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Common Tread

State of the industry: Three takeaways from the Powersports Business webinar

Jun 22, 2017

The recovery in sales of new motorcycles is weak to the point of being stalled, while consumers are buying more used bikes and, it seems, anecdotally at least, they're spending more to buy parts for those older motorcycles and repair them.

Is that the state of the motorcycle industry?

I listened in yesterday on the sixth annual State of the Industry webinar put on by Powersports Business. The discussion is primarily aimed at dealers and those in the parts and accessory businesses, but I think we all benefit from understanding the industry better, even if we're just trying to be well informed consumers. Here are three points I came away with from the one-hour discussion.

Squeezed margins for new motorcycles

If you think your local dealer is getting rich selling new motorcycles, think again. Instead, margins are shrinking, said Robert Grant, Business Development Engineer for CDK Global Recreation. CDK provides the Lightspeed dealer management software many dealers use and has compiled data on 2.9 million new units since 2013.

Over a five-year period, gross margins have shrunk 1.9 percent on motorcycles, ATVs and UTVs, said Grant. Margins shriveled even more in the V-twin category, by 3.2 percent.

Yamaha FZ-07 in the city
While manufacturers have brought out more affordable models in recent years to make motorcycling more accessible, that has also cut into margins for dealers. Photo by Nelson & Riles.
Despite that, 79 percent of dealers were profitable in 2016, according to the Powersports Business survey, said Managing Editor Liz Keener. So how did dealers make up for shrinking margins on sales of new motorcycles? Sales of parts are up modestly and revenue from repair orders grew even more, Grant noted.

While the CDK numbers lumped motorcycles and UTVs together, UTVs are clearly the bright spot, not just in sales, but also accessories. The average sale of parts and accessories to go along with a new unit is nearly twice as much for a multi-purpose UTV as it is for a touring motorcycle, Grant noted, and the motorcycle was the only category in which parts sales declined.

In addition to parts, accessories and repairs, dealers are probably also making a little more money from selling pre-owned motorcycles, too, as we'll see in the next point.

Used motorcycles are hot

National Powersport Auctions handles wholesaling of pre-owned motorcycles, whether they're trade-ins a dealer doesn't want or a repossession. Over the last 15 years, NPA has done $5 billion in transactions, said COO Jim Woodruff, which gives it a large database of information on prices as well as real-time data on changing trends. The trend right now is that pricing is strong for used motorcycles.

In addition to pricing trends, Woodruff is seeing other evidence of a strong used motorcycle market. Fewer of the motorcycles coming to auction are coming from dealers. Instead, they are holding on to more of those units, probably because they figure they can sell them for a profit.

Woodruff sees signs for hope in the pre-owned market, even for dealers who would rather be selling a new motorcycle to a customer.

"Pre-owned is a gateway to new unit sales," Woodruff said. "Pre-owned is a great way for new riders or re-entry riders to get into the market."

And that brings us to the third point: how to expand the market, rather than fight over the same shrinking share. That means both re-energizing dormant riders and creating new ones, particularly among young people.

rider training
Bringing new riders into motorcycling is one goal everyone in the industry agrees on. Photo by Lemmy.

Expanding the number of riders

Not only are new motorcycle sales still less than half of what they were at their peak in 2006, the modest upward trend in recent years has also stalled. Motorcycle Industry Council President and CEO Tim Buche said that projections for 2017 suggest a 0.8 percent decline in sales from 2016.

Only about a third of the people who have a motorcycle license in the United States actually own a motorcycle, according to statistics cited by Buche. All three speakers agree that reigniting interest among lapsed riders and, more importantly, attracting new riders, is key to the health of the industry long-term.

"When a manufacturer talks about creating two million new riders over the next 10 years, that's music to my ears," said Woodruff.

Not surprisingly, dealers who sent in questions asked about selling to Millennials. (Maybe they should read our How to get Millennials to ride motorcycles article.)

Woodruff said he saw a great opportunity because Millennials tend to be more interested in experiences than material possessions, and motorcycles and UTVs can be sold on the basis of the experiences they bring.

Buche cited survey results that revealed several factors that were important in improving customer satisfaction. They included offering test rides and following up after the sale. The speakers also noted that younger riders in particular will turn to a trusted source, so if you win over one member of a group, you have a better chance of becoming the "go-to" source for that customer's friends.

"Motorcycle affordability levels are at an all-time low," Buche said, adding that Millennial buyers are particularly interested in less expensive models. Manufacturers have responded with new bikes aimed at making it easier to buy into motorcycling, but the downside for dealers is that these smaller, less expensive models have contributed to the margin shrinkage mentioned earlier.

Summing it all up, I see the state of the industry as stagnant, in terms of growth, but dynamic in terms of searching for ways to approach the challenges. A lot of thought has been put into long-term plans to keep motorcycling from shriveling away in the United States, whether it's Harley-Davidson promising to create two million new riders or Honda offering 10 different street-legal models of 500 cc or smaller, just to cite two examples. If you're looking for easy money, I wouldn't recommend this business, but that doesn't mean you can't have a good time.