August is typically one of the weakest months of the year for Average Wholesale Price (AWP). Surprisingly, that was only partially true this year. August 2014 brought notable increases in AWP over 2013 for sport motorcycles and most off-road categories (ATVs, MX and Side-by-Sides). The ATV category rose 15 percent and the MX category rose 12 percent over 2013, while Side-by-Sides paralleled 2013 with no change overall. Sportbikes gained seven percent over last year to the highest AWP since Feb. 2014.
Conversely, both domestic and metric cruisers softened as expected. Domestic cruisers went down by six percent while metric cruisers experienced a softer four percent decrease. Similar trends hold true for the directional movement of AWP in August over the prior three month average – the sportbike and most off-road categories rose unexpectedly, while cruiser and other categories softened as usual.
Note that dual sport motorcycles and PWCs also saw substantial growth year-over-year, while the snowmobile category went down 16 percent. Unlike the categories above, these segments are highly unpredictable from month-to-month due to smaller volumes.
On The Horizon
We analyzed potential reasons for the atypical trends in off-road and sportbikes and found a number of contributing factors. One finding is that it is not materially volume-related – the number of vehicles offered and sold for off-road categories in August 2014 were roughly similar to that offered in 2013, while the number of sportbikes sold was actually greater in 2014.
The average condition and model age for off-road products did improve slightly, which explains part of the rise in AWP for those categories. For sportbikes, the mix of quality and age over last year was roughly the same. However, the average ratio of AWP to NADA clean wholesale was roughly the same, suggesting that although the quality of the product was similar year-to-year, the mix of models was not. Specifically, the AWP for Suzuki sportbikes rose almost $700 per unit due to a higher ratio of more expensive models combined with higher demand for Suzuki sportbikes due to supply constraints within the overall market.
In general, we think the rise in August AWP is temporary, especially after following a few months of softer pricing than usual. There may still be higher demand for specific sportbike brands and hard-to-find off-road product, but we expect AWP to drop back or remain flat for the surprise categories, and that the typical softness will continue before beginning to recover later in the fall.
Even though new model-year vehicles are entering the market, we believe consumers are still hungry for product and that excessive downward pressure on pre-owned prices will not be an issue. Now is still a great time to begin buying for the coming season while inventory is still a relative bargain. Low mileage, preowned vehicles in good condition will always be in demand.