LSVs Show Strength in Government & Commercial Markets

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A six passenger transport vehicle from Cruise Car with a solar array on the roof for battery recharging.

Cruise Car out of Sarasota, FL reports growing sales on the strength of orders for  government and commercial markets. The company manufacturers golf cars and low speed vehicles for transport and utility. A key differentiator for the company is their Sunray Solar Roof Canopy which uses solar power to recharge vehicle batteries. They also feature an aluminum chassis and AC electric motors. According to management the company has been successful selling vehicles to military installations and last month was awarded a contract to supply fleets of shuttles and light utility runabouts to VA Hospitals and VA Cemeteries nationwide. Hotels and resorts are also an important market segment for the company. Many of the vehicles they sell to these markets are LSVs which can be used on public roads. Learn more:  HeraldTribune.com

Comment:  The companies success confirms with what we have been hearing from dealers around the country. Namely that STOVs and in particular LSVs are selling well in the commercial and government markets. The military and other government sectors are attracted in part to the fact that the vehicles are electric powered, whether to reduce fuel costs and/or meet sustainability goals. This is also true of the college/market where they can be used for personnel transport or light utility work around campus. The safety features of LSV compliant vehicles are appealing to buyers as well.

Polaris Announces Military Grade ATV

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The new military grade ATV from Polaris, the Sportsman WV850 H.O. with Terrain Armor tires.

Leveraging their growing military business, Polaris recently launched a new military-grade ATV featuring Terrain Armor™ Non-Pneumatic Tires (NPT). The new Sportsman® WV850 H.O. with Terrain Armor will be available in “very limited quantities” in December 2013 for consumers looking for a work vehicle.

The non-pneumatic tires were first developed for military applications. Polaris has won a number of contracts to supply US and allied militaries with ATVs and UTVs for use in combat environments and started offering the NPTs earlier this year. Polaris has tested NPTs under several extreme situations, including logging more than 350 miles/563 kilometers after receiving fire from a 50-cal round, and driving 1,000 miles/1609 kilometers with a 3 in/7.6 cm railroad spike in the tread and webbing. The vehicle is designed for extreme work or hunting conditions and also features upgrades to the transmission, shocks and cooling.

Taking less than a year to move the technology over from the military to the consumer market is impressive. I contacted a Polaris representative about any military grade UTVs in the works but they said they were not aware of any. However, it would seem to be the next logical step. Potentially, you could see the tires useful for not only work but recreational riding in more extreme terrain. Learn more:  Businesswire.com

Poll Shows UTV is Hunter’s Vehicle of Choice

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A recent poll from an agriculture website shows that hunter’s prefer UTVs as their hunting vehicle compared to ATVs or other types of vehicles. The poll also showed that more than one third of hunters preferred using no vehicle at all. There is no additional information about the poll methodology but given the website’s focus, the population polled is most likely predominantly farmers. The results are as follows:

Which vehicle do you prefer for hunting?

· None – 37%
· UTV – Utility Terrain Vehicle – 26%
· Other – 21%
· ATV – All Terrain Vehicle – 16%

 Learn more:  Precisionpays.com

Survey Shows Dealers Optimistic About Side-by-Side Market

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Source: Powersportsbusiness/RBC Capital Markets Q3 Dealer Survey

The third quarter dealer survey produced by Powersports Business, in partnership with RBC Capital Markets, shows that while overall dealers are mixed about their current situation, they are optimistic about the next twelve months for the UTV market. The survey of powersports dealers indicated that dealers were most optimistic about their side-by-side lines of business compared to others such as motorcycles, ATVs, snowmobiles, etc with 48% expecting growth of 10% or better, 24% expecting flat growth and 3% expecting a decline. Some rough calculations of the figures indicate that overall dealers expect growth in the range of 10% for the next 12 months.

The survey results also offered some brand specific information:

  • Dealers expect Polaris lines to continue to lead the market with the Ranger product line having a slight edge in growth for the next twelve months.
  • For BRP, Can Am side-by-side sales in the third quarter were reported as good and the Maverick is expected to do well moving forward.
  • New vehicle entrants, Honda Pioneer and Yamaha Viking, have been doing well and are expected to continue with dealers giving the Pioneer an edge in quality.
  • On a more downbeat note, expectations for the Yamaha Rhino and Arctic Cat Prowler are trending downwards.

Learn more:  Powersportsbusiness.com

BRP Inaugurates New Mexican Facility

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Aerial view of part of the Queretaro industrial park in Mexico. BRP’s new facility is located in the park.

BRP, manufacturer of Can Am side-by-sides, last week inaugurated their new manufacturing facility in Queretaro, Mexico. The facility assembles Rotax engines for its Can-Am off-road vehicles, assembles the Sea-Doo Spark watercraft and manufactures composite hulls and decks for Sea-Doo watercraft. By 2015, a total of $100 million (Canadian) will have been invested in the facility and 1,100 people will be employed. A sister facility in Juarez, Mexico has been assembling Can Am ATVs and side-by-sides since 2001.  Learn more:  BRP.com

Comment:  BRP isn’t the only UTV manufacturer in Mexico. Polaris has a presence there as well. Part of the move is driven by production cost savings but the other reason is geography and distribution. The Southwest US and in general the South are an area of growth for the UTV market. These facilities put manufacturers closer to these markets as well as expanding markets in Latin and South America. As manufacturers try to shorten ordering cycles for dealers and better manage inventory while more closely aligning product supply to market demand these facilities can offer improvements in those areas.

GE Capital to Provide Dealer Financing to Massimo Motor

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UTV from Massimo Motor

Massimo Motor’s dealer network will now have access to inventory financing from GE Capital’s Commercial Distribution Finance division. Massimo Motor is based in Irving, TX and was started in 2009. They produce ATVs and UTVs which primarily serve the agriculture and hunting markets but are looking to expand their appeal. The company produces 500cc and 700cc UTVs and are developing a 1000cc product for the race/high end recreational market segment. Learn more:  Businesswire.com

Comment:  The high-end recreational market segment has been getting more and more competitive as competitors like Polaris, Arctic Cat and Can Am continue to pump out new models for the segment. The entry of Massimo Motor into the segment will only increase the competition. One challenge they will face is their relatively small dealer network in comparison to their more established rivals.

Polaris Acquires Navigation Software Company Primordial

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Screenshot from Primordial’s flagship Ground Guidance software product.

Polaris Industries announced the acquisition of Primordial Inc, a Minnesota-based software company known for navigation software used by the military in off-road environments and a crowd sourced mapping application. Ground Guidance is used by soldiers to map fast and stealthy routes in difficult terrain. Ooze is a crowd-sourced mapping application that it sells to businesses and government agencies.

Ground Guidance is a good fit for Polaris’s military segment which has been a long term strategic growth segment. Ooze could have synergies with their RiderX mobile apps, which snowmobilers use to navigate trails. Long-term there could be potential in the off-road recreation segment for both products.  Learn more:  Bizjournals.com

Comment:  You have already seen improving electronics in utility vehicles and the trend has been for these vehicles to eventually adopt many of the advanced features of automobiles. It will not be surprising to see OEMs offering more electronic gear and software as optional and eventually standard equipment. Polaris vehicles are also frequently used by firefighting teams for the Bureau of Land Management and Forest Service. These software applications may have some application in the off-road emergency response/fire/rescue market as well.

Arctic Cat F2Q 2014 Earnings Summary

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The new 50-inch Arctic Cat Wildcat is expected to ship in the second half of the fiscal year and help drive sales.

Arctic Cat sales increased a modest 4% for the quarter but side-by-side sales were strong. The following are some highlights from the earnings call with a focus on the side-by-side market.

  • Net sales for the second quarter increased 4% to 238.5 million from 229 million for the same quarter last year.
  • ATV sales, which includes ATVs and UTVs, increased 4% to 72.7 million driven by Wildcat and Prowler side-by-side sales.
  • Parts, garments and accessory sales decreased 1% to 30.4 million from 30.8 million.
  • Year-to-date net sales increased to 5.6% to 359.3 million from 340.3 million and net earnings increased 7% to 28.8 million from 27 million
  • Internationally Europe remains a difficult market but sales to Australia, Mexico and some of the Middle East and Latin American countries are up.
  • On a year-to-date basis ATV sales increased 4% to 149 million and parts, garments and accessory sales increased 2% to 52.3 million from 51.1 million.
  • For the quarter side-by-side retail sales increased by 23% driven by significant increases in the new Wildcat models, and the new Prowler HDX500 utility model.
  • There has been a net increase in the dealer network for Prowler and Wildcat product lines with the increase for the Wildcat line the largest.
  • Year to date R&D expenses increased 24% as management focuses on new product development, especially for side-by-sides.

Looking forward

  • Management expects sales to be in the range of 754 million to 768 million, an increase of approximately 12% to 14% versus fiscal ’13.
  • Arctic Cat will launch three new Wildcat side-by-sides in the next 6 months including the previously announced 50-inch Wildcat. Shipments for the other two new Wildcats are expected to begin in Q3 with dealer orders starting in November.
  • Off-road vehicles expected to be up 25% to 29% for the year.

Learn more:  Seekingalpha.com

Polaris Wins Military Contract to Supply UTVs

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Polaris was awarded a contract to supply vehicles like the MRZR4 to US Special Operations forces.

The United States Special Operations Command (USSOCOM) has awarded Polaris Industries a contract to provide MRZR Lightweight Tactical All Terrain Vehicles. The MRZR2 and MRZR4 are highly-mobile, CV-22 transportable, multi-configurable off-road platforms, and will be supplied with accessories, spare parts, mechanical and operator training. The contract spans five years. The company recently was awarded a military contract for ATVs as well. Polaris provides vehicles to the US military and allied militaries. Learn more:  Businesswire.com

Comment:  Growing the military business has been a strategic initiative of Polaris management and they have been able to execute on their plan. In their recent quarterly earnings report they noted that year over year sales for the military segment increased significantly. They have been helped in recent years by the strong expansion of the US Special Operations forces. They are also taking some of the technology developed for the military, like non-pneumatic tires, and bringing them into the commercial and consumer markets.

Polaris Q3 2013 Earning Results Summary

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Polaris Ranger and RZR lines helped drive 3Q ORV sales

Polaris Industries once again had a strong quarter as sales surpassed $1 billion for the first time in the company’s history. The following are some highlights from the earnings call with a focus on the side-by-side market and small vehicle business.

  • Quarterly sales increased 25% to $1.1 billion
  • Third quarter net income from continuing operations rose 24% to $116.9 million
  • Off-Road Vehicles (ORV) which includes side-by-sides and ATVs posted a 23% gain and PG&A jumped 37%
  • Year to date ORV sales increased 12%
  • Polaris North American side-by-side retail sales improved low teens percent, and the side-by-side industry was estimated to have grown in the low double digits.
  • Key drivers included higher demand for the Ranger line, RZR XP 1000 and the new XP 4.
  •  The Polaris ORV Commercial business was up double digits in the third quarter, led by the new Brutus product rollout and sales to Bobcat. However sales were slower than expected and more marketing resources are being put into the effort as dealers have to adapt to the business to business sales process.
  • Small vehicle revenue increased over $21 million and 188% for the third quarter, due primarily to the Aixam purchase. Year-to-date, revenue was up 136%.
  • For the GEM line  retail sales are up over 50% through the third quarter and year to date as the dealer network and B2B sales efforts gained traction. The company just introduced the new eM1400 electric utility vehicle as well.
  • Aixam had a good quarter expanding share of the European quadricycle market share lead in the third quarter and year-to-date as retail sales remained roughly flat while the overall market declined upper single digits.
  • Goupil revenue grew nicely year-over-year, and year-to-date, customer orders are up double digits.  
  • In Europe the ORV industry remains relatively weak, with third quarter and year-to-date sales down about 12%. Polaris is building on its market share leadership position, with third quarter retail sales about flat and year-to-date retail sales down low single digits.
Looking forward:
  • Management increased the full year sales guidance to up 15% to 16% over 2012.
  • Sales of Off-Road Vehicles are expected to increase in the 11% to 12% range, up from prior guidance, with retail sales of side-by-side vehicles and ATVs continuing to outpace the overall market in both North America and internationally.
  • Competition has increased in the ORV market.
  • Management expects ORV market share to increase in 2013 but at a slower rate than recent years.
  •  For small vehicles, sales are expected to increase over 150% for the full year 2013.
  •  Monterrey, Mexico plant will deliver well over half of Polaris’s side-by-side volume in 2014.
  • In India the Eicher partnership is moving ahead with a plant under construction in Jaipur, India for a late 2014 launch of a new vehicle solution for that market.
  • More resources will be put into the Brutus sales efforts as the longer purchase cycle in the business to business market has tempered sales expectations. Efforts will likely focus on “…some of our most capable and committed subset of our existing Polaris ORV channel.”

Learn more: Seekingalpha.com (earnings call transcript)