Can-Am earnings were strong for the fourth quarter and fiscal year for 2019. Annual revenues increased 18% from $4.5 billion to $5.2 billion (CA$) and quarterly revenues jumped 23% to $1.5 billion. The following are highlights from the recent earnings call.
North American powersports retail sales excluding snowmobile sales grew 19% while the industry decreased low single digits in the fourth quarter
North American side-by-side sales increased high teens while the industry increased single digits
Can-Am grew market share in side-by-sides
Increased UTV production capacity by 30% at Mexico facilities with another 50% capacity increase planned for the coming year
Continued to introduce a new side-by-side model every six months following their long term plan
Side-by-side market remains competitive with promotions or “back end” money going to dealers to reduce net pricing
Can-Am Earnings Guidance for FY2020
Management is expecting continued growth for fiscal year 2020
Annual revenue is expected to increase 7-11%.
Year-Around Products revenue is expected to grow between 12% and 17% driven primarily by side-by-side models.
Can-Am has grown into the main rival to Polaris in the North American side-by-side market. They have continued to gain market share for several years and have separated themselves from the rest of the pack chasing Polaris. They are the only company that has been able to match the market leader’s level of new model introductions. The development of their Defender product lines to pursue the utility vehicle segment has been a key to unlocking more growth. The complete Can-Am side-by-side lineup now comes close in size and segment coverage to the Polaris armada. Can-Am appears to be running on all cylinders and I would expect them to continue increasing revenue and market share.
Textron Off Road recently recalled approximately 700 model year 2018 Stampede and Rustler utility vehicles. The lower front suspension arm can fail and potentially cause a crash. The recall involves two-seat and four-seat models including the Stampede, Stampede 4, Rustler 850 and Rustler Crew 850. The following recall information is from the Consumer Products Safety Commission.
Stampede & Rustler Recall Information
Name of product: Stampede and Rustler off-highway utility vehicles (ROV’s)
Hazard: The lower front suspension arm can fail, posing a crash hazard.
Recall date: March 5, 2019
Units: About 700 (In addition, about 70 were sold in Canada.)
Consumer Contact: Arctic Cat at 800-279-6851 from 8 a.m. to 5 p.m. CT Monday through Friday or online at www.textronoffroad.com and click on Recall Information located at the bottom of the page for more information.
Description: This recall involves all model year 2018 Stampede and Rustler model side by side Arctic Cat off-highway vehicles with VIN number 9003240 through 9004062. The recalled vehicles were sold in multiple colors, have four wheels and side-by-side seating for two or four people. The Stampede models have Textron Off Road on each side of the hood area and Stampede on each side of the box. The Rustler models have Rustler 850 on each side of the hood area and 4X4 on each side of the box. The Vin number is located under the front hood on all models.
Remedy: Consumers should immediately stop using the recalled ROVs and contact TSV/Arctic Cat to schedule a free repair. Arctic Cat is contacting all known purchasers directly. If you need assistance locating an authorized dealer to conduct this repair, contact Arctic Cat.
Incidents/Injuries: The firm has received four reports of front suspension arm failures. No injuries or crashes have been reported.
Sold At: Textron Off Road and Arctic Cat dealers nationwide from September 2017 through December 2018 for between $13,800 and $16,000.
Manufacturer(s): Arctic Cat Inc., of Thief River Falls, Minn., a subsidiary of Textron Specialized Vehicles, of Augusta, Ga
Manufactured In: United States
Recall number: 19-727
This is a small recall, but follows on the heels of another recent Textron Off Road recall. Textron produces the Rustler UTV for farm equipment manufacturer New Holland. The two companies partnered several years ago to produce utility vehicles. The partnership marries Textron’s vehicle manufacturing expertise with New Hollands farm oriented distribution network. SVR maintains an ongoing list of recent STOV recalls.
Textron Off Road recently announced the recall of approximately 200 model year 2019 Havoc utility vehicles. Fuel can leak from the fuel line and pose a fire hazard. The two-seat UTVs were sold from October 2018 through January 2019. Consumers should stop using the vehicles and contact an Arctic Cat dealer to schedule a free repair. The following recall information is from the Consumer Products Safety Commission.
Havoc Recall Information
Name of product: Havoc off-highway utility vehicles (ROVs)
Hazard: Fuel can leak from the fuel line, posing a fire hazard.
Recall date: March 5, 2019
Units: About 200
Consumer Contact: Arctic Cat at 800-279-6851 from 8 a.m. to 5 p.m. CT Monday through Friday or online and click on Recall Information located at the bottom of the page for more information.
Description: This recall involves Model Year 2019 Textron Havoc off-highway utility vehicles manufactured by Arctic Cat. The two-seat vehicles come in three color combinations: Charcoal metallic/black, red/black or white/black. The vehicles have Textron Off Road printed on each side of the hood and Havoc on each side of the rear cargo box. Vehicle identification numbers (VIN) ending in 9007497 through 9007717 are included in this recall. The VIN is stamped under the vehicle’s front hood.
Remedy: Consumers should immediately stop using the recalled vehicles and contact Arctic Cat to schedule a free repair. Arctic Cat is contacting all known purchasers directly.
Incidents/Injuries: None reported
Sold at: Textron Off Road and Arctic Cat dealers nationwide from October 2018 through January 2019 for between $14,000 and $18,000.
Manufacturer(s): Arctic Cat Inc., of Thief River Falls, Minn., a subsidiary of Textron Specialized Vehicles, of Augusta, Ga.
Manufactured In: United StatesRecall number:19-726
This is a minor recall, but does again involve an issue with the fuel lines or fuel system. There have been at least six recalls from across the industry since early 2015 that involve fuel system problems. SVR maintains an ongoing list of recent STOV recalls.
In December, Kawasaki announced the recall of approximately 1,000 Mule Pro utility vehicles. The vehicle’s ROPS can fail to protect occupants. The recall involves model year 2018 and 2019 Mule Pro DXT, DX, FXT, FX and FXR vehicles sold from August to September of 2018. The following are recall details from the Consumer Products Safety Commission.
Hazard: The vehicle’s rollover protection structure (ROPS) can fail to protect consumers, posing an injury hazard.
Recall date: December 6, 2018
Units: About 1,000
Recall Date: December 6, 2018
Units: About 1,000
Consumer Contact: Kawasaki toll-free at 866-802-9381 from 8 a.m. to 5 p.m. PT Monday through Friday or online at www.Kawasaki.com and click on “Recalls” for more information.
Description: This recall involves 2018 and 2019 Mule Pro utility vehicles. The four-wheel, off-highway utility vehicles were sold in black, green, white, red, bronze, silver, camo and blue. They have side by side seating for three to six people and automotive style controls. Mule Pro is printed on the right and left front fender. Kawasaki is printed on the cargo box. The Vehicle Identification Number (VIN) is located on the steel frame between the right front lower A-arm mounts.
Mule Pro-DXT (EPS)
JKAAFCA1XJB501117 through JKAAFCA11JB501152
Mule Pro-DXT (EPS)
JKAAFCB18JB503625 through JKAAFCB18JB503642
Mule Pro-DX (EPS)
JKAAFCE1XJB502410 through JKAAFCE18JB502437
JKBAFSA13KB501645 through JKBAFSA14KB501671
JKBAFSB15KB513858 through JKBAFSB18KB514230
JKBAFSC19KB513036 through JKBAFSC19KB513361
JKBAFSD18KB506741 through JKBAFSD1XKB506787
Mule Pro-FX (EPS/LE)
JKBAFSF13KB506336 through JKBAFSF10KB506603
Mule Pro-FX (EPS/LE)
JKBAFSG18KB504354 through JKBAFSG1XKB504355
JKBAFSJ19KB508972 through JKBAFSJ15KB509343
JKBAFSK14KB504620 through JKBAFSK17KB504630
Remedy: Consumers should immediately stop using the recalled utility vehicles and contact a Kawasaki dealer to schedule a free repair. Kawasaki is contacting all known purchasers directly.
Incidents/Injuries: None reported
Sold At: Kawasaki dealers nationwide from August 2018 through September 2018 for between $13,000 and $17,000.
Importer(s): Kawasaki Motors Corp., U.S.A. of Foothill Ranch, Calif.
Distributor(s): Kawasaki Motors Corp., U.S.A. of Foothill Ranch, Calif.
A recent article speculated that Ingersoll-Rand’s acquisition of Precision Flow Systems could pave the way breaking up the conglomerate. Club Car is one of the pieces that seems a poor fit with the rest of Ingersoll-Rand. If this is the case, then Polaris Industries might be a good suitor.
The Pros for Acquiring Club Car
A strong international brand
Club Car has a number of characteristics that match previous Polaris acquisitions. First, Club Car is a leading brand, if not, the leading brand of the three major golf car manufacturers. Second, it is an international brand. Third, Club Car participates, in part, in a fragmented industry. Therefore, Polaris would have an opportunity to use their resources to establish a more dominate market position. While the golf car fleet market is primarily a three company affair, Club Car, E-Z-GO and Yamaha, the non-fleet personal transportation vehicle (PTV) and light utility vehicle markets are more fragmented markets. Fourth, a large installed base of vehicles forms the basis for a substantial parts and accessories business. This was a key reason for the Polaris purchase of Taylor-Dunn.
Club Car complements Polaris vehicle portfolio
A large portion of Club Car vehicles sold are electric and would fit well with the Polaris EV portfolio. Other EVs in the Polaris portfolio include GEM, Goupil, Taylor-Dunn and Aixam. Polaris could spread their battery and EV powertrain development costs over a larger number of vehicles. In addition, Club Car’s end markets and distribution network would complement current efforts by Polaris. Their PTVs would complement the street legal GEM vehicles and their light utility vehicles would complement the more heavy-duty Rangers.
In addition, the golf manufacturer’s dealer network would expand Polaris’ footprint. While there is some overlap with the GEM and Taylor-Dunn dealer networks, there would also be a large number of additional dealer locations in the US and internationally. Furthermore, these dealers could be used to expand the GEM and Taylor-Dunn distribution. Club Car end markets such as golf courses, resorts, colleges, airports and other institutions would also take Polaris into new markets or broaden their vehicle offerings where they overlap.
The Cons for Acquiring Club Car
Is there enough growth?
Polaris looks for acquisitions in growing markets and/or traditionally strong but neglected brands that they can leverage. In the case of Club Car, the fleet golf car market has been declining for a number of years. The PTV and light UTV markets are growing but not at really high rates and are a smaller part of the business. Club Car isn’t necessarily a neglected brand but is somewhat lost among much larger Ingersoll-Rand businesses. In contrast, Polaris might be able to focus more attention and resources and make a strong brand even stronger.
Another acquisition to swallow
Polaris has already made a number of acquisitions in the past year, adding Boat Holdings and the Marquis-Larson Boat Group to start a new boating business. Acquiring Club Car would require more management time and focus to successfully integrate the business into Polaris. In addition, the purchase would likely add additional debt to their balance sheet. Polaris management might want to finish integrating their recent acquisitions before adding another piece and avoid increasing their debt.
What Will Polaris Do?
A strong argument could be made that Polaris should acquire Club Car if it’s for sale. The key questions are whether the management perceives if there is enough growth in the market, and do they think they can use their resources to drive more growth. The combination of the PTV and light UTV markets along with the parts and accessories business may offer enough potential. Timing may also be an issue. Any down turn in the economy, which some are predicting, would hurt Polaris. Discretionary income drives a significant portion of their sales.
Polaris reported another strong quarter and full year with 4th quarter sales of $1.6 billion, up 14% from last year. Full year sales topped $6.1 billion, up 12% from the prior year. The ORV/Snowmobile segment reported sales of $1.1 billion for the quarter, an increase of 7% year over year. The ORV portion declined 2% as the company had a tough comparable with the prior year’s quarter. On a negative note, management expects tariff and trade war costs to total between $110 to $120 million company wide for fiscal year 2019. They will hit the ORV and Motorcycle businesses the hardest. A significant portion of the Q&A on the call revolved around tariff and trade war costs. A summary of the earnings call highlights related to the STOV market follow.
Polaris Earnings Call Highlights
Polaris side-by-side retail sales increased mid single digits % while ATV retail sales decreased mid single digits %
Average selling price for the ORV segment increased by 7% but were partially offset by tariff, logistics, and commodity costs
Polaris gained market share in the side-by-side market for the quarter and the full year
Management believes they are gaining share from Japanese competitors and Arctic Cat, now owned by Textron
Global Adjacent Markets revenue increased 4% to $122 million on the strength of commercial, government and defense and Aixam businesses.
Polaris increased wholegood prices 3.5% for the ORV/Snowmobile segment at the start of 2019 to counter tariff and trade costs
Revenue for ORV/Snowmobile and Global Adjacent Markets segments are expected to increase mid-single digits % for fiscal year 2019
Management does not expect to enter into electric powered markets until there is large consumer demand. Their response pertained to motorcycles but appears to be their general philosophy.
Textron Specialized Vehicles Launches Hauler 800 ELiTE Electric UTV
Textron Specialized Vehicles launched the Cushman Hauler 800 ELiTE electric powered utility vehicles. Samsung SDI lithium technology powers the ELiTE series. The Cushman Hauler 800 and 800X will feature the lithium battery pack. Textron is targeting golf course superintendents with these models.
The Hauler 800 and 800X ELiTE powertrains feature a 48-volt AC drive with a 11.7 hp (peak) motor and two zero maintenance lithium ion batteries. In comparison, the existing electric Hauler 800 and 800X have a 48-volt AC drive with 4.4 hp continues motor and six deep cycle batteries.
Textron’s initial introduction of the ELiTE lithium batteries in fleet golf cars was successful. As a result, utility vehicles used on golf courses are a logical extension of the program. Furthermore, from a macro market perspective, Textron is the first major manufacturer in the STOV market to make a strong push with lithium powered vehicles. While others have offered lithium batteries as an option on some vehicles, Textron is the first to incorporate them into key models.
Where is the Competition on Lithium Batteries?
Polaris diverse lineup sprinkled with lithium models
With the 2017 acquisition of Arctic Cat, Textron Specialized Vehicle business became an even more direct competitor with Polaris. Polaris has been active in the electric vehicle market for years. They invested in Brammo, and acquired Goupil in France and GEM and Taylor-Dunn in the US. However, to date, Polaris has not made a big push into lithium powered utility vehicles in the US. GEM vehicles have an option and the European based Goupil offers two lithium battery pack options for many models. Polaris briefly offered their Ranger EV with a lithium pack but the model was significantly more expensive. Their volume in fleet golf cars provides Textron with an advantage over Polaris when introducing lithium powered models.
Club Car enters the fray
At the recent 2019 PGA Show Club Car introduced its lithium powered fleet vehicle, the Tempo. According to sources, they are likely to introduce a lithium powered version of their Onward PTV later in the year. Like Textron, Club Car will have the advantage of production volume through fleet sales. They likely will follow suit and offer lithium powered utility vehicles in the future. A smaller manufacturer likely to follow the trend is STAR Electric Vehicles.
Using the 2019 PGA Merchandise Show as a launch pad, Yamaha Golf-Car Company unveiled their new light utility vehicle, the UMAX Rally 2+2. Aiming for a broad swath of the market, the company is marketing the vehicle as crossover model for work or play. The vehicle’s “rugged” styling is less golf car and more closely aligned with the rest of the UMAX line. The UMAX Rally 2+2 features a lifted suspension, front brush guard, wide fender flares and a convertible rear seat. In addition, customers can choose between a electronic fuel injected gas engine or AC electric powertrain.
UMAX Rally 2+2 Features & Specs
Additional features and specs include:
Powertrain Options: Yamaha 402cc, single cylinder EFI gas engine or 48V, 6.7 hp AC electric motor with 350 amp controller
Rear coil suspension system with individual coil springs with dual compressions for standard or heavier loads
Front bucket seats
Basket storage area behind the front seats
Sealed under-hood storage compartment
In-dash storage pockets with anti-slip rubber mats
HybriCore steel chassis
Tru-Trak II fully independent automotive-style strut front suspension
Mechanical drum front and rear brakes
15 mph top speed
This model will be available at authorized Yamaha dealers in Spring 2019.
Similar to many other UTV manufacturers, Yamaha is building out their utility vehicle line to drive sales growth. Marketed as a ‘work or play’ vehicle, this model is also trying to tap into the growing PTV market. The UMAX product line now includes four different models with most offering an option of gas or electric powertrains. Essentially, the UMAX Rally 2+2 adds a crew version to the lineup. The product line is versatile and can appeal to a wide range of commercial and consumer end users. The line offers varying levels of cargo and passenger capacity as well as light off-road capabilities.
Tracker, a leading boat manufacturer, and Textron Specialized Vehicles are forming a partnership to produce UTVs and ATVs and sell them under the new Tracker Off Road brand. Tracker is part of the White River Marine Group that includes Tracker, Triton, and Ranger boats, as well as Bass Pro Shop and Cabela’s. The Tracker Off Road vehicles will be sold through select Ranger, Triton, and Tracker, and other independent dealers, as well as at Bass Pro Shops and Cabela’s locations. They will be built at the Thief River Falls, Minnesota plant that produces Arctic Cat vehicles.
Tracker Off Road Product Lineup
The Tracker Off Road lineup includes four ATVs and four UTVs. The ATV line includes entry level youth and adult models and two more models with more features and capabilities. This lineup should be able to target a wide swath of the ATV market. The UTV lineup includes a personal transportation vehicle (PTV), and three models currently sold under the Prowler nameplate: the Prowler EV, Prowler Pro and Prowler Pro Crew. The corporate presentation also mentioned the potential of selling the Wildcat XX and even snowmobiles through the same distribution network.
The Textron Tracker partnership continues the trend in the UTV market of brands expanding beyond their traditional distribution networks. Typically, an established UTV brand partners with a traditionally non-UTV brand. They either re-brand existing models or develop similar but unique models to sell through the partner brand’s distribution network. Previously, major UTV brands have used this approach to gain access to farm equipment and outdoor power equipment distribution networks. In this case, Textron is tapping into marine distribution and outdoor apparel networks. In a similar vein, Polaris and Can-Am have recently acquired boating manufacturers. Primarily these acquisitions diversify their powersports portfolio. However, it would not be surprising to see them sell a select range of off-road vehicles through these marine networks. If the dealers believe they can make a profit and there is no territorial conflict with the traditional powersports dealers then these networks expand their geographic footprint and reach.
Polaris PRO XD 2000D is part of a new work-oriented UTV line.
The new PRO XD 4000D AWD from Polaris Commercial is the lines crew version.
PRO XD Overview
Last month Polaris Commercial launched their new PRO XD utility vehicle line. The line includes the PRO XD 2000D 2WD, the PROXD 2000D 4WD and the PRO XD 4000D 4WD. All three vehicles are purpose-built for work and are powered by a 898cc, 3-cylinder Kubota diesel engine. Polaris is engineered features to target three key areas they believe are necessary for work vehicles: durability, serviceability and safety.
For durability they designed a rigid chassis, a rust and dent resistant composite bed that can fit a full-size pallet, a heavy-duty sealed driveline, a reinforced seat with heavy-duty seat material and 26″ job site tires.
To improve serviceability Polaris:
Extended the maintenance intervals to 200 hours
Improved vehicle fault alarms for low oil, parking brake engagement, belt burn and engine overheat to identify problems earlier
Designed side access for dipstick and air filter servicing
Use front air intake for cleaner air and longer filter life
Integrated Polaris Pulse Connector to simplify accessory installation and improve uplift possibilities
For safety the PRO XD vehicles include:
Orange seat belts and vehicle decals to improve work site visibility
Backup alarm, horn and parking brake
System where the vehicle starts only in Park with brake enabled
Wide foot wells for easier entry and egress
Speed limited to 26 mph or as low was 15 mph
Engine Braking System for hill descending
Fully sealed cab
Features and Specs
Common features and specs across all three vehicles include:
24.5 hp, 898cc, 3-cylinder Kubota diesel engine
Engine Braking System
Automatic PVT transmission
1,250 lb. cargo box
2,500 lb. towing capacity
11″ of ground clearance
9″ of front and rear suspension travel
26″ Duro DI-2042 Power Grip tires
4-wheel hydraulic brakes
55W low/ 60W high, LED Tail
Kevlar backed seat material
The PRO XD 2000D AWD adds an all-wheel drive Ultra Turf drive system while he PRO XD 4000D AWD is the same but seats four and comes equipped with electronic power steering. The PRO XD 2000D 2WD starts at $14,599 the 2000D AWD at $16,099 and the 4000D AWD at $17,749. In addition, Polaris offers two standard accessories packages. The Work Package adds a poly roof, poly windshield, strobe light, air filter restriction gauge and wide angle rearview mirror. The Work Package with Cab System includes the same package plus doors, engine block heater, heater defrost kit and rear panel.
The new PRO XD vehicles are an improved version of basic work UTVs and replace the lower priced and lesser equipped Brutus vehicles. Last year Polaris Commercial discontinued the lower priced and less featured vehicles of their Brutus line, another work oriented UTV line, due to lagging sales, . In contrast, they kept Brutus HD PTO Deluxe, a fully equipped vehicle with a starting price of $24,099 which apparently sold well compared to the lesser equipped vehicles. According to earnings calls, the Brutus line did not quite live up to high sales expectations. In part because in the commercial UTV segment there is a different type of customer, sales process and sales cycle. Typically, a powersports dealer network does not serve this segment well.
Also, the Brutus uses a Kohler diesel engine and the PRO XD vehicles a Kubota. In the past Polaris did not have as much success developing their own diesel engines. They eventually switched to outside vendors. This makes sense since their volume of diesel powered UTVs is small compared to their overall sales. Development resources are better used elsewhere, and their diesel vehicles are improved by using an outside vendor specializing in developing high quality diesel engines.