A four seat Gator utilty vehicle from John Deere, the XUV 825i S4
John Deere is close to finishing an expansion of their Horicon Works facility in Wisconsin to consolidate Gator utility operations under one roof. The 388,000 square foot expansion allows the company to add assembly and shipping to production operations at the location. Management expects the move to be completed by March 2017. As part of the expansion, 70 new assembly jobs and 10 salary positions will be added to the existing work force of about 1,000. According to management, “We’ll be able to serve our dealers and customers better, improve the overall quality of the vehicles, and make our operations more efficient.”
While the growth in the UTV market has slowed, investments like this and others from the major players indicate that they continue to expect some market growth. John Deere spent an estimated $35 million on the expansion. The work and commercial utility segment, where the Gator is popular, has been targeted by a number of companies in search of sales growth. Coupled with the lower overall UTV market growth and other factors, this has increased the competition in the UTV market.
The Intimidator brand of UTVs includes the Classic series shown here, a Crew series and a Truck series. Each series comes with several powertrain options including diesel, gas and electric depending on the series.
Utility vehicle and lawnmower manufacturer Intimidator, Inc. of Batesville, AK announced plans for a $12 million expansion to address growth in both product markets. The expansion will include a second manufacturing plant and the addition of 400 jobs over the next four years. The company makes Intimidator UTVs, Bad Dawg UTV accessories, Ground HogMax disc plow for ATVs/UTVs, Spartan zero-turn mowers and the Gourmet Guru Grill. The company is owned by Robert and Becky Foster.
As part of the expansion, the company will receive support from the state in the form a $1.5 million community development block grant, a cash rebate equal to 4.25 percent of annual payroll for the new jobs for five years, and sales tax refunds on building materials, machinery and equipment associated with the expansion.
Intimidator has partnered with Mahindra to develop Mahindra’s line of mPACT XTV utility vehicles. The expansion is tied in part to this partnership. The Intimidator line of UTVs was originally launched in 2013. The product line includes the Classic, Crew and Truck versions. There are several powertrains available depending on the version including a Kohler 1000cc diesel engine, a Kohler 750cc gas engine, Intimidator’s own 800cc gas engine and a 48 volt AC electric motor. Learn more: NWAonline.com
John Deere has broken ground on an expansion of their Horicon, WI manufacturing facility to increase their production capacity for Gator utility vehicles. The 388,000 square foot addition will allow the company to move Gator production in-house from a contract facility, which will improve manufacturing efficiency and facilitate more vehicle customization. John Deere is investing $42.9 million in the expansion and receiving $2 million in tax credits from the state of Wisconsin. The Horicon plant currently employs 1,100 people and will add 80 more when the expansion is finished at the end of the 2016 or beginning of the 2017. Learn more: JSOnline.com
Comment: Earlier this year Kubota also moved ahead on an expansion of their utility vehicle manufacturing facilities in the US. Both Kubota and John Deere compete in the farming market segment and other markets for work utility vehicles. These investments indicate that the UTV market is growing and that major manufacturers expect it to continue going forward. The John Deere expansion may be an indication that increased vehicle customization is a trend moving forward.
Polaris Industries reported financial results for the third quarter of 2015, with sales increasing 12% to $1.45 billion and income increasing 10% to $155 million. The following are some of the key points from the earnings call related to the utility vehicle market:
From CEO Scott Wine “…the off-road vehicle space is quite healthy, as competitive activity is more intense than in any time in my seven years with Polaris.”
ORV sales which includes UTVs and ATVs grew only 3% in the quarter
Market headwinds from the oil and agricultural sectors as well as Canada
ORV sales were led by global RZR shipments and stronger U.S. sales, partially offset by continued weakness in Canada, along with unfavorable international currencies.
ORV sales were up 5% year to date
Polaris gained share in both UTVs/side-by-sides and ATVs
Side-by-side retail grew low single digits which slightly outpaced the industry
New product introductions from many manufacturers is intensifying competition
The sport utility market has been stronger than the recreational utility market for side-by-sides for Polaris and the industry
Global Adjacent Market third quarter revenues increased 10% and year-to-date revenue is up 4%.
European Work and Transportation declined mid-single-digits percent, due primarily to currency weakness and some softness in Goupil and Mega.
The European quadricycle industry remains flat year-to-date with Aixam retail up modestly and increasing market share.
Third quarter defense revenue increased over 50%, driven by strong momentum for MRZRs and increasing international demand.
Year-to-date defense sales are up high-20%s.
International revenue increased 1% in the third quarter with strong growth in Indian and RZR brands and in the Latin American region, but somewhat offset by weak currencies, which led to revenue declines in Europe and Australia.
Multix, the new product through a joint venture with Eicher Motors, is now in market and initial consumer satisfaction is encouraging.
Construction of the the Huntsville, AL ORV manufacturing plant is on schedule to start production in Q2 2016 with a focus on creating production capacity for the Ranger product line.
From CEO Scott Wine, “While competitive offerings and promotional efforts expand, we anticipate slightly slower growth in the powersports industry in general, and the side-by-side segment in particular.”
Global Adjacent Markets will look for appropriate acquisitions.
Models like the 2015 Wildcat Sport XT help make the side-by-side business a bright spot for Arctic Cat.
Last week Arctic Cat reported earnings for the first quarter of their 2016 fiscal year with the company losing $1.1 million on sales of $134 million. The following is a summary of the highlights from the earnings call with a focus on side-by-sides.
Sales of ATVs and ROV side-by-sides decreased 17% to $52.9 million from $63.8 million in the year ago quarter. Retail sales increased significantly but shipments to dealers decreased in order to substantially reduce dealer inventory.
Management believes side-by-side retail sales outpaced the industry in North America.
ATV sales were down as the management continued to reduce ATV dealer inventory. Inventory was reduced by approximately 4,000 units.
Plant investment in a new paint line and automated assembly started in the quarter
Management has set goals of improving and expanding the Arctic Cat dealer network, emphasizing end-user focused product development, making strategic acquisitions and partnerships and creating a brand marketing powerhouse.
Management estimates that ATV-ROV retail sales for the quarter were up high teens.
For the fiscal year ending March 31, 2016, Arctic Cat estimates full-year net sales in the range of $690 million to $705 million with ATVs and side-by-side sales to rise 9% to 12%.
Comment: The relatively new management team appears to be on plan in executing their turnaround of the ATV business while investing in initiatives for future growth. The side-by-side business continues to be strong. How well they can continue to execute on dealer network relationships and expansion will be a key to continued success.
Utility vehicles like the Kubota RTV400Ci will be built in a new manufacturing facility starting in 2017.
Kubota Tractor Corporation (KTC) and Kubota Manufacturing of America Corporation (KMA) announced plans to invest approximately $80 million in their Gainesville, GA manufacturing operations to increase production of utility vehicles, sub-compact tractors and turf products. The investment includes a new 502,000 square foot facility close to existing facilities for the production of RTV utility vehicles, as well as, upgrades to their existing facilities to enhance production for sub-compact tractors and turf products. The new facility will have the capacity to produce 50,000 utility vehicles per year. Construction is expected to begin in September 2015 and mass production in spring of 2017. Learn more: Businesswire.com
Comment: Kubota joins Polaris and Arctic Cat as the latest utility vehicle manufacturers to announce sizable investments in new and/or upgraded manufacturing facilities. This indicates that manufacturers are optimistic about the overall market in general and their products in particular. It also indicates that competition in the utility vehicle market will continue to be fierce and likely become more intense as these manufacturers will have to increase sales to generate returns on these sizable investments. SVR estimates that Kubota sells approximately 20-30 thousand UTVs a year in North America.
Arctic Cat recently announced that they plan to invest $27 million in their Thief River Falls and St. Cloud, Minnesota manufacturing facilities. The bulk of the investment will be in Thief River Falls where a new state-of-the-art paint line will be installed and other improvements made. In St. Cloud Arctic Cat’s engine manufacturing and assembly capabilities will be expanded. The paint line will be used for the company’s recreational off-road vehicles. The investment is expected to result in an additional 50 jobs. Learn more: Arcticcat.com
Comment: This is another sign of the aggressiveness of the new CEO Christopher Metz who came in at the end of last year. Previously, after some sales and inventory problems with their ATVs, he immediately took a write down and quickly moved to reduce inventory rather than slowly trying to reduce the inventory over the next year or more. With companies like Honda and Yamaha renewing their UTV efforts, strong competition from Chinese manufacturers like Kymco and CFMoto and continuing efforts by Polaris and Can Am, Arctic Cat needs to continue to invest in their UTV product line in order to just maintain their market position, let alone improve it.
Rendering of the new Polaris facility in Huntsville, AL
Polaris Industries has chosen two Nashville, TN firms for the design and construction of their new manufacturing plant in Huntsville, AL. T.W. Frierson Contractor, Inc. and the architectural firm Design Constructors, Inc. were chosen for the $48 million, 775,000-square-foot plant that is scheduled to be operational within a year. The production facility is the first for Polaris in the southern half of the United States, and will initially be producing the Ranger side-by-side utility vehicles including vehicle assembly, chassis and body painting, welding, fabrication and injection molding. Learn more: Madisoncountyrecord.com
One of the Visage system’s screen views. GPS Industries has partnered with Club Car to provide the Visage system for fleet management and content delivery.
GPS Industries reports that they have signed more than 100 installation contracts to date to provide telematics and fleet tracking technology. Properties now using the technology include The Phoenician (AZ), Turnberry Isle Resort (FL), Omni Interlocken (CO) and Journey at Pechanga (CA).
GPSI has an exclusive partnership with Club Car whose Connected Precedent i3 golf car showcases the Visage Mobile Golf Information System and recently-launched Visage Media Network. The mixture of technology and software allows properties from golf courses to master-planned communities to track, control and deliver promotional content.
According to GPSI, “The Visage system offers hole-by-hole graphics and flyovers, scoring and gaming, on-course food and beverage ordering, and addressable promotional messages on high-resolution 10-inch touch screens mounted to Club Car Precedent golf cars. Featuring in excess of 75 million-plus page views monthly, the Visage Media Network represents the largest connected global audience of golfers.” The company is also working on new applications to leverage the platform for social media and user generated content.
The appeal for golf courses and the like is that they can reduce costs through better fleet management, increase revenues from food service and promotions and provide a better experience for their customers. Learn more: GIuser.com
The site for the new Polaris factory in Huntsville, AL.
Polaris Industries has announced that they will begin construction on a new factory in May of this year in Huntsville, AL. The the 600,000-square-foot plant on a 453-acre site is expected to be completed in the second quarter of 2016 and will manufacture Ranger, RZR and Ace utility vehicles. According to reports, operations at the $142 million will include vehicle assembly, chassis and body painting, welding, fabrication and injection molding and employ an estimated 1,700 people full-time when fully operational and potentially 2,000 over time. The average wages are expected to be approximately $18/hr with some highly skilled positions earning $30/hr. Learn more: Al.com
Comment: This clearly indicates that Polaris believes their strong growth in the UTV market to continue. I expect one of the reasons they chose Alabama is the strong market for UTVs in the Southeast and in the Southern tier of the US in general. The location is also puts them closer to the Central and South American markets they have been trying to expand as well, although they also have Mexican facilities to serve these markets. Given that they could have expanded operations in Mexico, I suspect the proximity to the Southeastern US markets might be the primary geographical reason for the location. In addition that area of Alabama has an established manufacturing base and the related skilled work force they need.