Kubota To Invest $80 Million To Expand US UTV Manufacturing

Posted on May 27, 2015 by Marc Cesare

Utility vehicles like the Kubota RTV400Ci will be built in a new manufacturing facility starting in 2017.

Kubota Tractor Corporation (KTC) and Kubota Manufacturing of America Corporation (KMA) announced plans to invest approximately $80 million in their Gainesville, GA manufacturing operations to increase production of utility vehicles, sub-compact tractors and turf products. The investment includes a new 502,000 square foot facility close to existing facilities for the production of RTV utility vehicles, as well as, upgrades to their existing facilities to enhance production for sub-compact tractors and turf products. The new facility will have the capacity to produce 50,000 utility vehicles per year. Construction is expected to begin in September 2015 and mass production in spring of 2017. Learn more: Businesswire.com

Comment: Kubota joins Polaris and Arctic Cat as the latest utility vehicle manufacturers to announce sizable investments in new and/or upgraded manufacturing facilities. This indicates that manufacturers are optimistic about the overall market in general and their products in particular. It also indicates that competition in the utility vehicle market will continue to be fierce and likely become more intense as these manufacturers will have to increase sales to generate returns on these sizable investments. SVR estimates that Kubota sells approximately 20-30 thousand UTVs a year in North America.

Arctic Cat Quarterly Earnings & Analysis

Posted on May 21, 2015 by Marc Cesare

The 2015 Wildcat Sport XT, a recent addition to the Arctic Cat side-by-side lineup.

The 2015 Wildcat Sport XT, a more recent addition to the Arctic Cat side-by-side lineup which is a bright spot among Arctic Cat’s business segments.

Arctic Cat recently released their financial results for the fiscal fourth quarter ended March 31, 2015. Management reported a net loss of $21.5 million on net sales of $98.9 million for the fiscal 2015 fourth quarter. In the prior-year quarter, Arctic Cat reported a net loss of $1.6 million on net sales of $145.4 million. Full-year net sales were down approximately 4% to $698.8 million from $730.5 million in fiscal 2014. Net earnings decreased to $4.9 million. Full-year net sales include an unfavorable foreign currency impact that reduced net sales by approximately $18.1 million.

Highlights of the earnings call related to the utility vehicle market include:

ATV sales (includes ATVs and UTVs) for the year decreased 15% to $284.1 million from $333.2 million in the prior fiscal year.
Strong sales of Wildcat side-by-side models were offset by lower sales of core ATVs to North American dealers and in international regions, including Russia, as the company reduced bloated dealer inventory of core ATVs.
At the retail level ATV and side-by-side sales increased low 20s% for the fourth quarter.
Management reported gaining market share in the side-by-side segment
Management announced $27 million of investment in US manufacturing facilities and is investigating establishing a facility in a lower-cost region of the world
In the fourth quarter Arctic Cat began shipping UTVs to Toro under their OEM agreement
Arctic Cat ATV sales are expected to increase 9-12% at the wholesale level for the coming fiscal year, primarily from Wildcat sales. Retail sales are expected to be in the 15-20% range.
Dealer feedback on the newest Wildcat Trail models has been positive as well as the new 2016 Prowler HDX announced in Febuary

Learn more: Seekingalpha.com (earnings call transcript)

Analysis: The new CEO Christopher Metz is moving aggressively to improve the company. One of his first moves was to take a significant write down related to excess ATV inventory. He appears to be moving more quickly to clean up inventory in the ATV as well as other business segments than his predecessor. He also created a new position, Chief Marketing Officer and added a new NA sales executive. In addition they are investing $27 million in improving manufacturing facilities.

While there will be some new products in 2016, with launches in August, the year will be dedicated more to cleaning up inventory and laying the foundation for a more efficient and productive company. Fiscal year 2017 will feature a more robust slate of product introductions. Despite some difficulties overall for the company, Arctic Cat’s side-by-side business continues to be a growth area. Expect the company to continue to aggressively buildout their product offerings in this area, targeting both the recreational sub-segments with new Wildcat vehicles and trying to expand into more areas of the work/utility segment under the Prowler product line.

GPS Industries Reports Strong Start For Telematics In 2015

Posted on May 7, 2015 by Marc Cesare

One of the Visage system’s screen views. GPS Industries has partnered with Club Car to provide the Visage system for fleet management and content delivery.

GPS Industries reports that they have signed more than 100 installation contracts to date to provide telematics and fleet tracking technology. Properties now using the technology include The Phoenician (AZ), Turnberry Isle Resort (FL), Omni Interlocken (CO) and Journey at Pechanga (CA).

GPSI has an exclusive partnership with Club Car whose Connected Precedent i3 golf car showcases the Visage Mobile Golf Information System and recently-launched Visage Media Network. The mixture of technology and software allows properties from golf courses to master-planned communities to track, control and deliver promotional content.

According to GPSI, “The Visage system offers hole-by-hole graphics and flyovers, scoring and gaming, on-course food and beverage ordering, and addressable promotional messages on high-resolution 10-inch touch screens mounted to Club Car Precedent golf cars. Featuring in excess of 75 million-plus page views monthly, the Visage Media Network represents the largest connected global audience of golfers.” The company is also working on new applications to leverage the platform for social media and user generated content.

The appeal for golf courses and the like is that they can reduce costs through better fleet management, increase revenues from food service and promotions and provide a better experience for their customers. Learn more: GIuser.com

Polaris Reports Record First Quarter 2015 Results

Posted on April 23, 2015 by Marc Cesare

Polaris yet again reported record quarterly results with first quarter 2015 sales reaching $1,033.3 million, up 16% compared to the previous year. Operating income increased 19% to $150.3 million during the 2015 first quarter. Currencies in the 2015 first quarter had a $32 million negative impact on total company sales versus Q1 of last year. Here are some of the highlights related to the STOV market. Comparisons are between first quarter 2015 to first quarter 2014, unless otherwise stated. The highlights have been updated following the earnings conference call with analysts.

Off-Road Vehicle (ORV) sales, which includes UTVs and ATVs increased 11% to $645.4 million.
ORV inventory increased primarily in the ATV segment.
Polaris North American ORV unit retail sales were up mid-single digits percent, with consumer purchases of Rangers and RZRs each increasing from the first quarter last year.
RZR sales are stronger than Ranger sales but the latter grew “nicely”.
North American ATV retail sales decreased low-single digits percent due to heavy competitive promotional spending during the 2015 first quarter with ACE up significantly.
Management reports a “fair amount” of wholesale discounting by competitors but this is not expected to continue. Promotional activity is more pronounced for ATVs but is occurring for side-by-sides as well.
Management sees the Hammerhead brand acquisition as a good way to attack the value end of the UTV market.
North American industry ORV retail sales in the first quarter 2015 increased an estimated mid-single digits percent according to management.
Sales of Polaris ORVs outside of North America decreased 10% primarily due to weak economic conditions in the Europe, Middle East and Africa (EMEA) region, as well as the currency impact of a strengthening U.S. dollar.
ORV industry in EMEA region grew mid-single digits in terms of volume but was driven by smaller value products and discounting.
Average sales per ORV unit increased 7% in the quarter.
The Eicher-Polaris JV will begin shipping the new utility vehicle in Q3.
Global Adjacent Markets, which includes GEM, Aixam, Goupil as well as government and military sales, increased 7% to $65.4 million.
Government/military group experienced double digit percent sales growth during the 2015 first quarter.
Work and Transportation (W&T) group sales (part of Global Adjacent Markets) increased mid-single digits percent with North American W&T sales increasing double digits percent while W&T outside North America declined partly resulting from lower Aixam sales in EMEA due to the impact of negative currencies.
North American W&T was up over 30% on strong partnership shipments, national account growth and 40% GEM retail increase.
Brutus retail increased low double digits in volume but revenue was hurt by promotions and the loss of some dealers. The PTO and high end models are performing well but base models are underperforming.
Goupil and Aixam increased shipments and future orders are up 20% but currency headwinds remain a drag.
Aixam made market share gains in a flat industry performance.
Defense revenue grew double digits on strength of M RZR in international markets and DAGOR shipments to special forces.

Guidance for the Year

Global adjacent market sales are now expected to grow 5% to 10% and total international sales are now expected to decline low single digits percent.
ORV’s are expected to increase mid-single digits percent after growing 11% in the first quarter benefiting from a 7% increase in the average sales per ORV unit.
Currency changes are expected reduce full year 2015 revenue by $140-160 million.

Learn more: Seekingalpha.com (Earnings call transcript)

Eicher-Polaris Joint Venture To Launch Flexituff Utility Vehicle For The Indian Market

Posted on April 17, 2015 by Marc Cesare

Eicher-Polaris-Flexituff-side-spied-900x549

The new Flexituff utility vehicle from an Eicher and Polaris collaboration was spied on the road recently while undergoing tests. Photo Credit: www.indianautoblog.com

A collaboration between Eicher and Polaris is set to release their first vehicle, something akin to a mini-truck, later this year for the Indian market. The Flexituff UV will be available in two configurations, a multi-passenger van (MPV) and a twin-cab pickup for hauling cargo. The vehicle will feature a Greaves Cotton 600cc diesel engine with claimed mileage of 25km/L. Based on pictures of the vehicle in testing, the vehicle will be slightly larger than competitive offerings, the Mahindra Maxximo and Tata Magic. Initial production is expected to be 10-12,000 vehicles per year with expectations that it will reach 100,000 units in the future. Learn more: Motoroids.com

Update: Some more information on the vehicle. It uses composite body panels to save weight and “…features a bare dashboard with a four-spoke steering wheel, a simple instrument cluster and a centre console-mounted gear level.” The double cab pickup with cargo area can fit five occupants. The price of the vehicle is expected to be about 1 lakh or about $1,500-1,600 US. The vehicle development project is reported to have cost $40 million US. Learn more: Inidancarsbikes.in

Comment: This type of vehicle is not as prevalent in the US but in India and parts of Asia the vehicles are common. Smaller sized delivery vehicles are an important part of a hub and spoke delivery system where they are used to deliver goods the last kilometer or so through small and crowded streets. Price points and cost of operation are important purchasing factors for owner/operators of these local shipping businesses.

BRP Q4 FY15 Earnings Call & Analyst Day

Posted on April 10, 2015 by Marc Cesare

The Can Am Maverick Xds Turbo was introduced in 2015.

BRP, manufacturer of Can-Am branded off-road vehicles recently announced their financial results for the fourth quarter of fiscal year 2015, and also made a presentation to industry analysts. The following is a summary of some of the key points from the earnings call and analyst presentation, mostly related to the utility vehicle market. (all $ figures in Canadian dollars)

For the year total company revenues were up 10% to $3.5 billion and net income increased to $70.1million from $59.7 million.
For the year, Year Round Products revenue, which includes ATVs, UTVs and the Can Am Spyder, increased to $1.3 billion from $1.2 billion.
Gross Profit Margins decreased by 1% to 24% because of currency issues.
In the Q4 2015, which ended January 31, Year Round Products increased 53% year over year to $416.0 million from $272.5 million. The large increase is attributed to continued growth, dealer shipments for new product introductions for ATVs, UTVs and the Spyder and a new dealer ordering system that shifted some shipments from Q3 to Q4.
The Maverick Xds and Xds Turbo were introduced but slightly behind the optimum schedule.
Management reports that North American industry side-by-side sales are up mid-teens percent for the season starting in June while the ATV industry remains flat.
Can-Am side-by-side sales were up mid-single digits. While Can AmMaverick and Commander maintained market share in their respective sport and recreation focused market segments, BRP’s lack of product in the more utility oriented segments puts their sales growth behind the overall industry pace.
New product introductions increased inventory for UTVs and ATVs slightly.
Promotional activity for the UTV market is reported to be normal.
UTV OEMs continue to collaborate through the ROHVA association in discussions with the CPSC regarding new UTV regulations.
BRP continues to expand their NA dealer network. They added 38 dealers in FY14 and 76 in FY15. Of the latter 76, 72 are carrying off-road vehicles and 31 are located in the South or Southwest. Dealer network coverage for ORV and Spyder has increased by 10%. The management is targeting 200 to 300 new dealers in total by the end of FY17.
Management is focusing not only on increasing the number of dealers but improving the quality with better showrooms, as well as increasing the number of BRP product lines that existing dealers are carrying.
Ramp up time for new dealers is averaging about 12 months, which is slower than expected but management appears satisfied with the quality of the dealers and is taking a long-term approach.
The company is continuing to invest in and shift manufacturing operations with an emphasis on their facilities in Mexico, which have lower production costs, are closer to ORV and water products market and a offer a good location for international shipping.
Their Queretaro facility in Mexico will build engines for ORVs and other products. BRP is investing $55 million in their Juarez II facility in Mexico which will handle new ORV growth and brings chassis painting in-house. The facility is expected to have enough capacity for their growth plans through at least FY2020.
Capital expenditures will increase significantly from $175 million in FY2015 to $200-220 million in FY2016.
Guidance for Year Round Products for FY2016 is an increase in revenues of 7%-11%.

ORV Related Growth Areas

Management is targeting the utility segment of the UTV market as a growth area and the biggest opportunity in the Year Round Products division.
Overseas, China represents a sizable off-road opportunity and BRP plans to increase the number of dealerships from 19 to 30 by the end of FY16.
Another growth area related to ORVs that is being targeted is in Parts, Accessories and Clothing which has grown at a CAGR of 12% over the last five years.

Comment: While not explicitly stated by the management, expect BRP to introduce new UTVs this year targeting the utility/work market segment. The challenge for the powersports UTV manufacturers is reaching the utility/work customers with their existing dealer networks. Some portions of this market segment is often reached by non-powersports distribution channels and involve different selling processes at which powersports dealers may not excel or be interested in pursuing. Nevertheless, the continued entry into other UTV segments by various powersports manufacturers as well as the expansion of dealer networks should help drive growth in the NA UTV market. Overseas, there are some currency and macro economic headwinds but BRP and other OEMs appear to be committed to the long term development of the ORV market.

NEVs Help Drive EV Sales in China

Posted on March 18, 2015 by Marc Cesare

Kandi Technologies NEV

According to China’s Association of Automobile Manufacturers sales of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) reached 78,499 units, 3.5 times of such figure in last year.

Among the total, BEV was 48,605 units and PHEV was 29,894 units, 2.4 times and 8.1 times from the previous year respectively. As for the sales, the total volume reached 74,763 units, 3.2 times from a year earlier, of which BEV was 45,048 units and PHEV was 29,715 units, 2.1 times and 8.8 times of that of last year.”

While exact figures are not available it is believed that half or more of the the BEV sales can be attributed to BEVs. Learn more: Insideevs.com

Comment: The Chinese market for NEVs is more conducive to the use of NEVs than the US because of the amount of intra-city driving which requires a lower top speed and less range. The Chinese government is also making a big push for electric vehicles.

New Small Task-Oriented Vehicle (STOV) Study from SVR Forecasts Significant Growth

Posted on March 11, 2015 by Marc Cesare

Small Task-Oriented Vehicle (STOV) market at the Edge Of Significant Transformation & Growth in Next Five Years

In a new market study on the small vehicle market, Small Vehicle Resource (SVR), LLC predicts significant growth over the 2015-2019 period. The market research reveals four trends coming together that will result in market gains of between 8%-12% in the forecast period and an industry value in the range of $20-$25 billion at retail. These trends are:

Growing appreciation in a highly diverse market for the effectiveness of small vehicles specifically designed to meet individual segment needs (small, task-oriented vehicles (STOVs);

Superior product development in drive trains (AC electric plus the addition of EFI and hybrid drives in many new market segments) and automotive-type components, which heightens performance capabilities and raises the bar in the cost/benefit trade-off;

Critical improvement in distribution and sales systems that cater to manufacturers’ non-traditional markets—in conjunction with,

Increased use of the internet-based information to drive sales.

“Much better economic performance for the last three quarters of 2014 and a strong positive outlook for 2015, provides the launching pad for SVR’s positive forecast for 2015-2019,” states Steve Metzger, SVR Managing Director. “The drag on industry growth from the 2008/09 recession and subsequent slow recovery appears to be over,” he went on to say. Further, Metzger explains, “With the exception of fleet golf cars, where demand is stagnant at best, the privately-owned (primarily personal transportation vehicles), utility vehicle, and off road segments should all see gains in mid-single digits to low double digits range over the next five years.” The report notes that the stability of the golf-related market offers to golf car manufacturers the cash flow breathing room to transition to non-golf segments.

Marc Cesare, SVR Managing Director adds, “We put special emphasis on the off-road market in this report, because it has become the competitive vortex for golf car manufacturers seeking new markets, the powersports industry, and traditional manufacturers of work related utility vehicles.” “The spectrum of off-road solutions has greatly expanded,” Cesare notes, “as manufacturers seek growth by broadening their product lines and targeting market sub-segments with models tailored for specific end-use applications.”

The new study, the seventh in the series of studies produced by SVR since 2000, covers utility, off-road, and personal transportation vehicles, and fleet golf cars.

The study is entitled, “The Small, Task-Oriented Vehicle Market: Greater Product Diversity Opens New Avenues of Market Competition–Trends from 2010; Forecasts to 2019. For additional, detailed information see our SVR STOV Market Study Brochure or contact:

Steve Metzger at smetzger@smallvehicleresource.com or (914) 293-7577

Utility Vehicles Top Equipment List for Golf Course Superintendents

Posted on February 20, 2015 by Marc Cesare

Planned equipment purchases for 2015 from Golf Course Industry’s State of the Industry survey.

According to the recent State of the Industry survey by Golf Course Industry, utility vehicles top the list of equipment that golf course superintendents are planning to purchase in 2015. A third of the respondents are planning on acquiring the vehicles. UTVs topped the list in all regions, the West, Northeast, Midwest and South. A deeper dive into the data reveals some prime markets… “Broken down further, 43 percent of respondents at private courses, 51 percent at western courses and 55 percent at courses operating with budgets in excess of $1 million all indicated utility vehicles as their top purchases.” Learn more: Golfcourseindustry.com

Comment: The positive outlook for utility vehicles in this segment is similar to what SVR is projecting for the market in our latest STOV market study. However, utility vehicle offerings from traditional golf car manufacturers will continue to face stiff competition from power sports and other manufacturers that are more aggressively pursuing other utility vehicle markets in the search for growth.

Polaris Reports 2014 Q4 Earnings

Posted on February 3, 2015 by Marc Cesare

The new four passenger RZR 4 EPS in Havasu Red Pearl from Polaris.

A constant stream of new models like the new four passenger RZR 4 EPS in Havasu Red Pearl help keep Polaris growing.

Polaris continued on the path of strong growth with another record quarter. Managment reported net income was $135.4 million for the fourth quarter of 2014, up 25 percent from the previous fourth quarters net income of $108.7 million. Sales for the fourth quarter of 2014 totaled a record $1,275.0 million, an increase of 18 percent over last years fourth quarter sales of $1,083.7 million.

For the full year ended December 31, 2014, Polaris reported net income from continuing operations of $454.0 million for the full year 2014, up 19 percent from the previous years net income from continuing operations of $381.1 million. Sales for the full year 2014 totaled a record $4,479.6 million, an increase of 19 percent compared to sales of $3,777.1 million for the full year 2013. Some of the highlights related to small, task-oriented vehicles follow.

Off-Road Vehicle sales , which includes ATVs and UTVs or side-by-sides, increased 19% from the fourth quarter 2013 to $781.5 million. This increase reflects continued market share gains on strong demand for both ATVs and side-by-sides.
Polaris North American ORV unit retail sales were up low-double digits percent from the 2013 fourth quarter with consumer purchases of side-by-side vehicles up double-digits percent and ATV retail sales up high-single digits percent for the 2014 fourth quarter.
Polaris introduced over twenty new MY14.5 and MY15 ORV models in 2014, including the all-new RZR® XP 900 trail and RZR® XP4 900 trail, several new value models, and two models in a newly defined category of single-seat, ride-in ATVs, the Polaris ACE.
Polaris extended their market share lead in the North American ATV industry for the fourth straight year with retails up mid-single digits in an industry that only rose slightly.
ACE sales accelerated notably in the fourth quarter as marketing and the new 570 model began to impact the marketplace.
Four recent model year ’15 introductions include the new electronically fuel-injected RZR 170 and the new RZR 900S4, both of which have already begun to ship.
Commercial. Sales increased by over 80% in the fourth quarter driven by initial Ariens-Gravely supply vehicle shipments, strong national accounts growth and notably improved BRUTUS and Bobcat retail performance.
In the Small Vehicle division which includes GEM, Aixam and Goupil, fourth quarter revenue declined 11% due to the weak French economy afflicting both Aixam and Goupil. For the full year 2014, sales increased 28% fueled by Aixam market share gains and increased sales from both our GEM and Goupil businesses.
Polaris significantly outperformed in the ORV market in Europe.
For 2015 management expects ORV is expected to grow mid-single digits, driven by new products but offset by further implementation of RFM, their new inventory management program, and slower international demand.