Arcimoto FUV: A Threat to PTVs?

Arcimoto Fun Utility Vehicle - FUV

The electric powered Arcimoto FUV (Fun Utility Vehicle) is just coming to market.

Oregon based Arcimoto is beginning to roll out their three-wheeled Fun Utility Vehicle (FUV). The combination of price point, size, electric powertrain and ability to travel public roads makes the Arcimoto FUV an intriguing alternative to golf cars, PTVs and LSVs.

Update – Arcimoto responded to a number of questions I sent them and I have added the information to the relevant sections below.

Arcimoto FUVs already on the Road

The first 10 FUV prototypes hit the road this past June. The company completed another 15 vehicles, referred to as their beta series, in September. These went to five customers and the remainder to rental locations. Vehicle rental franchising in tourist locations is a key part of Arcimoto’s marketing plan. As of the end of June the company has 2,800 reservations for the FUV.

Volume Production

Management expects to begin production and delivery of their A series of vehicles during this quarter. The A series marks the move to higher volume production. Plans call for a run rate of 200 vehicles/week or roughly 10,000/year by the end of 2019. The company has deliberately designed smaller sized production facilities that can produce approximately 10,000 vehicles per year.  A production facility costs approximately $10 million. This limits initial capital costs and creates a facility that can be profitable relatively quickly. Furthermore, the facility can be easily replicated in other parts of the country or the world.

Vehicle Features and Specs

The Arcimoto FUV is a three-wheeled vehicle powered by a 67 hp electric motor and a 12 or 20 kWh lithium-ion battery for a range of 70 or 130 miles and a top speed of 80 mph. As a three-wheeler, most states classify the FUV as a motorcycle or similar vehicle. Therefore, it does need the same  safety requirements as a full-sized, highway capable vehicle. The FUV can seat two passengers, one behind the other, and features regenerative braking, hydraulic brakes, a windshield with wiper and defrost, and heated seats and hand grips. Additional options include full HVAC, soft or hard shell doors, rear cargo box, bluetooth speakers and racks for golf clubs, bikes, surfboards, etc. The target price for the base model is $11,900 with a fully decked out model reaching the $19,000 range.

Arcimoto FUV Dimensions

Arcimoto FUV Dimensions

Versatility and Price Point Creates an Alternative to PTVs

The FUV is a versatile vehicle for gated communities. The vehicle can move from golf course, to community pathways to public roads. On public roads the FUV faces none of the restrictions of a golf car, PTV or LSV since it is classified as a motorcycle. Therefore, it can travel on higher speed roads and at night. The FUV can travel faster and farther as well. In terms of speed, the FUV may need a speed limiter option for use on golf courses or within communities depending on local regulations. According to Arcimoto, the vehicle does have the capability to cap speeds to meet specific needs.

The company is targeting a $12,000 base price. Therefore, the FUV is pricier but competitive with LSVs and fancier PTVs given the trade off between price and functionality. One of the reasons LSV sales never really took off in gated communities as expected is that the additional price premium did not offer a significant benefit over new or refurbished golf cars. LSVs are most successful where regulations greatly restrict the use of PTVs or golf cars on local roads. However, if anything, municipalities are becoming less restrictive regarding golf car use. Furthermore, in states like California, Massachusetts, Maryland, Arizona, and Illinois there are tax incentives available for the FUV. There is also the possibility that electric motorcycle or similar incentives could be brought back at the federal level. The company is lobbying to have the tax credits for motorcycles and three-wheeled vehicles brought back. This additional cost reduction could further boost the attractiveness of this alternative vehicle.

Arcimoto FUV Drawbacks

There are some potential drawbacks to the Arcimoto FUV in the gated community setting.

Higher Driving Speeds

Some communities may object to the vehicle’s higher speed capabilities. Some type of speed limiter could address this, or not, depending on the locality. In addition, given the older demographic in gated communities, some drivers may not feel safe driving at higher speeds on local roads. Nevertheless, driving up to 40 to 45 mph would include a large swath of vehicle usage inside and outside a gated community. In effect, the FUV could displace both PTV miles and a sizable chunk of driving performed with highway capable vehicles.

Seating Configuration

Seating configuration is another potential drawback. The seating in an FUV is one passenger behind the other rather than side by side. Some users may feel this reduces the social aspect while riding in the vehicle, particularly on a golf course.

Vehicle Storage

For seasonal usage by vacation home owners, there is often a need to store the vehicle for several months without any usage. This can be an issue or at least require some planning for the current battery powered vehicles. According to Battery University a lithium ion battery should be stored at 40% percent charge if being stored for an extended period. Arcimoto did not answer my question directly on this subject but expect to have a battery pack with a lifetime of “…8-10 years with normal vehicle usage, and still maintain more than 80% of their original charging capacity.” The pack replacement cost is expected to be under $2,500 inclusive of the residual value.

Marketing, Pricing and Local Regulations Critical to Success

The success of the Arcimoto FUV in displacing golf cars, PTVs and LSVs will depend on three key elements:  marketing, pricing and local regulations. The last may be the most important. If gated communities object to the FUV’s higher speed capabilities, and there is no technological fix, foreclosing the market. The pricing may be the easiest to address. If Arcimoto can hit their target price at volume production, even without tax incentives there is a compelling cost benefit story for the FUV.

The marketing element depends in part on where Arcimoto’s management wants to invest resources. The gated community market may be too small to target during the initial phases of the vehicle’s rollout. In addition, golf car dealers mainly serve this market. The company likely does not have relationships with this distribution channel. On the other hand, their rental franchise plan could overlap with these dealers as some are located in tourist oriented beach communities and have high PTV use. This angle could serve as an entry point to the market. In response to my questions Arcimoto stated that they put on a test ride event for the FUV at The Villages, a gated community in Florida, on November 12th. They also noted that the short drives and warm weather make resort communities a great market for the vehicle.

In a years time we will have a better idea whether the Arcimoto FUV has met with success, and whether it threatens the PTV market.

Marc Cesare, SVR

Tariff Questions Dominate Polaris Earnings Call

Polaris 2019 Ranger XP 1000 EPS 20th anniversary

The 2019 Ranger XP 1000 EPS 20th Anniversary edition helped drive sales despite tariff concerns.

Financial Results Overview

Tariff questions dominated the Polaris Industries earnings call to discuss their Q3 financial results for fiscal year 2018. The manufacturer of the RZR, Ranger and General side-by-sides reported adjusted revenue of $1,653 million, an increase of 12% from $1,480 million from third quarter 2017. Net income increased 21% from $98 million to $118 million. (Financial figures are compared to Q3 2017 unless noted)

STOV Segments Perform Solidly

Overall ORV/Snow segment revenue increased 3% from $1,007 million to $1,036 million. Lower snowmobile revenue was more than offset by a 12% increase in ORV revenue. ORV includes UTVs and ATVs. North American (NA) retail sales, driven by side-by-side sales, increased 1% in the quarter against a tough comparable. In comparison, management estimated that industry wide NA ORV sales improved low single digits for the quarter. Polaris side-by-side market share for the quarter remained the same.

The average selling price of ORVs overall increased 5%. Management reports that the initial launch of the 2019 model year was successful with good response from consumers and dealers. In particular, the new Ranger XP 1000 variants drove sales. Furthermore, the company’s inventory management system, RFM, is producing results with the best side-by-side delivery performance to date. In addition, lower promotional costs accompanied the stronger sales. Comments on individual markets indicated that the oil and gas customer segment improved while agriculture decreased some.

Global Adjacent Markets Gain

The Global Adjacent Markets (GAM) segment made solid gains as well. Sales increased 5% from $92 to $98 million. This segment includes vehicle sales to commercial, government and defense clients in addition to Aixam quadricycle sales in Europe. In addition, the GAM segment includes vehicles like Ranger and Brutus UTVs, military RZRs, GEM electric vehicles, Taylor-Dunn industrial vehicles and Goupil electric vehicles based in France. Management reported solid sales for  Goupil vehicles and strong orders from fire and police departments, and other government agencies.

ORV and GAM Drive International Growth

Sales to international markets jumped 10% with a strong showing from the ORV/Snow segment, up 9%, and the GAM segment, up 6%. Looking at sales by region, the Europe and Middle East drove overall international sales while Latin America increased only slightly and the Asia Pacific region decreased.

Full Year Guidance Improves

Polaris increased their guidance for the ORV/Snow segment. They now expect a low double digit increase in sales.The GAM segment should increase sales by low double digits, which is unchanged from previous guidance.

Tariff Impacts

Tariff impacts raised expenses by $8 million for the quarter and are expected to total $40 million for the year. The renegotiated NAFTA deal, the USMCA, is expected to have a neutral effect. However, the 301 tariffs, especially the upcoming List 3 tariffs could have more severe repercussions. Currently, the company is dealing with List 1 and List 2 tariff impacts. Polaris is at a disadvantage related to 301 List tariffs because their main competitors produce their vehicles in Mexico or assemble them in the US using Japanese parts. Therefore, these companies are not subject to the same tariffs.

Tariff Mitigation Plans

Management laid out a three pronged approach to mitigating the potential List 301 tariffs. First, they will try to negotiate with their suppliers to share some of the increased costs. Second, they may increase prices. Thirdly, they hope to lobby the current administration to obtain an exemption from the tariffs. Polaris argues that the tariffs are primarily hurting them, but they are the only US based manufacturer among the major players in the market. Furthermore, the company has been increasing their US based manufacturing. At this time, Polaris is not providing any specific quantitative guidance for tariff impacts for 2019.

Other Future Factors

For the powersports market in general, management expects that there will be a need to increase pricing to offset inflation, tariff impacts and increasing commodity and logistics costs. Furthermore, management stated, “As the industry leader, we’re not afraid to lead on price.”

The newly launched Factory Choice program, which gives the customers and dealers an opportunity to make differentiated vehicles from the factory and has been popular, gives Polaris optimism. The program should help drive sales in the future.

The dealer inventory profiles produced under the RFM program this year for side-by-sides significantly improved product availability. The increased availability bolstered sales, raising similar expectations moving forward.

Learn more:  Polaris Earnings Call Transcript (Seekingalpha.com)

SVR’s Take

This was another solid quarter for Polaris. The sales increases for side-by-sides were not gangbusters at first glance, but they are being compared to a really strong third quarter in 2017. The new 2019 vehicle lineup should drive sales more fully in the fourth quarter. The GAM segment is slowly growing into a significant business and could become a $500 billion business in about two years. On a cautionary note, the tariff impacts could slow progress for Polaris, especially in contrast to fast growing and Canadian based Can-Am. Increased pricing could potentially hurt sales, although as a premium brand Polaris can pass on some pricing. The other alternative is that they will take hit to their margins and generate less income.

 

 

Textron Off Road Struggles with Arctic Cat

Textron Off Road Wildcat XX

Textron Off Road’s Wildcat XX. Wildcat models were previously sold under the Arctic Cat brand.

Textron 2018 Q3 Earnings Results

Textron, Inc recently reported fiscal year 2018 third quarter earnings. They point to a struggling Arctic Cat brand which was acquired in early 2017. The company embedded the Arctic Cat brand under their new Textron Off Road brand in their Specialized Vehicle business, which is part of their Industrial segment. Specialized Vehicles also includes E-Z-GO golf cars, Cushman utility vehicles, towing tugs among other small, task-oriented vehicles. Management reported that poor Specialized Vehicle results hurt the Industrial segment that in turn reduced overall quarterly performance for the company.

Weak Performance but Faith in the Product

The Q&A part of the earnings call pointed to problems with products formerly sold under the Arctic Cat brand. CEO Scott Donnelly remarked that  “…the most fundamental challenge in the business is around particularly the dirt side, the consumer side of that business and that’s the area that where we need the most work”. Furthermore he noted that,

” Industrial, segment profit was breakeven primarily due to unfavorable operating performance in specialized vehicles. Specialized vehicles has undergone significant change over the past two years, as we have expanded the product portfolio. While we’ve seen increasing revenue in the segment, we haven’t seen the planned level of growth or do the operating levers necessary to support the expected returns.”

Nevertheless, management remained positive about future performance and confident of the products they are putting on the market. Donnelly further stated,

“We’ve got great feedback from customers, the performance side we don’t have a product problem I mean we have still gaps which again as I said we’re working on it as we go forward but I think the progress on what the product is and how the product is performing we’re very pleased with.”

The management expects better performance in the fourth quarter.

 

Sales Channel Issues

Additional management comments indicated other issues in the sales channel may be limiting performance. Management noted the need to manage the channel but that some dealers are doing very well. Overall the retail sell through did not meet expectations. Furthermore, management allocated more funds to product discount programs to reduce inventory. In addition, management expressed a desire to improve the sales tools that help customers get to the product.

Pricing Changes Reflect Sales Issues

The pricing changes across the Textron Off-Road vehicle lineup from 2018 to 2019 reflects the poorer than expected retail performance. Management reduced prices for nearly every model, slashing prices for the Wildcat side-by-sides the most. Wildcat price cuts ranged from $500 to $2,500 with most at least $1,000. In contrast, many other manufacturers maintained pricing or slightly increased pricing by around $200 in most cases.

Textron Earnings Call (Seekingalpha.com)

SVR’s Take:

If management likes the product and some dealers are doing well, it sounds like it may possibly be a dealer issue. Either dealers are in the wrong location or they are not performing well. The management’s comments about getting customers to the product raise additional potential issues.

“I think in general how we manage that channel is something that frankly we just haven’t done as well as we should have. And our sales tools and how easy we make it for perspective customers to figure our product, have access to the dealers, have a natural way to help customers move to our product is just something we didn’t do well.”

This could cover a lot of ground from advertising to website performance to in-store marketing material to how dealership personnel interact with customers from first contact to sale.

Marc Cesare, SVR

Can-Am Market Share Increases

2019 Can-Am Defender HD8

New models like the 2019 Can-Am Defender HD8 help increase Can-Am market share.

Can Am Defender Max

Can Am Defender Max

BRP Reports Strong Fiscal Q2 Earnings  

BRP Inc., manufacturer of Can-Am vehicles announced strong earnings for their fiscal second quarter (ending July 31, 2018) and improved Can-Am market share for their side-by-side business. Management reported an increase in revenue of 18% to $1,207 million from $1,023 million (In Canadian $) as well as increased profit margins.

Ahead of Strategic Plan 

Since implementing their strategic plan in 2015 Can-Am has steadily made inroads in the side-by-side market. Management set the goal of doubling Can-Am market share for the North American side-by-side market from approximately 10% to 20% by 2020. They are on track to reach that goal in 2019 instead of the original 2020 target year.

Recent Can-Am UTV Launches Source: Can-Am Presentation 9/10/2018

Product Development Drives Can-Am Market Share Success

The company drove this rapid growth by launching a host of new models to maintain competitiveness in existing market segments or to enter new segments. They typically launch new models every six months. The Defender lineup of UTVs is an example of entering new segments. The Defender not only attacked the work/utility segment where Can-Am needed a presence, but opened up under represented geographic markets. The company reports US side-by-side dealer network coverage increased over 50% over four years. They also added trail and sport models for the recreational segment while continuing to produce competitive high-end performance side-by-sides as well.

Can-Am Emerges as Main Polaris Competitor

While still far from the market share of market leader Polaris, Can-Am has established itself as the main competitor to Polaris, outpacing the likes of Yamaha, Honda, John Deere and others. This applies to not only to the side-by-side market but in other product segments as well including ATVs, 3-wheelers and snowmobiles. Both companies have also entered the boating market with recent acquisitions. (BRP; Polaris) Can-Am is one of the few side-by-side manufacturers that comes close to the breadth of models that Polaris offers across all the market sub-segments. Management’s intentions are to continue to build out their product lineup.

Earnings Call Highlights

The following are highlights from the earnings call and presentation. Unless noted comparisons are to the same quarter of the previous year.

  • Revenues were up in North America (NA) and all intl markets
  • NA retail sales for Seasonal and Year-round business segments increased 16%
  • All product segments are outgrowing respective industries
  • Year Round business which includes SxS, ATV and Spyder products increased by 26% from $440.4 to $554.0
  • NA side-by-side retail jumped low 30% vs. low teen % for industry for the quarter
  • NA 2018 SSV industry up high single digits percent for recently ended model year while Can-Am jumped mid 30%
  • Management reports gaining over 2.5% in market share in NA side-by-side market for the 2018 season
  • Can-Am SxS up 25% in all  international markets:  Europe/Middle East, Latin America and Asia-Pacific.
  • Management states:  “We are seeing solid growth across the lineup, and the popularity of our specialized models such as the Defender LONE STAR, the Maverick X3 rock crawler and our mud-ready Maverick X3 and Defender is helping us deliver superior profitability for us and our dealers.
  • Management increased guidance for Year Round business to up 18-21% from previously guided 12-15%
  • Can-Am has more than doubled their side-by-side retail volume since 2015 with 6 new platform introduced over the past 3 years and on target to reach 2020 goals one year in advance
  • Room to grow in the Defender side-by-side segment
  • Some cost pressures from commodity prices and freight costs

Learn more:  Earnings Call Transcript

American Landmaster Recalls UTVs

LandMaster Crossroad

American Landmaster is recalling Crossroad UTVs because of a potential gas leak.

Landmaster Landstar utility vehicle

Landstar models are part of the recall.

Landmaster Trailwagon models are also part of the recall.

American Landmaster has recalled approximately 1,500 model year 2018 UTVs including Landstar, Crossroad and Trailwagon models due to a potential gas leak from the vehicle’s gas tank which can potentially create a fire and burn hazard. Owners have not reported any injuries related to this recall. Owners should immediately stop using the vehicles and contact their American Landmaster for a free repair. The recall information below is from the Consumer Product Safety Commission. SVR maintains an ongoing list of recalls related to utility vehicles, golf cars and LSVs with links to detailed recall information.

Name of product:  Off-road utility vehicles
Hazard:  Gas can leak from the utility vehicle’s gas tank, posing fire and burn hazards.
Remedy:  Repair
Recall date:  August 23, 2018
Units:  About 1,500
Consumer Contact:  American Landmaster at 800-643-7332 from 8 a.m. to 5 p.m. ET Monday through Friday, email at recall@AmericanLandmaster.com or online at www.AmericanLandmaster.com and click on the “Notice to UTV Owners Important Recall Information” icon or www.AmericanLandmaster.com/recall for more information.

American LandMaster Recall Details

Description:  This recall involves model year 2018 gasoline-powered Landstar, Crossroad and Trailwagon models of American Landmaster four-wheel off-road utility vehicles. The recalled vehicles were sold in a variety of colors. The model name and number are printed on the hood of each front fender. The American Landmaster logo is printed on the center of the hood of the vehicle. The VIN is located behind the pedals and below the steering wheel.

Model Number

VIN range start

VIN range end

CR350, LS350, LS350DL

A4PUTYFB1JBA00023

A4PUTYFB9JBA00304

A4PUTYFB1JBA00751

A4PUTYFB7JBA00754

LS450

A4PUTYJC4JBA00422

A4PUTYJC6JBA00499

A4PUTYJC3JBA00749

A4PUTYJCXJBA01512

TW450

A4PUTYJCXJBA00358

A4PUTYJC0JBA00496

A4PUTYJC2JBA00760

A4PUTYJC2JBA01147

TW750

A4PUTYPD0JBA00014

A4PUTYPD8JBB00149

LS477

A4PUVTKD7JBB00003

A4PUVTKD9JBB00049

LS550

A4PUTVKD9JBA00003

A4PUTVKD9JBA00308

LS670, 677EFI, 677EPS

A4PUTYPD6JBB00005

A4PUTYPD7JBB00224

Crew2, Crew4, Crew4X

A4PUFYPD0JBA00005

A4PUFYPD5JBA00078

Remedy:  Consumers should immediately stop using the recalled vehicles and contact American Landmaster for a free repair.
Incidents/Injuries:  None reported
Sold At:  Atwood Distributing, Tractor Supply Company, Orscheln Farm and Home stores and other distributors nationwide from January 2018 through July 2018 for between $4,300 and $10,300.
Manufacturer(s):  ASW, LLC d/b/a American Landmaster, of Columbia City, Ind.
Manufactured In:  U.S.
Recall number:  18-207

Polaris Recalls Gravely Atlas UTVs

Name of product:  Gravely Atlas JSV 3000 and 6000 utility vehicles
Hazard:  The utility vehicle’s exhaust header pipe can crack, posing fire and burn hazards.
Remedy:  Repair
Recall date:  August 8, 2018
Units:  About 2,100
Consumer Contact:  Gravely at 877-740-7060 from 8 a.m. to 4:30 p.m. ET Monday through Friday or online at www.gravely.com and click on the Product Support link at the bottom of the page, then select Product Safety Recall in the menu on the left of the page for more information.

Recall Details

Description:  This recall involves all model year 2015 through 2018 Gravely Atlas JSV 3000 and 6000 gas-engine-powered utility vehicles. The recalled utility vehicles were sold in red and have one or two rows of seats and a rear box. “Gravely” is printed on the rear box, and “Atlas” is printed on the hood of the utility vehicle. The model and serial number can be found on the driver’s side and are visible from the front wheel well. The following model numbers and serial number ranges are being recalled:

Year

Model

Serial Number Range

2015

996200 Base

150100, 150102 – 150299, 150310, 150321, 150332, 150343, 150354, 150365, 150376, 150387, 150398, 150409 – 150771, 150774 – 150803 and

150805 – 151173

996201 Crew

150100 – 150299, 150310, 150321, 150332, 150343, 150354, 150365, 150376, 150387, 150398, 150409 – 150599 and 150601 – 150641

2016

996200 Base

160100 – 160299, 160310, 160321, 160332, 160343, 160354, 160365, 160376, 160387, 160398 and 160409 – 160640

996201 Crew

160100 and 160102 – 160112

2017

996200 Base

170100 – 170256

996201 Crew

170100 – 170102 and 170108 – 170152

2018

996200 Base

180101, 180105 – 180116, 180118 – 180136, 180138 – 180149, 180151 – 180154, 180158 – 180161, 180163 – 180166, 180168 – 180170, 180172,

180174 – 180178, 180181 – 180182, 180186 – 180187, 180190, 180192, 180199, 180202, 180205 – 180206, 180209 – 180211, 180214 – 180215, 180218 and 180220 – 180222

Remedy:  Consumers should contact an authorized Gravely dealer for a free repair. If the exhaust system becomes noisier, consumers should immediately stop using the recalled utility vehicles. Gravely is contacting all known purchasers directly.
Incidents/Injuries:  Gravely has received seven reports of cracked header exhaust pipes. No injuries have been reported.
Sold At:  Gravely dealers nationwide from September 2014 through July 2018 for between $13,000 and $15,700.
Manufacturer(s):  Polaris Industries Inc., of Medina, Minn.
Distributor(s):  Gravely Company, of Brillion, Wis.
Manufactured In:  United States
Recall number:  18-758

Bobcat 3400 and 3400XL UTVs Recalled

Bobcat 3400 utility vehicle

The Bobcat 3400 for model years 2015 through 2018 is being recalled.

Bobcat 3400XL utility Vehicle

The Bobcat 3400XL is being recalled as well.

Last month Bobcat issued a recall of the gas powered Bobcat 3400 and 3400XL UTVs for model years 2015 through 2018. The vehicle’s exhaust header pipe can crack and create potential burn and fire hazards. Owners have not reported any injuries or fires related to this recall, which involves approximately 2,700 units. The 3400 model is a two-seater and the 3400XL is a four-seater. Polaris manufactured both models for Bobcat under a partnership the companies formed several years ago to develop UTVs for commercial markets. If you have an affected model you should contact your local Bobcat dealer. The following recall information is from the Consumer Product Safety Commission.

Name of product:  Bobcat 3400 and 3400XL utility vehicles
Hazard:  The utility vehicle’s exhaust header pipe can crack, posing burn and fire hazards.
Remedy:  Repair
Recall date:  August, 2018
Units:  About 2,700

Recall Details

Description:  This recall involves model year 2015 through 2018 Bobcat 3400 and 3400XL gas engine-equipped utility vehicles manufactured by Polaris Industries. The recalled utility vehicles are white and black with orange decals and have one or two rows of seats and a rear box. “Bobcat” is printed on the hood of the utility vehicle and “3400” or “3400XL” is printed on the rear box. The model and vehicle identification number (VIN #) can be found on a label under the seat and storage bin on the passenger side. The following models and VIN ranges are being recalled:

Year

Model

VIN Range

2015

3400 4X GAS

B3FL11001 through B3FL11911

3400 4X GAS DLX

B3FN11001 through B3FN11286

2016

3400 4X GAS

B3FL12001 through B3FL12803

3400 4X GAS DLX

B3FN12001 through B3FN12245

2017

3400 4X GAS

B3FL17001 through B3FL17580

3400 XL GAS

B3FN17001 through B3FN17124

2018

3400 4X GAS

B3FL18001 through B3FL18097

3400 XL GAS

B3FN18001 through B3FN18065

Remedy:  Consumers should contact an authorized Bobcat dealer to schedule a free repair. Bobcat is contacting all known purchasers directly.
Incidents/Injuries:  Bobcat has received seven reports of cracked exhaust pipes. No injuries or fires have been reported.
Sold At:  Bobcat dealers nationwide from August 2014 through July 2018 for between $10,000 and $15,000.
Manufacturer(s):  Polaris Industries Inc., of Medina, Minn.
Distributor(s):  Bobcat Company, of West Fargo, N.D.
Manufactured In:  United States
Recall number:  18-757

Polaris Industries Reports Q2 2018 Results

2019 Polaris Ranger Crew XP 1000 EPS

New models like the 2019 Polaris Ranger Crew XP 1000 EPS helped drive side-by-side revenue for the quarter.

Polaris Industries reported their financial results for the second quarter of 2018. Second quarter 2018 revenue increased 10% year over year to $1.503 billion with the ORV/Snowmobile segment jumping 17% to $993 million and off-road vehicles, excluding PG&A, increased 19%. Some of the gains in ORV were because of the need to boost dealer inventory levels to match retail demand.

Earnings Call Highlights

The following are highlights from the earnings call related to the small, task-oriented vehicle market.

  • The powersports market in North America is essentially flat to up slightly with Polaris ORV flat
  • ORV retail is growing in every region of the US
  • Ag markets have not slowed down at all at this point
  • ORV/Snowmobile segment sales were up 17% in Q2
  • Improved ORV demand for side-by-sides worldwide, and availability and sale of new models accelerated during the quarter helped drive sales
  • Polaris side-by-side North American retail sales up mid-single digits driven by new products and improved oil/gas and agriculture markets
  • Average selling prices for ORV increased 3% and promotional spending per unit decreased
  • Polaris gained market share in side-by-sides and ATV for the quarter
  • Production costs are increasing due to higher logistical and commodity costs
  • ORV helped drive international growth, particularly in Europe
  • Global Adjacent Markets sales increased 17% in the second quarter to $113 million, due to growth in Commercial, Government, and Defense businesses

Guidance for Full Year 2018

  • Management increased guidance for the Global Adjacents and ORV businesses with Global Adjacents expected to be up low-double digits % for the year and ORV/Snowmobiles up high-single digits %
  • ORV sales are expected to be up high single-digits percent from international results and pricing actions and slightly higher volumes

Learn more:  Seekingalpha.com (Earnings call transcript)

Honda Recalls 65,000 Pioneer 1000 UTVs

The 2016 Honda Pioneer 1000 EPS is one of the models being recalled.

Honda is recalling approximately 65,000 Pioneer 1000 utility vehicles because potential muffler overheating may cause a plastic heat shield to melt or catch fire. Consumers should immediately stop using the vehicles and contact a Honda powersports dealer for a free inspection and repair. Honda is contacting all known purchasers directly. The recall involves model year 2016, 2017 and some 2018 three passenger and five passenger Pioneer 1000 vehicles. The vehicles were sold from October 2015 through April 2018. The following recall information is from the Consumer Product Safety Commission.

Hazard:  The muffler can overheat, causing the plastic heat shield to melt or catch fire, posing a fire and burn hazard to consumers.

Remedy:  Repair

Recall date:  May 15, 2018

Units:  About 65,000

Consumer Contact:  American Honda toll-free at 866-784-1870 from 8:30 a.m. to 4:30 p.m. PT Monday through Friday or online at http://powersports.honda.com and click on “Recall Information” at the bottom of the page for more information.

Recall Details

Description:  This recall involves all model year 2016 through 2017, and some model year 2018 Honda Pioneer 1000 Vehicles. The recalled vehicles were sold in various colors including: red, blue, green, gray and yellow. The name “HONDA” is on the front, sides and the rear of the vehicle. The model name Pioneer 1000 is printed on a label located on both sides of the vehicle, near the rear. The serial number (VIN #) is stamped in the frame at the left rear, below the tilt-up bed/seat. The following model numbers and serial number ranges are being recalled:

 

MY Model VIN Start
2016 Pioneer 1000 3P

(SXS10M3*)

1HFVE04**G4000001 — 1HFVE04**G4008403
2016 Pioneer 1000 5P

(SXS10M5*)

1HFVE04**G4000001 — 1HFVE04**G4010507
2017 Pioneer 1000 3P

(SXS10M3*)

1HFVE04**H4100001 — 1HFVE04**H4102101
2017 Pioneer 1000 5P

(SXS10M5*)

1HFVE04**H4100001 — 1HFVE04**H4103000
2018 Pioneer 1000 3P

(SXS10M3*)

1HFVE04**G4200001 — 1HFVE04**G4203360
2018 Pioneer 1000 5P

(SXS10M5*)

1HFVE04**G4200001 — 1HFVE04**G4207379

* Variable character

Remedy:  Consumers should immediately stop using the recalled ROVs and contact an authorized Honda Powersports dealer to schedule an appointment for a free inspection and repair. Honda is contacting all known purchasers directly.

Incidents/Injuries:  The firm has received 22 reports of the muffler plastic heat shield melting and three reports of muffler plastic heat shield fires. No injuries have been reported.

Sold At:  Authorized Honda Powersports dealers nationwide from October 2015 through April 2018 for between $14,000 and $22,000.

Manufacturer(s):  American Honda Motor Company Inc., of Torrance, Calif.

Manufactured In:  United States

Recall number:  18-742

Learn More:  CPSC.gov

SVR’s Take:  This is another very large recall for the industry and once again related to an overheating and heat shield issue that can create a fire hazard. While massive recalls by Polaris have probably received the most attention in the industry, other manufacturers have had very large recalls as well.

Horsepower is one of the key vehicle specifications that manufacturers use to differentiate their offerings. This has created an atmosphere of one-upsmanship regarding engine size with each vehicle introduction trying to outdo the last in terms of horsepower. Given the large number of recalls in recent years related to overheating and/or fire hazards one has to wonder if the industry’s expertise in engine technology has outpaced their expertise in handling the additional heat output by these increasingly powerful engines. SVR has been tracking utility vehicle recalls for the past several years.

Marc Cesare, Smallvehicleresource.com

Polaris Earnings Report: Q1 2018

2018 Polaris Ranger XP 1000 EPS

The new 2018 Polaris Ranger XP 1000 EPS helped drive ORV sales in the first quarter according to the latest Polaris earnings call.

Polaris Industries reported first quarter 2018 revenues fo $1,297 million, an increase of 12% from the prior year. Adjusted net income for the quarter ended March 31, 2018 was $69 million compared to $48 million in the 2017 first quarter. ORV/Snowmobile segment sales were up 15% in Q1 driven by improved ORV shipments of side-by-sides worldwide as demand accelerated during the quarter.(ORV includes UTVs and ATVs). The following are highlights of the Polaris earnings call related to the small, task-oriented vehicle market.

  • ORV/Snowmobile segment sales were up 15% in Q1 to $833 million driven by improved ORV shipments of side-by-sides worldwide as demand accelerated during the quarter
  • Average Selling Price of ORV was up 4%
  • First quarter North American (NA) retail sales were driven side-by-side sales
  • NA side-by-side sales were up high single digits %
  • Important oil and agriculture market areas are improving
  • Side-by-sides gained market share in Ranger and RZR brands despite less promotional spending
  • Ranger business grew both in units and in dollars faster than the RZR business
  • The RZR RS1 demand was slightly higher than anticipated but management is not ready to call it a “Grand Slam” product
  • Global Adjacent Markets (GAM) grew revenue by 20% to $113 million and is looking for a strategic acquisition. This segments includes commercial ORVs, Defense, GEM, Aixam, Taylor-Dunn and Goupil sales)
  • GAM vehicle sales increased 25% with strong performance from Aixam, Goupil and government/defense business, and PG&A sales increased 19%
  • International ORV/Snow sales increased 20%
  • GAM international sales increased by 32%
  • Polaris has the leading ORV market share outside of North America
  • Polaris increased its full year 2018 sales guidance to up 4% to 6%
    • ORV/Snow is expected to increase mid-single digits %
    • GAM is expected to increase high single digits %
  • Management addressed the latest recalls and stated that they were part of the process of improving their systems, working with the CPSC and identifying any previous outstanding thermal issues. Moving forward under the new systems in place management expects to see fewer recalls involving a smaller number of vehicles.

Learn more:  Seekingalpha.com (Polaris Earnings Call Transcript)

SVR’s Take:  This was another strong Polaris earnings report and the last large recall appears to be related more to the company’s previous issues than an ongoing or new problem. The company seems to be back on track with strong performance in both Ranger and RZR and introducing innovative new products like the RZR RS1. I’m curious to see what the GAM acquisition they referred to could be. After the failed Eicher-Polaris JV are they going to try to buy their way into the Southeast Asian STOV market as an alternative? In the past they have often acquired strong brands that could be grown with improved financial and engineering resources as well as expanded distribution. I previously speculated on the pros and cons of Garia as an acquisition target, which offers a luxury international brand and electric vehicles.