Self-Driving Vehicles = Growth For STOVs?

Google Prototype self-driving low-speed vehicle.

My colleague recently penned an article exploring the nexus of self-driving cars and golf car-type vehicles. Some of the key takeaways:

  • Hardware costs are dropping precipitously and may soon be within striking distance of being affordable for golf car type vehicles.
  • Golf car manufacturers are already exploring the technology and in some cases conducting testing.
  • Other companies are using GEM vehicles as self-driving test vehicles.
  • Gated communities with low speed vehicles provide a lower complexity environment that is more conducive to self-driving solutions.
  • Self-driving technology could expand potential growth avenues in non-golf car markets, an area of focus for golf car manufacturers

The article points to gated communities and urban fleets as potential market segments for deployment of self-driving technology. There are also other potential market impacts not addressed in the article that this technology can have.

For one, self-driving technology could provide an impetus for LSVs sales in the personal transportation sector. Purpose made LSVs have not quite reached their potential in this segment due to the relative cost of LSVs compared to the available market alternatives such as used golf cars, golf cars modified to be LSV compliant, customized golf cars and new golf cars. Put simply, not enough customers have found the additional price of LSVs to be worth the additional benefits. LSVs for personal transportation have done best where local regulations have favored them such as where golf cars or modified golf cars are not allowed on public roads but LSVs are, or where night time driving or other driving restrictions require LSV compliant technology.

Self-driving technology could be a differentiator for personal transportation LSVs. Since they are higher priced, LSVs are likely to feature self-driving technology before traditional golf cars. While it is possible existing golf cars could be retrofitted with self-driving technology, it may prove cost prohibitive and, more importantly, likely to encounter regulatory issues. It’s one thing to slap on some lights and an auto-style windshield, it’s quite another to install the software and hardware components necessary to create a self-driving vehicle, not to mention supporting the system with updates moving forward.

Regulatory issues brings to mind another consideration in regard to self-driving technology, medium speed vehicles (MSVs). While a few states in the US allow medium speed vehicles, at the Federal level NHTSA has never created a MSV classification and, in fact, has strongly opposed the idea on safety grounds. A MSV would require prohibitively expensive safety features akin to a highway capable vehicle.

Can self-driving change this dynamic? It is a possibility worth considering. In January, 2017 NHTSA completed their investigation (PDF file) of Tesla’s Autopilot and Automatic Emergency Braking (AEB) system, which was initiated following a fatal crash of a Tesla with a tractor trailer in Florida. Their conclusion was that, “A safety-related defect trend has not been identified at this time and further examination of this issue does not appear to be warranted.” However, for the purposes of this discussion, the most important finding of the report was related to Tesla vehicles before and after they had Tesla’s Autopilot Technology Package (ATP) installed at purchase or through updates. “The data show that the Tesla vehicles crash rate dropped by almost 40 percent after Autosteer installation.”

This is an astonishing drop, and even more so considering it does not take into account whether Autopilot was in use. Therefore, this improvement is likely a conservative finding. The question is straightforward. Can MSVs use self-driving technology to make them safe enough to pass NHTSA’s regulatory rigor? Why rely on a package of older and likely more expensive safety technology to improve MSV safety when a potentially cheaper and possibly more effective solution is on the horizon. It may soon be time to revisit the possibility of creating an MSV classification, which could open up a range of potential growth markets.

Marc Cesare, Smallvehicleresource.com

Polaris GEM Issues Recall

Marc Cesare, Smallvehicleresource.com

Polaris GEM e2

The 2016 GEM e2 is part of the recall.

GEM, owned by Polaris, has issued a recall for 2016-2017 e2, e4, e6, and eL XD models because the drive mode switch can send an incorrect signal, causing the vehicle to go in the opposite direction than intended. This is a fairly large recall for GEM in relation to their annual sales. It seems few Polaris brands can escape recall issues of late.

The following information is from NHTSA.

Campaign Number: 16V884000

Manufacturer Polaris Industries, Inc.

Components ELECTRICAL SYSTEM

Potential Number of Units Affected 1,644

Summary

Polaris Industries, Inc. (Polaris) is recalling certain 2016-2017 GEM e2, e4, e6, and eL XD electric vehicles manufactured May 29, 2015, to November 18, 2016. The drive mode switch can send an incorrect signal, causing the vehicle to go in the opposite direction than intended.

Remedy

Polaris will notify owners, and dealers will replace the drive switch, free of charge. The recall is expected to begin in December 2016. Owners may contact GEM Consumer Service Department at 1-855-743-3436. Polaris’ number for this recall is L-16-01.

Notes

Owners may also contact the National Highway Traffic Safety Administration Vehicle Safety Hotline at 1-888-327-4236 (TTY 1-800-424-9153), or go to www.safercar.gov.

Polaris Reports 2016 2nd Quarter Earnings

2015-RZR-XP-4-1000-eps

The very large recall of RZR vehicles impacted Polaris 2nd quarter side-by-side revenue.

Polaris Industries reported fiscal year 2016 second quarter earnings with sales increasing 1% from the same quarter last year to reach $1,130.8 million. Net income was down 29% to $71.2 million, reflecting approximately $25 million in warranty, legal and recall costs. Here are some of the highlights of the earnings callrelated to small, task-oriented vehicles.

  • ORV (ATV and UTV) sales decreased 6% in the quarter with Ranger shipments flat and RZR/ATV shipments down
  • RZR retail was down significantly more than RANGER and that was anticipated given the impact from the recall
  • North American (NA) ORV inventory was down 8%
  • Demand for the new General line of UTVs is exceeding company expectations
  • The Huntsville, AL plant is ramping up Ranger and Slingshot production
  • NA retail market for side-by-sides was flat and declining for ATVs
  • Management reports losing a few points of side-by-side market share attributable more to their product lineup in the utility segment in a competitive environment
  • NA retail market for side-by-sides was flat and declining for ATVs
  • Polaris NA retail was down double digits for ORV for the quarter impacted by the large product recall as well as weakness in the oil  and ag markets with side-by-side retail down high single digits
  • Product recall costs have been approximately $27 million for the first half of the year. The company has had a 30% response rate so far and the Consumer Product Safety Commission is targeting a response rate close to 80%
  • Global adjacent market sales increased 14% in the second quarter to $91 million including PG&A, driven by market share gains in Aixam and the added sales from the Taylor-Dunn acquisition.
  • Management reports that Taylor-Dunn’s “performance out of the gate, it’s been one of our best acquisitions yet” and they like what is essentially a made to order model along with synergies for the people mover segment with other global adjacent brands
  • The defense business was up over 30% and our PG&A related sales for the global adjacent division increased 21%.
  • Defense sales were up with the DAGOR vehicle gaining traction
  • Multix early sales have been disappointing but transmission issues were fixed during the 2nd quarter and the distribution network is expanding
  • Polaris will begin transitioning their RZR and Ranger lines to their retail flow management system to improve lead times and inventory management
  • ORV and Snowmobile sales are expected to decrease mid-single digits
  • Global Adjacent markets which includes GEM, Aixam, Goupil, etc. is expected to be up mid teens for the year with strength across brands

Learn more:  Seekingalpha.com (Earnings call transcript)

Polaris Reports Q1 2016 Earnings

2015-RZR-XP-4-1000-eps

One of the Polaris RZR models involved in the large first quarter vehicle recall.

Polaris reported earnings for the first quarter 2016 fiscal year with sales and earning declining for the second consecutive quarter. Revenue was down 5% to $983 million driven by inventory management and currency impacts. Earnings per share was down a significant 45% with currency, volume and mix and considerable legal and warranty costs more than offsetting leaner operations. The following are some of the highlights related to the small, task-oriented vehicle market.

  • Polaris is recalling more than 160,000 RZR vehicles to address fire and other thermal risks. This figure appears to include vehicles outside the US as the CPSC reported a figure of 133,000.
  • Management expects to “…address all of the recalled vehicles within the quarter…” and emphasized their commitment to resolving the issue quickly.
  • Side-by-side dealer inventory declined upper single digit percent in the quarter.
  • Year-over-year (YOY) North American side-by-side retail decreased slightly in an industry up mid to high single digits, so some market share was lost.
  • Management is positive about the performance of the new GENERAL product line and reports cannibalization of Ranger and RZR lines is not significant.
  • Side-by-side market remains weak in oil producing states but overall management is optimistic about the ORV (ATV & side-b-side) industry.
  • Management reports higher variability from month to month and regionally in the ORV market.
  • The Global Adjacent Markets business unit saw a 8% decrease in revenue with strength in Aixam, national accounts and GEM offset by weakness in Bobcat and Brutus. Defense business (MRZR and Dagor) declined “significantly” due to tough comparables but the order backlog is up.
  • The European ORV industry grew low single digits in the first quarter, with Polaris retail outperforming, up mid-single digits.
  • Multix retail and distribution, while still relatively small, are on plan through the first quarter. Multix is a small multi-purpose vehicle for the Indian market.
  • Ranger production will begin in the second quarter at the new Huntsville, AL plant, which should provide significantly better operating efficiencies and better inventory and retail flow management.
  • Management expects  Global Adjacent Markets to be up in the high single digits percent range, reflecting the recent acquisition of Taylor-Dunn and ORV/Snowmobile sales to be down low to mid single digits.

Learn more:  Seekingalpha.com (earnings call transcript)

$230 Million for California’s Clean Vehicle Rebate Program (CVRP)

CVRP NEV Rebates

Source: SVR based on CVRP data.

The California Air Resources Board (ARB) is proposing $230 million in funding for the California Clean Vehicle Rebate Program (CVRP) for fiscal year 2016-2017.

CVRP offers vehicle rebates on a first-come, first-served basis for light-duty ZEVs, plug-in hybrid electric vehicles (PHEVs), zero-emission motorcycles, and neighborhood electric vehicles. Rebate amounts are $2,500 for battery electric vehicles (BEVs); $1,500 for PHEVs; $5,000 for fuel cell electric vehicles; and $900 for zero-emission motorcycles and neighborhood electric vehicles. As of February 1, 2016, the CVRP has rebated over $291 million, covering 137,000 vehicles.

NEVs have been a small portion of these vehicles, totaling only 147 vehicles and just over $151,000 in rebates from 2010 to 2016, according to the CVRP statistics. One issue is that there have been only four brands that have been eligible for the rebates including GEM, Miles, Vantage and EVI eMega. By far GEM has been the most prevalent NEV in the program, accounting for 111 of the 147 vehicles. However, the model year 2014 and 2015 vehicles have not been eligible because the do not meet CVRP performance requirements. According to the CVRP website there are no current model year NEVs eligible for the rebate. As the above chart shows, there has been a significant drop-off in NEV rebates since 2013.

Source:  SVR based on CVRP data.

Source: SVR based on CVRP data.

Only 35% of the NEV rebates went to businesses, 34% to federal, state or local governments and 22% to individuals with the remainder to non-profits. These figures are not that surprising as GEM sells mostly to commercial customers.  Learn more:  Cleanvehiclerebate.org

Buying a Vehicle for Campus Use

The new GEMs for model year 2016.

GEMs are popular for use on campuses for people moving and general utility work applications.

I recently interviewed Andy Kaplan of Dominion Utility Vehicles in Bedford, Virginia about buying a small, task-oriented vehicle for use on a college or university campus. Some common uses for these vehicles include people transport, campus security, general maintenance, grounds keeping and other heavier duty work. He sells the GEM, Polaris Brutus and Gravely Atlas JSV four-wheel drive utility vehicles.

In this and other commercial segments many dealers will bring vehicles to the customer to try out for several hours, a full day or even a few days if their interest is high. If you are in the market for a vehicle, it is wise to do so as it affords you the opportunity to drive and use the vehicle just as if you owned it. The best approach according to Kaplan is to use the vehicle just as you would during a typical work day. You can see how the vehicle handles the terrain, the various tasks, maneuvers in tight spaces and, if exploring electric vehicles, what type of range and charging time you will need on a daily basis.

Another consideration is what are all the tasks for which you will be using the vehicle on campus. If you are hauling material or equipment, how much cargo box and vehicle capacity do you need, how large a cargo box do you need in terms of dimensions and do you need a covered cargo area. If you are carrying tools do you need one or more toolboxes or a ladder rack. One of the advantages of these utility vehicles is that they can be customized to a great degree with many different options and accessories to perform a specific task or set of tasks. By investing the time up front thinking about how you will use the vehicle, you can purchase a vehicle that can be highly versatile, productive and cost-efficient.

Other important considerations include:

  • Campus terrain:  Do you need 4WD for hills, off-road capabilities, turf sensitive tires and handling capabilities, LSV features for public road use, etc.
  • Weather protection:  Do you need protection from the sun or rain, harsh winter weather, allergy issues when mowing, etc
  • People moving:  How much seating capacity do you need? What about creature comforts? If you will be transporting clients or customers, what image and branding reinforcement do you want to convey with the vehicle?

For the complete interview visit our buying guide section.

NFMT Trade Show

Last week I visited the NFMT trade show in Baltimore at the invitation of Andy Kaplan of Dominion Utility Vehicles, a Polaris commercial dealer who carries the GEM, Brutus and Gravely vehicle lines. The National Facilities Management and Technology Conference & Exposition (NFMT) brings education, networking and new products to facilities professionals nationwide. While a host of products and services from lighting, energy, air systems, roofing, HVAC, etc are on exhibit, I was there to check out the handful of utility vehicle brands on display including the GEM and Brutus from Polaris, Club Car, Taylor-Dunn and Vantage Vehicle.

The Polaris Brutus HDPTO Deluxe with an angle broom attached.

The Polaris Brutus HDPTO Deluxe with an angle broom attached on display at the NFMT expo.

The Polaris display had one of the larger footprints on the NFMT expo floor and had on display the GEM eL XD, Polaris M1400 and Brutus HDPTO Deluxe. The latter probably received the most attention on the day I was visiting. (The NFMT ran for three days) The Deluxe is an impressive vehicle with a factory installed cab with heat and A/C standard, integrated front PTO, 24 hp Kohler diesel engine, hydrostatic drive, and 1,250 lb. cargo box. The model also has a treadle pedal so you don’t have to shift gears back and forth during tasks like plowing snow, and with the hydrostatic drive the hydraulic fluid absorbs the changing forces rather than gears. The display model had an angle brush attachment mounted on the front. Starting at around $24,000 with the attachments extra the vehicle may appear to be pricey, but the Brutus HDPTO Deluxe is a commercial level work utility vehicle and the versatility provided by the attachments allow the Brutus to do the work of several vehicles on all types of terrain.

An interior view of the Brutus shows the joystick for controlling attachments.

An interior view of the Brutus shows the joystick for controlling attachments.

For example, with the finishing mower attachment you can mow even on steep terrain and do so in a climate controlled cab. The angle brush can sweep sidewalks of dirt and debris in the summer and snow in the winter. For other snow removal applications there is a snow blade or snow blower. The attachments can be controlled from the cab and can be moved up, down, left, right and tilted forward or backward. A cargo box spreader attachment was added last year with cab controls for adjusting the area of the spread, the volume of material, and the vibration of the auger to prevent clogging. The PTO also has a separate throttle control so the vehicle can be operated at a slower speed but the attachment can be operated at higher power. Other attachments include a landplane, grapple, pallet forks and materials bucket. According to recent Polaris earnings calls the higher end Brutus vehicles have been selling well.

The recessed bed in the new 2016 GEM eL XD.

The recessed bed in the new 2016 GEM eL XD.

A shot of the interior of the GEM eL XD.

A shot of the interior of the GEM eL XD on display at the NFMT expo.

I was also able to see the new 2016 GEM eL XD up close. As advertised the new doors feel really solid. I met another GEM dealer who expressed optimism about sales for the new line in the coming year. The recessed bed on the eL XD is one of the new features for 2016. I sat in the cab and the overall look and feel of the vehicle is solid and gives the impression of a quality build.

A Club Car Carryall with the VersAttach system installed.

A Club Car Carryall with the VersAttach system installed.

At the Club Car display they had their relatively new Carryall 500 and 700 on display but were focusing more on their VersAttach Bed System, a configurable and removable track-based bed attachment system for carrying tools and equipment. The commercial focused team was representing Club Car at the event. They are focusing products and services on specific vertical market segments such as education, resorts and government.

The electric powered Vantage Vehicle is proving to be a popular alternative to pickup trucks in certain applications.

The electric powered Vantage Vehicle is proving to be a popular alternative to pickup trucks in certain applications.

Werres Corporation, a distributor of Vantage Vehicles, had one of the vehicles on display at their booth. The electric powered vehicle features a long truck bed and an enclosed cab with a design similar to mini-trucks. The Vantage Vehicle has been a big seller for Werres, and often displaces pick-up trucks for campus applications.

The electric powered Taylor-Dunn Bigfoot has a 3,000 lb. load capacity.

The electric powered Taylor-Dunn Bigfoot has a 3,000 lb. load capacity.

Taylor-Dunn was featuring one of their relatively new vehicles, the Bigfoot. The Bigfoot features 48V AC power, hydraulic brakes, 12 mph top speed, a 44″x77″ flatbed and a 3,000 lb. load capacity. Other amenities include dual USB charging ports, LED lighting, adjustable seats, tilt steering and recessed tie-downs. The Bigfoot has a range of up to 40 miles and can be configured with a cab, stake sides or aluminum drop-down sides.

2016 GEM Line Looks Like A Success

The new GEM product line for model year 2016.

The new GEMs for model year 2016.

A recent conversation with a GEM dealer indicates that the newly designed 2016 GEM product line will be a success. In November I spoke with John Stockman, Director of GEM about the new 2016 line of GEM vehicles. I wanted to follow-up that article with a dealer’s perspective of the line now that it has been in the market. To that end I spoke with Andy Kaplan of Dominion Utility Vehicles of Bedford, Virginia, which carries the GEM line along with Gravely and Brutus utility vehicles. Polaris manufactures all three of these brands.

While December through February are typically a slow season for Kaplan, he has been selling GEMs at a rapid rate this year. In fact, we conversed while he and his loaded vehicle trailer were calling on customers for test drives and to deliver a price quotes. He is still following up leads from a trade show six weeks ago. Kaplan typically sells vehicles to colleges and universities, hospitals and real estate developments where GEMs are used for security, maintenance and people transport.

Polaris significantly re-engineered the GEM line for 2016. They made changes to the body design, added more cabin space, improved the doors and added more door options, introduced their Smart Power concept, and expanded options and accessories for the utility model. According to Kaplan, the changes have all hit the mark and are winning over customers. The new doors and additional cabin space are probably the most critical changes driving customer interest. As Kaplan observes, these changes give the GEM a more car-like feel. He believes they have helped position the GEM in it’s own market niche between golf car based vehicles and fully functional automobiles.

Kaplan expects to double his GEM sales this year driven by both the new 2016 line, and by virtue of the new line being part of a Virginia state purchasing contract. The latter allows state colleges, universities and other agencies to more easily purchase GEMs without having to conduct a complex purchasing process.

I’ve posted a more in-depth article from my discussion with Mr. Kaplan in our buying guide section.

 

What’s Cooking on the STOV: Electric Food Truck

Highlighting some of the many applications for Small, Task-Oriented Vehicles

Chef Greg Steel and his Philly Greens food truck built on a GEM LSV.

Chef Greg Steel and his Philly Greens food truck built on a GEM LSV.

In Philadelphia Chef Greg Steele is using a solar-powered Polaris GEM EL XD LSV as the basis for his Philly Greens food truck. With a top speed of 25 mph and range of up to 30 miles, the electric powered food truck suits his needs for urban/suburban mobility. The electric power plant cannot provide enough power for cooking as well, so he also uses a small gas generator.The Philly Greens truck started out as flatbed and then a metal frame was added followed by what looks like a stainless steel or aluminum skin. Custom paint and graphics made the truck complete.

The metal framework that provides the foundation for the custom food service area.

The metal framework that provides the foundation for the custom food service area.

The GEM customized and ready for paint and graphics.

The GEM customized and ready for paint and graphics.

The vehicle is an integral part to Chef Steele’s goal of creating a sustainable food truck business. He offers a seasonal menu made with non-GMO, high quality, healthy food and sources ingredients locally. The menu changes frequently and includes what is referred to as a Jawn, which his website describes as “A word used by Philly cats to describe anything and everything. It fills in for another word, handy in a brain-freeze moment, or comes out as an expression of enthusiasm.” It also seems to include leafy greens and other ingredients of the moment. Other menu items include chili, nachos and recently sweet potato, coconut soup with sunflower chili, topped off with spiral cut turnip. Learn more:  Phillygreens.com

Comment:  Whether it is taxi services, tourist rentals or now food trucks, electric powered LSVs appear to be slowly carving out a niche in urban environments. The slower speeds, shorter distances, and limited parking space in these areas make these vehicles an ideal choice. The drive for sustainability by many local governments and citizens makes these electric powered vehicles appealing as well.

Polaris Q4 2015 Results Point To Slowing UTV Market

The base model General 1000 EPS is Indy Red with an MSRP of $15,999.

Despite a good start for the new General crossover utility vehicle, Polaris had a tough fourth quarter in 2015 as the UTV/side-by-side market showed weakness.

Polaris reported their worst year-over-year quarterly performance since 2009 with their recent Q4 2015 results. Fourth quarter sales were down 13% to $1.1 billion with net income of $110.7 million, down 18% as all businesses except Indian motorcycles and Slingshot fell short of expectations. Management expects a slowdown in the UTV/side-by-side market faces tough macroeconomic conditions in North American and abroad, as well as currency headwinds. The following are highlights of the earnings call as they relate to the UTV/side-by-side market.

  • Despite solid demand for the new GENERAL and improving interest in the RZR Turbo, Polaris lost side by side market share in the fourth quarter.
  • To keep dealer inventory low the company cut shipments of higher margin RZRs and Rangers.
  • Off-road vehicle dealer inventory including ATVs was down year-over-year for the first time in six years
  • Side-by-side dealer inventory was up slightly for the year
  • Management reported a “more cautious” consumer in the ORV channel
  • Polaris side-by-side revenue for 2015 grew “modestly”
  • 4th quarter side-by-side retail sales in North America declined mid-single digits as the industry grew slightly
  • The new GENERAL vehicles began shipping in December, and initial consumer and dealer response was positive
  • ORV sales in oil producing states declined 10% while other areas of the market increased mid-single digits
  • For the full year 2015, Polaris again grew side-by-side market share.
  • Side-by-side retail sales increased mid-single digits in a side-by-side industry that grew slightly slower
  • Camp RZR in Glamis, California had an all-time record attendance, over 17,000 strong, which was up 45%
  • Q4 North American work and transportation revenue decreased low 20s percent as difficult comparables included the Ariens partners launch
  • GEM sales declined due to the transition to a completely redesigned GEM product platform during the quarter
  • Initial GEM orders are solid and a strong 2016 is expected
  • Q4 European Work and Transportation revenue declined low single-digits percent due primarily to currency weakness and some softness in Goupil and Mega
  • Aixam sales grew high single digits and the European quadricycle industry grew in both fourth quarter and for full year 2015, up low single-digits with Aixam retail up slightly more increasing their leading market share
  • Vehicles sales in Q4 and 2015 to Department of Defense and GSA related accounts were hurt by stop gap funding measures, but 2016 backlog is “healthy”
  • The European ORV industry grew mid-single digits in the fourth quarter and for the year.
  • Polaris gained share in the fourth quarter, as retail was up mid-teens percent and for the full year retail increased mid-single digits.
  • Multix, the three-in-one personal transportation vehicle from the Polaris-Eicher joint venture in India is retailing vehicles.
  • Multix customers are satisfied although currently the retail ramp remains well below management expectations, but they expect to accelerate retail in 2016 with key product improvements and further distribution expansion.
  • Huntsville plant will start production in Q2 and will initially produce RANGER side-by-sides
  • Huntsville incorporates the company’s most advanced Lean flow and state of the art manufacturing technologies and improves throughput times by approximately 80% compared to existing facilities
  • Management expects continued macroeconomic headwinds with ongoing currency issues overseas, a slight slowdown in global economies and a low growth economy in North America
  • Total company sales are expected to be in the range of down 2% to up 3%
  • ORV market share is expected to be maintained while gains are expected in global adjacent markets
  • ORV/snowmobiles revenue is anticipated to be flat to down mid-single digits and global adjacent markets up mid-single digits
  • Management continues to forecast strong competition in the side-by-side market
  • Q1 for 2016 side-by-side revenues is expected to be down because of Canadian currency issues, a weaker retail environment and tough prior comparables

Learn more:  Seekingalpha.com (Earnings call transcript)