scooter and Diamo have even established what could loosely be termed their own aftermarket subsidiaries, respectively Scooterworks Direct and Dragon Customs. The difficulties of finding parts may not have completely disappeared but it’s definitely a lot easier these days.

Possible Problems Ahead

Currently it appears that there is a fair amount of substitution buying occurring in the powersports market in general, with some consumers happy to purchase lower-priced Chinese and Taiwanese-sourced brands instead of the higher cost traditional brands. In the short term, distributors of the non-traditional brands should have a very good year, but there are clouds on the horizon.

In 2005, many scooter distributors were scrambling to source enough units to meet demand and many reported experiencing supply bottlenecks and lost sales through lack of on-hand inventory. It will be interesting to see if three years later scooter manufacturers and distributors have been able to manage the supply situation more efficiently.

At the time of writing this article, inflation in China is running at 8.7%, compared with 2% a year ago. We have already been hearing from many of the largest distributors of Chinese scooters that they will be forced to pass on their increased manufacturing and shipping costs to the end consumer in the fall of this year, with some talking of a 40% price-hike on some units. This is going to negate much of the price advantage that the nontraditional brands have historically enjoyed. While their quality has improved they may be losing their main advantage over the traditional brands, assuming the likes of Honda, Yamaha, Suzuki and Piaggio are able to absorb their own supply inflation.

Both of these potential issues would seem to favor the traditional brands but with oil estimated to be over-priced by as much as 100% as a result of speculation and the continuing weakness of the dollar, an inevitable price correction will have a considerable impact on the price of gas. This will undoubtedly affect the popularity of the scooter for both traditional and non-traditional brands.

For the short term, however, high fuel costs and increased awareness of scooters will drive the market to new heights. Major cities in the U.S. might still be a long way off from reaching scooter ridership levels of London or Rome, and it’s going to take a sea change in the psyche of the American public to wean themselves from the automobile, but it appears that the scooter will be a much more familiar sight on the roads in the coming years.

Editor’s note: Power Products Marketing, a Minneapolis research firm, has been tracking the U.S. Scooter market for over 5 years. This report was prepared by Matthew Camp, a powersports analyst with the firm.