According to the latest J.D. Power Powersports Industry Market Report, the weight of rising inflation and consumer confidence could have an impact on the otherwise successful powersports market in 2022. At the mid-year point of the year, now is the time for powersports dealers to take strategic action to build in revenue and protect gains generated to date. First, let’s take a look at the state of the market.

Overall, powersports pricing remains stable to slightly off the recent historic peak reached in 2021. While the market experienced a bit of seasonality in Q1 — for the first time in two years — all segments performed in the positive territory. However, there are signs of a maturing market:

• Utility side-by-sides averaged 13.3% higher in the first half of 2022, off 4% from market highs.
• Sport side-by-sides averaged 20.2% higher in the same period, off 3% from market highs.
• Cruisers averaged 11.1% higher in the first half of 2022, 5% lower than recent highs.
• Sport bikes averaged 9.7% higher in the same periods, off 7% from market highs.

In general, powersports dealers are still basking in the euphoric glow of the pandemic-driven 2021 market. According to a recent dealer sentiment survey, 59% of dealers ranked business conditions as good or very strong. But a black cloud may linger over new unit sales and overall inventory, with 72% of dealers reporting new unit sales as flat to negative and 76% described inventory as too low.

Economic Factors to Consider

While it might come in handy, powersports dealers would be well-served keeping their eye on market indicators and their business plans nimble. Several factors may play a role in the continued success — or potential downturn — of the powersports market in the second half of 2022.

Interest rates and inflationary concerns could play a notable role in the success of 2022. The Federal Reserve raised interest rates to 2.4% in July and has indicated future increases are likely. While these rate increases rattle financial markets, they truly have little impact on consumer’s ability to finance purchases such as a new powersports unit. 

An initial review by the U.S. Bureau of Economic Analysis shows that consumers are continuing to spend. Personal income and disposable personal income both increased 0.2% in July, while personal consumption expenditures also increased by 0.1%. Although inflationary pressures have begun to impact spending on discretionary purchases, the price of personal consumption expenditures did decrease by 0.1%, putting a few more coins in pockets.

Unemployment continues to decline as well, with the U.S. Department of Labor reporting another month of remarkable hiring, an overall 3.5% unemployment rate and several states setting all-time unemployment lows. But the Great Resignation lingers, and many workers continue to depart jobs in search of greener pastures.

Strategic Steps Spell Success

The pandemic overhang has people reevaluating their time and life choices. Consumers remain anxious for outdoors adventures. Dealers with off-road units or road cruisers who have successfully implemented online sales models with supporting finance and insurance (F&I) products and suitable margins should fare better than businesses that overreact to concerns of inflation or market volatility. Tap into the consumer desire to improve their “happiness quotient” and offer value-focused vehicles. Reach out to target demographics with the right deal at the right time and train your sales team to boost the investment with products that keep the unit on the road.

Although inventory constraints continue to hamper new unit sales for powersports, the used market continues to be a bright spot. Dealership staff who are mindful of bundling opportunities when selling a new unit are in a good position to also capture the used unit. Dealers who leverage used inventory — as well as a service department that can repair those units — have an opportunity to offset tight inventory issues.

While waiting for a new unit to arrive, dealership staff who are trained to effectively build in F&I during the online sales process will have an advantage over other dealers waiting for customers to walk through the door. Online sales are here to stay, and dealers who have not updated their websites and trained their staff to proactively work with customers in the digital realm will continue to miss lucrative deals.

Speaking of training, make sure it is a key component of second half plans. There are many new compliance regulations on the horizon as well as best practices for online selling. The team with the right skill set — and mindset — will position the dealership for success in the second half of 2022.