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OEM Update: How CFMOTO is Problem-Solving Pandemic Woes

Demand has never been higher … but supply has never been lower. As a result of pandemic shutdowns and social distancing, market demand for powersports shot up starting in March and April 2020. While that was good news during an uncertain period for dealers and manufacturers alike, it was only a matter of time before supply couldn’t keep up with demand.

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By now, we’re all aware of the chip shortage (in addition to other raw materials) hampering the production of new vehicles. As if that weren’t enough, now there’s a worker shortage. We’ve heard the stories of dozens of ships waiting to dock and unload at the Port of Los Angeles, and we’ve seen the photos of stacks upon stacks of freight containers sitting there, just waiting to be unloaded. Your inventory may be here, but it’s not doing you any good sitting at port.

Due to increased demand, it’s no surprise powersports prices saw a sharp increase in 2021 – even more than last year, when demand skyrocketed. While prices have since leveled out from the meteoric rise this past summer, according to J.D. Power’s Q3 2021 Market Insights analysis, prices for motorcycles and side-by-sides (SxS) were trending at least 20% higher in the September to October period in 2021 over 2020. Specifically, for the most recent 10 model years:

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  • Cruisers averaged 18.6% higher.
  • Sportbikes were up 21.7%.
  • Utility-model SxS prices grew 25.3%.
  • Sport-model SxS prices averaged 31.6% higher.

With customers willing to pay these kinds of prices, how can manufacturers pass up such a prime opportunity to grow business during unprecedented demand? They can’t – so they’re looking for as many ways to stock inventory as possible. We reached out to CFMOTO, an ATV manufacturer just starting to enter the motorcycle market as well, for some insight into what the pandemic has looked like from the manufacturing standpoint.

Supply Chain Woes

The name of the game is securing inventory. But to do that, you almost have to have a crystal ball to make sure your inventory arrives in time. As such, manufacturers are trying to look further out on their timelines than usual to evaluate their needs for parts and secure their containers ahead of time. Of course, it isn’t always that easy.

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Chris Peterman, director of motorcycle strategy for CFMOTO, explains, “We are trying to get [our vendors] as much information now, so we can – if we can – secure more containers ahead of time, and that’s really what it’s all about right now. But even when you think you’ve got a contract for secured containers… we still have to look outside of our contracts and grab whatever we can.”

Related: ATV-UTV Market Update

As much as the company is trying to forecast needs better, Peterman wonders how sustainable this practice really is. Unfortunately, such complex issues likely won’t be resolved any time soon. We’re coming up on the holiday season, which is always a selling frenzy, and while sales might ease up after the new year, the strain on the supply will not.

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John Tranby, director of marketing for CFMOTO, predicts, “I think the spring would be really aggressive in terms of expectations. From what I have seen in the past and what I am hearing from these forward-looking conversations that we are having, I even see mid-year next year as being a really aggressive target. I mean, I think the expectations are almost that we’re going to go through this for another full calendar year.”

To Grow or Not to Grow?

Reflecting on those first months of the pandemic shutdown, Tranby says, “I think back to last March, April, where it was like, which way is this thing going to go? I was pulling back. If we had only known, we’d have been on the gas. I mean just fully on the gas.” 

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Even so, CFMOTO has seen a huge increase in dealer inquiry, and while the company is looking to grow in the future by selling to more dealers, right now, it’s had to limit its four-wheel sales to a little over 500 dealers and keep a hold its new growth in the motorcycle market – the consequence of having little inventory to sell.

“You wouldn’t believe the number of new dealer inquiries we’ve got coming right now, and from all those dealers we’ve knocked on their doors for the past eight years and are like, ‘CFMOTO who?’ Now they’re actually kind of coming back our way, and while it’s hard to say no – you may only have one shot at them – we literally have kind of had to and will continue to have to,” Peterman laments.

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According to Peterman, selling valuable inventory to new dealers would be a slight to the company’s current customers, who would see that inventory as something they should have had. Even so, since CFMOTO is building from the ground up with its motorcycle product, it’s taking a strategic approach to growing its dealership base. According to Peterman, the company generally will look at the largest states that consequently have the most numbers of motorcycle registrations: California (although there’s a whole kettle of fish of other factors at work in this state), Texas, New York and Florida, for instance. From there, the company zooms into its dealer network on the city-level to see where it needs to be.

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Advertising and Training

Advertising during a pandemic when product is in short supply is tricky business. When working with its dealer partners, CFMOTO chose to pull back on that front as well. “When we’re dry on inventory, I don’t want to be pushing dealers to push customers to go to a dealer looking for a unit that’s not there,” Peterman says. Therefore, instead of focusing on advertising that will bring a customer into the store, the company helps its dealers optimize the CFMOTO section of the store itself to draw the eyes of walk-ins.

As a smaller manufacturer, CFMOTO may not have the advertising budget that some of the other big-name brands do, but nevertheless, it offers both the marketing materials and assistance in crafting in-store displays to its dealer partners. That said, CFMOTO does plan to hire a channel marketing manager in the future whose sole responsibility would be to visit dealers and help them optimize the branding in the store.

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Another service CFMOTO offers that changed during the pandemic is service and sales training. Under normal circumstances, CFMOTO would host regional training events, where dealers would send in their staff to receive up-to-date training. However, no one was going anywhere during the pandemic. As such, CFMOTO then offered a learning management system (LMS), allowing staff members to learn such tasks as product-inventorying a unit and sales walkaround; thereafter, they can take a test to prove their proficiency.

Peterman, however, has spoken with dealers who have been concerned about a different sort of training flagged during the pandemic: sales training. “Because the dealers have sold most of what they’ve got in every brand in the last 15 months… they feel like this is breeding bad habits with their sales people, with their service people, with their parts people,” Peterman explains.

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Naturally, the market cannot sustain these sorts of conditions forever, so what happens when it finally does shift, and salespeople need to actually start selling again, no longer able to just take a number?

Despite the worries – or perhaps because of them – Peterman isn’t too concerned. “[The dealers] seemed like they were pretty on top of it for taking care of their customers and making sure they’re honing their skills regularly,” he notes.

That sort of continuous improvement is just another example of the powersports market forecasting the future. After all, the better you can prepare for the next big shift in the market, the better you’ll be able to weather it.

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