China Low Speed Electric Vehicle Market Booming According To Report

Posted on September 2, 2014 by Marc Cesare

A Chinese low-speed vehicle.

A research report recently published by ResearchInChina estimates that 302,000 low speed electric vehicles were produced in China last year, an increase of 46.6% from the year before. The market has grown rapidly since 2009 and is marked by manufacturers and intense competition. From the report:

At present, domestic LSEV producers concentrate their production bases mainly in Shandong Province, whose LSEV output rose from 16,300 in 2009 to 175,000 in 2013 at a CAGR of 81.0%. Key players there are Shifeng Group, Shandong Baoya New Energy Vehicle Co. Ltd., Shandong Tangjun Ouling Automobile Manufacture Co., Ltd., and so on. At the same time, spurred by the robust downstream demand for LSEV, Chery and BYD have also ventured into this field.

Learn more: Reportstack.com

Comment: As we have noted previously, the LSVs in China and LSV compliant vehicles in the US are two different animals. Relatively speaking, the Chinese LSV market is largely unregulated so the quality and safety features of the LSVs are not the same. On the other hand a dynamic LSV market has arisen with a host of manufacturers and component suppliers. China is a very large market so even a niche market like LSVs can result in sizable market demand. The relatively inexpensive LSV option is appealing to those consumers who have some money but can’t afford a highway speed vehicle or don’t need that level of features and functionality. The Chinese government is also encouraging the adoption of alternative fuel vehicles.

LSVs Popular In China

Posted on July 29, 2014 by Marc Cesare

A Chinese low-speed vehicle.

A recent article discusses the surprising large size of the low-speed electric vehicle market in China. With over 200,000 LSVs produced there in 2013, it dwarfs the nearly 15,000 sold in the US. Some interesting characteristics of the market include, according to the article, a complete lack of regulation. Not surprisingly, hand in hand with this is a lack of safety features on the vehicles. On a more positive note, a host of component manufacturers and innovative low cost manufacturing processes have also cropped up to support this market and enabled many manufacturers to enter the fray.

A common design for a Chinese LSV is four doors with one seat in the front and two side-by-side in the back. The seating room would be considered small by Western standards. Chinese LSVs typically use lead-acid batteries and are powered by 1.5-kW to 4-kW DC motors with a top speed of around 38 miles per hour and costs range from $2,000 to $12,000. They are particularly popular in rural areas. Learn more: Green.autoblog.com

Comment: As the article points out, the small size of the US LSV market makes it a less appealing export market to Chinese manufacturers with so much opportunity at their doorstep. A friend of mine tried for several years to import a quality LSV from China that met the US safety standards and consumer requirements. He had a difficult time finding any company willing to spend the money to do the testing and meet the standards for a relatively small market opportunity. At the time, the quality of many of the vehicles he looked at was also not going to meet the needs of the US market.

Another difference in the markets is that the US market has become more of a commercial/institutional market. In the US, many of the consumer markets where LSVs would be useful are already served by golf cars and from what I’ve seen the trend among municipalities has been to allow golf cars on public streets rather than restrict them. This negates to a large degree the necessity of having purposely built LSV compliant vehicles. The commercial/institutional buyers however are looking for vehicles with those added safety features and official designation as an LSV.

In general, international markets offer greater potential for small electric vehicles than the US. From other developing countries in Asia to urban environments in Europe, from both a regulatory and market demand perspective, these markets are more conducive to creating a substantial market for these vehicles.

Polaris Reports Record Quarterly Results – Gains Market Share

Posted on July 23, 2014 by Marc Cesare

Beauty shot of the new Sportsman ACE from Polaris.

The Sportsman ACE, one of the many different vehicles that helped drive record quarterly performance for Polaris.

Polaris Industries reported record second quarter results with sales of $1.014 billion and net income of $96.9 million. Sales increased 20% from Q2 2013 and net income 21%. Key drivers were an increase of 15% in North American retail sales with strength in ORV and motorcycle products. Management also raised their full year guidance to a 16-18% increase revenue. Here are some highlights from the earnings call with a focus on small, task-oriented vehicles:

ORV sales increased 13% for the quarter to $701.5 million
Guidance for full year: up 11%-13%
Side-by-side sales up low teens % and outpaced the market
Polaris gained market share in side-by-sides and ATVS
Sportsman ACE is selling well and customer data to date indicates that it is reaching a new market segment
New ORV models will be announced shortly
Promotion environment for side-by-sides remains aggressive
Small Vehicle sales increased 29% to 43.5 million
Aixam Mega sales up over 40% in Q2
GEM and Goupil sales combined increased 6%
New products will be announced in the second half of the year
Small Vehicle sales guidance for the year: up 25%-30%
In the commercial segment Brutus sales are below expectations as the company tackles the B2B sales process but Bobcat and National Account sales did well.
International sales increased 29% in Q2 to $170.5 million driven, in part, by side-by-side sales in many regions

Learn more: Seekingalpha.com (Earnings call transcript)

Comment: Polaris continues to operate on nearly all cylinders and will be shortly rolling out new products. Their only weakness appears to be in the commercial segment. It is telling that Bobcat and national accounts did well in the quarter but the Brutus retail sales, while improving, remained below expectations. This points to the continuing mismatch between the majority of Polaris’s distribution network and the commercial customer the Brutus is targeting. Most of their current dealers are accustomed to a different consumer-oriented sales process. Management is likely to pursue additional marketing partnerships in this segment to bolster commercial sales while trying to assist, train and bring more of their traditional dealers up to speed in this segment. But this is nitpicking, the company continues to roll in competitive markets and is even exceedng high expectations.

Eicher-Volvo Joint Venture May Enter Mini-Truck Market

Posted on May 16, 2014 by Marc Cesare

eicher-volvo-joint-venture-ve-commercial-vehicle-studying-plans-to-enter-mini-trucks-segment

Eicher is considering a mini-truck offering to enter the small commercial vehicle market through their joint venture with Volvo.

A joint venture between Eicher Motors Ltd. of India and Volvo, VE Commercial Vehicle, may enter the growing small commercial vehicle market in India. The small commercial vehicle market consists of the vehicles of 5 tonnes or less. The joint venture is considering a mini-truck offering in the 1-3 tonne range. This segment already features vehicles like the Ashok Leyland Dost, Tata Ace and Mahindra’s Maxximo Plus. The decision to enter the market will be made within the next six months with a potential product launch in 2016-17.

The small commercial vehicle market represents over 50% of the commercial vehicle market with an estimated 359,000 vehicles sold every year and growth to over 500,000 expected by 2019. The market is driven by the hub and spoke distribution system in India where large trucks transfer goods to or between hubs and smaller vehicles deliver the goods the last few miles. Learn more: Economictimes.com

Comment: For regulatory reasons, mini-trucks have not been a major market in the US although farmers often purchase used mini-trucks coming out of Japan and use them as of-road work vehicles. In some areas they are being allowed more access to public roads, but this is often in the context of agricultural use rather than the general public. Eicher, which also makes motorcycles, has a joint venture with Polaris that started in 2012. This joint venture is focused more on a range of personal vehicles with reports of a four-wheeled vehicle to be launched in 2015. At the same time, there could be opportunities for the companies to work together in the small commercial vehicle space given Polaris’s acquisitions in the past few years of GEM, Aixam and Groupil.

Polaris Posts Strong First Quarter 2014 Results

Posted on April 25, 2014 by Marc Cesare

The new Sportsman ACE from Polaris is one of the reasons for the company’s strong financial results for Q1 2014.

The following are some of the highpoints of the Polaris earnings call discussing their first quarter 2014 financial results with a focus on aspects relevant to the STOV market.

Polaris first quarter sales increased 19% to $888 million.
Net Income increased 7% to $80.9 million.
Management is raising their expectations for full year revenue and earnings to increases of 14%-16% and 17%-18% compared to 2013.
Off-Road Vehicle sales which includes UTVs and ATVs increased 11% and market share improved with good demand for the RZR XP 1000 and the new Sportsman ACE.
In North America management estimated that side-by-side sales retail grew upper single digits in an industry that grew similarly.
The new Sportsman ACE has gotten off to a good start.
PG&A momentum remains very strong with first quarter sales up 20%, parts accessories and apparel all grew strong double-digits led by strength in both ORV and Motorcycle related products.
First quarter Polaris commercial revenues increased by over 60% with sales to Bobcat Polaris national accounts and BRUTUS up notably year-over-year. Commercial segment has grown more slowly than expected by management but they will continue to put resources into this segment.
Small Vehicle first quarter revenue increased by 248% as all three brands, GEM, Goupil and Aixam grew year-over-year. The increase includes the addition of revenue from recently acquired Axiam, which also increased market share in Q1, and an increase of over 20% from the GEM product line.
International business had another strong quarter with sales increasing 44% led by nearly 50% and 60% growth in the EMEA and Asia Pacific regions respectively. Small Vehicles, PG&A and side-by-side sales all grew over 30%.
ORV is now expected to grow 9% to 11% in 2014.
Small Vehicles guidance is unchanged up 25% to 30% which includes the full year of the Aixam acquisition.
ACE orders in both North America and internationally have been better than expected with only minimal signs of cannibalization of either ATVs or side-by-sides.
There is broad based strength across many ORV products.
Management is seeing increased competitiveness and promotions in the side-by-side market.
Management is disappointed in Brutus sales into the commercial segment so far but expect to see improvement over the next 12 months as dedicated sales staff, partnership with Ariens and other efforts help them adjust to the longer B2B and B2G selling cycles in this segment.

Learn more: Seekingalpha.com (earnings call transcript)

Comment: The early signs that the ACE is not cannibalizing ATV and UTV sales is an indicator that Polaris is creating another vehicle category. More time will be needed to see how sales play out over the next 12 months to see if this theses remains true. It’s not only a question of cannibalization but how buyers are actually using the vehicles – what market segments, what applications, etc.

E-Z-GO Recalls Golf, Shuttle and Off-road Utility Vehicles

Posted on April 23, 2014 by Marc Cesare

One of the Bad Boy Buggie models being recalled.

One of the E-Z-GO TXT models being recalled.

The Cushman Shuttle that is part of the recall by E-Z-GO.

E-Z-GO is recalling approximately 30,000 golf, shuttle and off-road utility vehicles because a steering wheel nut may not have been tightened sufficiently, reducing the driver’s steering control. This can result in a crash. There has only been one reported incident related to the issue and it was a minor injury.

The recall includes E-Z-GO, Cushman and Bad Boy Buggies branded vehicles. Recalled E-Z-GO and Cushman vehicles have serial numbers from 2823208 to 2850425 and from 3000001 to 3003187. Bad Boy Buggies vehicles have serial numbers from 8005089 to 8006013. The recall includes the following models:

E-Z-GO TXT Fleet golf cars
E-Z-GO Freedom TXT, Shuttle 2+2 TXT and Valor personal golf cars all with one bench seat and one rear-facing seat
E-Z-GO Express with two bench seats and one rear-facing seat,
E-Z-GO Terrain with a cargo bed
Cushman Shuttle vehicles
Bad Boy Buggies HD, LD, LTO, and LT Safari utility vehicles

The vehicles were sold between August 2012 through February 2013. Consumers should immediately stop using the recalled vehicles and contact E-Z-GO or an authorized dealer for a free repair. E-Z-GO and E-Z-GO dealers are already contacting known owners. Consumers can contact E-Z-GO toll-free at (855) 738-3711 between 8 a.m. and 5 p.m. ET Monday through Friday; or online at www.ezgo.com and click on Product Recall Information or at www.badboybuggies.com and click on Recall Information at the bottom of the page for more information. Learn more: CPSC.gov

Comment: The number of vehicles being recalled is quite large compared to the typical recall in the STOV market, which usually numbers a few hundred to a few thousand vehicles. On the other hand this seems to be only a minor issue and for the company a simple and relatively inexpensive fix. In general, dealers I’ve spoken to believe the quality of the Bad Boy Buggies vehicles has increased significantly since E-Z-GO acquired the company in late 2010. At the time, a large and more serious recall from both a safety and financial standpoint was a major reason the company needed to be sold.

Arctic Cat Recalls Prowler 500 HDX UTVs

Posted on March 21, 2014 by Marc Cesare

The 2014 Arctic Cat Prowler 500 HDX is being recalled due to a fuel leak issue.

Arctic Cat has recalled approximately 2,300 model year 2014 Prowler 500 HDX utility vehicles because of a potential fuel leak issue and related fire hazard. No injuries have been reported related to this recall. The vehicles were sold from August 2013 to January 2014. The following information is from the Consumer Product Safety Commission recall notice.

Recall Details

Product: Arctic Cat Prowler 500 HDX

Hazard: Fuel can leak from the fuel fitting at the throttle body of the vehicle, posing a fire hazard.

Units: About 2,300

Description: This recall includes Model Year 2014 Arctic Cat Prowler 500 HDX Recreational Off-Highway Vehicle (ROV). The two-seat vehicles come in four colors: green, red, vibrant red metallic or emerald green metallic. The vehicles have “Arctic Cat” printed on each side of the hood and on the cargo box tail gate, “500” printed on each side of the front fenders and “HDX” printed on each side of the rear cargo box.

Sold at: Arctic Cat dealers nationwide from August 2013 to January 2014 for between about $11,000 and $12,400.

Incidents/Injuries: None reported.

Remedy: Consumers should stop using the recalled Prowlers immediately and contact an Arctic Cat dealer to schedule a free repair. Arctic Cat is contacting all known owners of the Prowlers directly.

Consumer Contact: Arctic Cat at (800) 279-6851 from 8 a.m. to 5 p.m. CT Monday through Friday or online at www.arcticcat.com and click on Customer Care, then Product Recall and then List of Safety Bulletins for more information.

Learn more: CPSC.gov

Comment: This is not a particularly large recall as many UTV recalls typically involve two to three thousand vehicles or less. A search of the CPSC database shows that Arctic Cat hasn’t recalled any other UTVs in at least the last five years.

Polaris Reports Another Quarter of Strong Results

Posted on January 31, 2014 by Marc Cesare

The new RZR XP 1000 is the fastest-selling side-by-side in Polaris history.

Polaris reported another strong quarter of results for the Q4 2013 driven by off-road vehicles, motorcycles, PG&A and international sales. Overall, sales for the quarter were $1.08 billion, up 20% from the prior year period. Net income for the fourth quarter was up 23% to $108.7 million, yielding record earnings per share of $1.56, up 26%. Full year 2013 sales increased 18% to just under $3.8 billion. International and adjacent market businesses each grew 29% and 79%, respectively. Full year net income from continuing operations was $381 million. Some of the highlights of earnings report and conference call with a focus on small, task-oriented vehicles include:

Off-Road Vehicles division which includes UTVs and ATVs increased in revenue in Q4 16% driven by strength in side-by-sides, particularly RZRs, Defense and Commercial.
For calendar year 2013, ORV completed another strong year with revenue up 13%.
Polaris gained market share again in the fourth quarter and for the full year 2013
Polaris is #1 in the North American ATV industry, with 2013 retail sales up mid-single digits in an industry that was essentially flat.
All Model Year ’14 new product introductions are selling extremely well and seasonality is now approaching.
The new RZR XP 1000 is the fastest-selling side-by-side in company history and the XP 4 is built on that RZR XP sales momentum.
Polaris ORV commercial revenues increased by over 120% in 2013.
Both Bobcat and Brutus retail improved notably in the fourth quarter but management still sees significant missed opportunities in Polaris in dealer execution and customer development opportunities. To drive improvement in 2014, they added a dedicated infield commercial sales force to assist dealers in landing local B2B and B2G business and also initiated a partnership with Ariens.
The Defense division, which sells mostly off-road ATVs and UTVs has momentum with a strong 4th quarter and an ongoing winning streak for recent contracts.
Small vehicles, were up 25% to 30%, which includes a full year of Aixam acquisition.
PG&A sales also rose 33%. Growth came from every category, with Accessories up 30%, Parts up 24% and apparel up over 150%, led by an outstanding first year from KLIM.
2013 industry conditions remained tepid with ORV industry down upper single digits.
Polaris side-by-side retail sales growth moderated just a bit in the fourth quarter, but increased low double digits for 2013, outpacing the side-by-side industry which grew an estimated 10% for the year.
ORV is expected to grow in the high single-digits percentage range in 2014.
Management anticipates aggressive competition in the side-by-side market, with increased promotions possibly being more of a challenged than new products.
The new Sportsman ACE is expected to add incremental revenues with a small amount of cannibalization of existing ORV sales.
Management is very happy with how the numerous product introductions have been received in the market.

Learn more: Seekingalpha.com (earnings call transcript)

Comment: Polaris continues to churn out new models and in general execute very well. It will be interesting to see how well the Sportsman ACE will sell, to whom and whether or not it will create a new category of vehicles. Management’s comments indicate that the side-by-side market may be slowing a little in the coming year. This could create a more competitive environment in the market as the pie will be growing at a slower pace than in the past few years and manufacturers recently added new offerings to go after key segments.

Mini-truck Sales Slow In India

Posted on January 10, 2014 by Marc Cesare

According to a recent report mini-truck sales have slowed in India in 2013. This segment includes vehicles with a payload of under one ton like the Tata Ace. Combined with pick-ups that fall under a gross vehicle weight of 3.5 tons, they make up what is referred to as the Small Commercial Vehicle market. This market had been growing quite well in recent years as a hub and spoke model of distribution has been widely implemented. The vehicles in this segment are often used in the last mile of this distribution scheme. However, analysts believe this market has become saturated in the larger metropolitan areas. Mini-truck sales have dipped below pick-up sales which also slowed toward the end of the year. Learn more: TheHindu.com

Comment: Polaris is making an effort to grow sales in the Indian market through a strategic partnership. While their focus appears to be more on the off-road vehicles and snowmobiles, they also starting to sell the GEM which in some configurations would be appropriate for this application.

More Indicators of Strong UTV Market

Posted on December 31, 2013 by Marc Cesare

A couple of more news items point to continued strength in the UTV market with increased sales from new models and more widespread applications.

An analyst from Felt and Company raised their revenue expectations for Arctic Cat and reiterated their Buy recommendation in part on the strength being seen in the market from both dealers and consumers from the new 50 inch Wildcat side-by-side. (Note: This was before the recent patent lawsuit was filed against Arctic Cat by Polaris) Learn more: Powersportsbusiness

The recent GIE + EXPO and Hardscape North America dual trade shows in Kentucky saw an increased presence from UTV manufacturers. UTV manufacturers attending included Bad Boy Buggies/E-Z-GO/Cushman, Bobcat, BV Powersports, Cub Cadet, Deere, JCB, Kubota, Sunright International and Polaris. The trade shows feature outdoor power equipment, along with products for landscapes, gardens, outdoor leisure, hardscapes and light construction. Learn more: Powersportsbusienss.com

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