SxS Market Update in the COVID-19 Crisis

The side-by-side market was on an upward trajectory until March, when the world was hit with the COVID-19 pandemic. Most of the powersports industry, and country, shut down or reduced staff and limited retail operations.

The side-by-side market was on an upward trajectory until March, when the world was hit with the COVID-19 pandemic. Most of the powersports industry, and country, shut down or reduced staff and limited retail operations.

We won’t dance around the effect that the pandemic has caused on society, but we also think that we will all return to work sooner than later and bounce back stronger than ever. If the previous trends hold, then UTVs should continue to see steady growth after the crisis ends. 

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On the pre-owned side, UTVs have held steady in the off-season and were off to a solid start in early spring, according to data from National Powersport Auctions. “The values seem to hold well, even in the used market for side-by-sides,” Jim Woodruff, CEO of NPA, told MPN in February before the crisis hit the U.S.

He said that SxS customers are a different kind of buyer. The demographic that plunks down $40,000 on a SxS with a bunch of accessories is a different demographic than someone that might plunk down $40,000 on a big V-twin bike. There’s more of the SxS buyers right now. It’s a broader demographic as well.

According to reports, the North American ORV industry was up mid-single digits percent last year compared to the fourth quarter of 2018. Polaris, with arguably the largest share of the ORV market, had a solid 2019 with sales up 7% in Q4 and had high hopes for a breakout 2020. The company reported that ORV sales were up low single digits overall in 2019 with market conditions that included record low unemployment, low-interest rates and banks working with powersports dealers to ensure loans for lower credit-rated customers. 

How this changes after the current coronavirus crisis is anyone’s guess. Still, if the stay-at-home orders are lifted, and the economy can fire up again, we think the momentum will continue. However, we can’t make predictions on any timeline. Most of the industry people we spoke to said that the situation is too fluid to answer questions about the future with any confidence. 

In response to the COVID-19 pandemic, Polaris, as well as most UTV manufacturers, quickly enacted measures to reduce the spread of infections to employees and customers. As many manufacturers are trying to navigate through the current environment, they are reducing expenses and furloughing staff to help boost financial flexibility to get through the crisis.

“This is an unprecedented crisis with a sudden and stark impact on our business, but in difficult times Polaris has always responded with agility and proved our resilience,” said Scott Wine, Polaris chairman and CEO. “While the immediate future is uncertain, what is crystal clear is that Polaris must act judiciously but decisively to win both during this situation and after it is resolved. The measures we are taking today are necessary responses to a dynamic environment that compels us to bolster our liquidity and rapidly adapt to extraordinary circumstances.”

Polaris also said it would draw down an incremental $150 million of its revolving credit. But the company has plenty of cash on hand to weather the storm. As of March 31, Polaris said it had more than $420 million in reserve to help weather the current COVID-19 crisis. 

Yamaha Motor Corporation reported that its U.S.-based manufacturing subsidiaries have also paused production in response to COVID-19.

“The well-being of employees is of utmost importance,” said Bob Starr, corporate communications manager for Yamaha Motor Corp., USA. “This step is being taken with the factories to protect the health and safety of all team members, their families and our local communities.”

Affected manufacturing plants include Yamaha’s factory in Newnan, GA, where their UTVs are built, among other locations.

ROXOR reported that up to March, sales have continued to climb. “We’re beating our YOY performance on a regular basis,” said ROXOR marketing manager, off-road vehicles, Dan Proffer. “Our brand awareness is also continuing to build.”

While MIC doesn’t track UTV sales, estimates from our sources put them at roughly 500,000-600,000 annually in new unit sales. With motorcycle sales around this same level and on the decline with baby boomers, it is clear that UTVs are driving the industry at this point. 

Proffer agreed with this assessment. “Notwithstanding COVID-19, we also see the segment continuing to grow steadily. We see growth across the board (in the various segments within ORV), but particularly in the work/utility end of the segment.”

Proffer believes that UTVs are experiencing record growth due to their broad range of uses. “They are relatively easy to operate, and the ability to carry several people has naturally broadened the demographic appeal of UTVs. Where other powersports vehicles were limited to a single user, specific use and not easily operated by wide ranges of people, the SxS UTV solves for all of those. Thus, we’re seeing, and believe, will continue to see, more families of all age ranges, and entrants into powersports as a result of the SXS UTV option.”

Besides new unit sales, SxS customers also spend a healthy amount on accessories that could range from audio equipment to wheels and tires. “On average, we see consumers spending well over $1,000 on accessories per new unit sold with a healthy growth trend,” Proffer revealed. “We anticipate continuation in this area as our accessory offering increases, and as the aftermarket continues to develop new products for the ROXOR.”

ROXOR has also closed production following the shelter-in-home policy enacted by the Michigan Governor. “We are actively looking for opportunities to switch our production over to manufacturing products that can help with the COVID-19 fight,” Proffer said. “We will continually monitor this situation, but as of now, it’s business as usual, and we look forward to restarting production as soon as it possible (and safe for all concerned).”

BRP/Can-Am’s Global Consumer Public Relations Manager, Brian Manning, said that they are taking all necessary precautions but notes that it is difficult to comment at this time since the situation around COVID-19 is extremely fluid. “Of course, we agree — the show must go on! And it is, but the reality is we are evolving every day as we learn more about the global impact. I will say that we have worked very hard to put programs in place to take care of our dealer network during this incredibly difficult time.”

Can-Am’s North American retail sales grew 12% in the quarter with SxSs growing more than 30%; revenues for SxSs have also increased by 7.3%.

While BRP saw a 15% increase in retail sales in a relatively flat North American industry, exceeding their $6 billion revenue targets. José Boisjoli, president and CEO, said that his thoughts are with all those who have been affected by the
COVID-19 virus. 

“We are putting in place different measures to ensure the health and safety of our employees across the world. In this current global uncertainty, we are proactively implementing measures to protect our financial flexibility and are monitoring the situation closely to assess its potential impact on our business,” Boisjoli said. “Our diversified manufacturing footprint, product portfolio, market presence and our experienced management team provide us with a solid base to navigate through this period of uncertainty while preserving our industry leadership position.”

BRP reported that it has temporarily suspended or slowed down all powersports and marine manufacturing operations around the world due to COVID-19. They are evaluating and responding to the changing conditions daily, as well as to respect international health and safety recommendations in the face of the crisis. When and at what frequency the different production lines resume will vary, according to a BRP press release. Slowdowns or reduced work hours are also being implemented for office staff worldwide. The company said it is remaining agile and deploying prudent measures to ensure the safety of its employees and partners.

HISUN Motors said they are supporting their dealers and customers by working diligently behind the scenes to adapt their operations to continue business as usual.

“We have successfully setup a telecommuting network that allows many employees to work from home and continue to deliver the level of support that you deserve,” said Gabriel Cruz, media development manager at HISUN. “Together, we can collaborate from anywhere and achieve more as a team. Our warehouse and production teams have stepped up and continue to perform critical business roles on site. These teams allow HISUN to continue fulfillment of product and part orders to support our customers. We strive to meet or exceed all applicable local, state and federal laws and have a dedicated team that is working on ensuring we stay up to date on the laws as they change in our community and state.” 

Kawasaki and Honda did not provide details to MPN at the time of writing this article. Still, we have read reports that they have also taken precautions during the COVID-19 crisis to shelter in place where necessary and are implementing social distancing. 

As the industry takes an unexpected break and slows down to deal with this crisis, now is the time also to take stock of ways to come back stronger when the markets open up again. Will you have the workforce ready, the products in place and will the customers come back? We think there will be more incentive than ever to go out and ride. But for now, let’s #RideItOut. 

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