Kawasaki and Polaris have donated a number of vehicles to aid in the relief effort in Oklahoma following the devastating tornado. Kawasaki is donating ten new Kawasaki Mule™ 4010 Trans4x4 Diesel and Teryx4™ 750 4×4 four-passenger UTVs to local governments, police, and fire agencies in the region. Polaris is donating ten military ATVs, Rangers and RZRs with run-flat and non-pneumatic tires to enhance The Salvation Army’s efforts to transport food, water and other supplies to survivors. Honda is not donating any vehicles but made a $100,000 contribution to the Red Cross operations in the area as well as providing some generators for the effort. In addition, their financing arm is providing extensions on load payments and other services to help those customers impacted by the disaster. Learn more: Powersportsbusiness.com
A bill that would stop the US Marine Corps from taking over the Johnson Valley off-highway vehicle recreational area has passed the Natural Resources Committee in the US House of Representatives. The bill would designate Johnson Valley as a national off-highway vehicle recreation area but would authorize limited military use of the area. Several years ago the US Department of the Navy had begun the process of taking over nearly 366,000 of public land near San Bernardino to use for live-fire training for the Marines. Included in that acreage is a large portion of the Johnson Valley area. The bill will now move to the full House for consideration. Learn more: Motorcycle-USA.com
A special inter-ministerial group in India has approved the use of quadricycles for public transport within city limits. The effort has been spearheaded by Bajaj Auto, the leading three-wheeler manufacturer in India. Quadricycles are similar to low-speed vehicles in the US, although they are more likely to be powered by internal combustion engines and operate at slightly higher speeds. They are already prevalent in Europe. Similar to LSVs in the US, there has been some objection to the quadricycles because they do not have to meet the same safety standards as higher speed autos but share the same roads. In India some of this criticism has come from the manufacturers of higher speed autos. Bajaj Auto management reports that they will beging production of their RE60 quadricycle very soon.
Comment: This may be a potential win for Polaris in the long term. They recently purchased a leading quadricycle manufacturer in Europe, Aixam Mega, and have also entered the Indian market with their UTVs and GEM vehicles. A quadricycle product line could be a nice addition for their dealer network, especially if their use is allowed to expand beyond the current limitations.
Another consideration is whether this is the beginning of a trend towards wider quadricycle use around the world. And if it is, does it put pressure on US regulatory bodies to approve the use of medium speed vehicles and/or wider use of low speed vehicles?
GE Capital’s Commercial Distribution Finance (CDF) business will provide inventory financing to motorsports dealerships that carry American SportWorks products. American SportWorks sells UTVs under the Landmaster brand as well as several brands of go-carts. The company is looking to expand their dealer network of approximately 200 dealers. Learn more: Wall Street Journal
The following are some of the highlights from Arctic Cat’s earnings call for their fiscal 2013 fourth quarter ended March 31, 2013 with an emphasis on side-by-side related information.
- Net sales for the fourth quarter increased 15% to $113.2 million from $98.5 million
- Full year net sales increased 15% to $671.6 million from $585.3 million
- Net earnings increased 33% to $39.7 million from $29.9 million
- ATV and side-by-side sales increased 32% to $299.8 million from $226.9 million for the year and increased 16% to $87.6 million from $75.8 million for the quarter
- ATV and side-by-side business sales increases were driven by Prowler models as well as the launch of the new Wildcat Four, a new four seat version of the Wildcat Four side-by-side and Wildcat X a high horsepower version of the Wildcat Sports side-by-side
- Management reports taking more market share in the side-by-side category during the year
- Wildcat parts and accessories business was strong
- ATV industry retail sales for North America were flat as retail sales decreased by 2% during fiscal year 2013.
- The new 50 inch trail legal Wildcat is expected to ship in the 4th quarter of 2014 and allows Arctic Cat to enter this segment of the side-by-side industry
- Next year the North American ATV industry retail sales are expected to grow between zero to 5%
- The side-by-side market is expected to grow in the 15% to 25% range.
- Management expects net sales in the range of $754 to $768 million based on an increase in ATV and side-by-sales in the 25% to 29% range for the full year driven by shipments of Wildcat sport side-by-side models including the new Wildcat 50
- Management expects at least 90% of our dealers to pick up the trail version of the Wildcat
The Defense Department recently awarded a number of contracts including a $382.5 million contract for fire and emergency vehicles for the Army, Navy, Air Force, Marine Corps, and federal civilian agencies. The contract is a “maximum value, fixed-price with economic-price-adjustment contract” which gives the Polaris Defense subsidiary the right to compete with other vendors for various orders under the larger contract. Polaris will only get the portion of the total contract for which it wins individual orders from the various agencies. The completion date for the contract is May 17, 2018.
Polaris management has targeted military sales a key strategic driver for future revenue growth. According to the company, they currently sell about $50 million of products, including ATVs and UTVs, to military customers and is targeting $200 million in annual revenues. Polaris was also one of the first vendors to offer a six wheeled UTV that has been popular with Bureau of Land Management fire units which fight wild fires. Learn more: Fool.com
The Light Commercial Vehicle (LCV) market in India is experiencing a slowdown. Industry experts point to expensive loans, reduced economic activity and challenging freight rates in several sub-markets as the reasons. The mini-trucks which can carry up to two tons of goods has seen growth fall. According to the manufacturer’s trade association, “From an average 40,000 units a month last financial year, sales of goods-carrying light commercial vehicles (LCVs) fell have fallen to 33,721 units in April; growth slowed from 16 per cent last year to three per cent in April.” The segment’s more recent growth had attracted more competition and new models with the main manufacturers being Tata Motors with their Ace models, Mahindra & Mahindra’s Maxximo and Ashok Leyland’s Dost . Learn more: Business-standard.com
John Deere has plans to add new models to their Gator RSX line that targets the recreation/sport side-by-side segment. The current line features three models: the Base, Trail and Sport. The RSX line was specifically developed to appeal to recreational riders and expand John Deere’s presence in the UTV market beyond their traditional work segments. John Deere started the UTV market with their early Gators focusing on work applications and expanded their reach in 2007 with the Gator XUV line which appeals to crossover users that want vehicles for a combination of work and play. The Gator RSX line is a natural progression towards the pure play applications. It is also a higher priced, highly profitable and becoming a highly competitive segment. Management reports that the RSX models have brought in new customers to the brand and is particularly strong in the West Coast market, a major recreational side-by-side market. Learn more: Powersportsbusiness.com
Comment: It’s not surprising to see John Deere expanding the RSX line. This segment of the market is performance and feature driven and highly competitive. Polaris, Arctic Cat and Can-Am are considered the leaders and continuously trying to one-up each other so product development must be relatively fast and ongoing. On the other hand, vehicles in this fast growing segment sell for upwards of $15,000 to $20,000 or more and buyers frequently spend thousands more on accessories and options so there is a lot of profit to be made. I see two challenges for John Deere in this segment. First their brand is associated more with work applications than sport, especially in light of their main competitors that come from a powersports heritage. Second, their distribution network is, not surprisingly, designed to reach customers buying work related vehicles. However, their original RSX line had solid reviews, and with customers using so many online resources to research vehicle purchases, distribution alignment issues can be mitigated to a certain extent.
GE Capital’s Equipment Finance business has entered into an agreement to provide financing for GEM’s commercial purchases. GE Capital already provides financing for other product lines sold by Polaris. The agreement with GEM is for three years. The majority of sales for the GEM product line are for commercial customers such as municipalities, universities and resorts. According to GEM management adding a leasing option is an important option for their commercial base. Learn more: Marketwatch.com
Comment: Although LSVs/NEVs were originally targeted towards the consumer market, the majority of GEM’s sales through the years have been to commercial customers. SVR predicts this segment will continue to be a strong growth area for LSVs. Historically commercial customers have been more likely to look for leasing options than private customers in the STOV market. For some commercial purchasers they can more easily lease vehicles using funds from their operating budgets than purchase them from a capital budget.
A bill introduced in the House and the Senate would designate over 9 million acres of public land in Utah as Wilderness, effectively closing off that land to any off-road riding. If land is designated as Wilderness then no vehicles, including motorcycles, ATVs, UTVs or bicycles, are allowed on that land. Called the America’s Red Rock Wilderness Act, the bill includes riding areas around Moab, the San Rafael Swell and Chimney Rock. The Utah congressional delegation opposes the legislation and some of them are working with local stakeholders to develop a separate lands bill. The American Motorcyclist Association is encouraging off-road riders to oppose the legislation. Learn more: Powersportsbusiness.com
Comment: Besides the riders themselves this legislation can impact dealers as well. In some recent interviews, dealers have told me about the negative effect on their business of local land access rules. In one case it was land use rules passed by the local municipality and in other it was a long-term trend at the state level. In the latter case the dealer stopped carrying an off-road line of UTVs because of poor sales he attributed to the very limited areas available for off-road riding.