The following is a brief assessment of favorable trends seen in 2014, as impacting the small, task-oriented vehicle industry, and a positive projection for the year ahead, as well as the longer term beyond.
The Big Picture Looks Promising
The small, task-oriented vehicle (STOV) industry has seen a recovery from the depths of the recession that has pretty much tracked the pace of the overall economy, with exceptions for notable companies that have outpaced the average gain.
The recovery, often referred to as the “so-called recovery” has been inching forward all these many quarters since the depths of first quarter, 2009, until the second half of 2014. Since then GDP growth in the second and third quarter looks like what most past economic recoveries have experienced; that is, growth in the range of 3.8%-4+%. A similar outcome for the fourth quarter is anticipated.
Unfortunately, the deadline for this column catches me a day or two short of Department of Commerce releases of fourth quarter initial GDP figures, but here is a synopsis of late trends in key indicators for the small vehicle industry (and virtually all are positive):
- Gross domestic product, after a dismal first quarter (-2.1%), increased by 4.6% in the second quarter, and by at least 3.9%-4.3% in the third (awaiting the final reading). While the fourth quarter may slow down in the range of 3.0-3.5%, the full year 2014 is likely see a gain of 3.3%-3.7%.
- Real disposal income showed steady year-over-year gains of 2.0-2.3% over year ago levels for at least the last eight-to-nine months since March;
- Personal consumption expenditures more than kept pace with gains in disposable income, recording increases of 2.2% in the first quarter, a big jump of 14.1% in the second, and 8.7% in the third;
- In a sector of considerable significance for our industry, consumer expenditures on recreational goods and vehicles has increased quarter-to-quarter to the tune of 3.7%, 13.3%, and 15.1% from the first through the third quarters this year;
- Business investment in industrial equipment, also a good indicator for the STOV market, increased substantially: 14.1% in the first quarter, 27.2% in the second, and 29.3% in the third;
- Investment in manufacturing structures, a further good indicator, showed increases of 2.9%, a whopping 32.3%, and 19.8% for the first through third quarters.
By the way, all these figures are available at the Department of Commerce’s Bureau of Economic Analysis (BEA).
These trends, even if they are half as good for the fourth quarter, add up to a much stronger economy than previous years and bode well for 2015. In the context of this optimistic big picture context, we turn to the specifics of STOV products and markets.
Opportunities for Market Expansion
Small Vehicle Resource (SVR), LLC, the market research and consulting firm, of which I am a managing director, will be issuing its seventh major study of the small, task-oriented vehicle industry on January 15. That analysis will go into considerable detail regarding the outlook to 2019, but here are some broad conclusions, which I can disclose at this time:
- 2015 should be another strong recovery year for the industry, with the non-golf-related segments leading the way with an average of 12% growth;
- Golf-related markets will continue a slow downward slide experienced since 2006, but a drastic decline is definitely not likely;
- SVR believes there is great potential for a sea-change in the market beginning in 2016, reflected industry growth in the low-to-mid double digits through 2019.
The strong post 2015 growth prediction is based on three factors:
- Growing appreciation of the STOV concept and the capabilities of the highly diverse small vehicle product lines;
- Better, more diverse product lines;
- Greater efficiency and effectiveness in distribution and sales;
- Better use of internet marketing.
#1– The market, across a wide range of customer segments, is beginning to see the value of the small, task-oriented vehicle as an efficient substitute for light trucks and for specialized tractors and mobile construction equipment in the commercial segment, and, of course, a cost-efficient alternative to the on-road automobile. It takes a while for consumers to embrace a new concept.
#2– Major companies, as well as smaller competitors, will be seeking to diversify and strengthen their product lines. Biggest events in the past year has been the introduction by Club Car, following the precedent set by Yamaha, of EFI technology. The dealers are enthusiastic about this. In addition, Yamaha has introduced AC technology into their line, which will greatly strengthen the company’s basic platform for the non-golf related market. More about this product in my next column.
3– The transition of small, task-oriented vehicle manufacturers from traditional distribution and sales channels will begin to take hold strongly by and during 2016. This means investment in different kinds of sales and service systems. Again, it takes awhile to accomplish this, even though the effort has been moving along over the past several years.
#4– Internet marketing is more than a website. It is a process of buyer education, an inducement to do research on the product of interest, and then to act upon it. A recent study by Polk and Neilson clearly indicates that the appropriate vehicles are reputable third party websites which are information-based, rather than promotion and hype.
It is our view at SVR that these three elements will come together, post 2015, and result in a rising tide that lifts all ships.
That being said, here is hoping your Christmas was a great one and best wishes for more blessings at the bottom line!
