As we enter the second quarter of the year, this article takes a look at the current state of the golf car industry and the outlook in both near term and longer term to 2030. Small Vehicle Resource (SVR) publishes a full set of trend and outlook numbers, by market segment. In its upcoming annual analysis of the industry and market to which you can subscribe (see the adjacent insert), but this writing provides a context for what we are now facing and focuses primarily on the LSV/PTV market segment.
Industry and market environment
The industry continues to change in the wake of the COVID pandemic. Here are the main components of the change, as we enter the second quarter:
- The pace of market growth has decreased from the hectic gains experience during the COVID period;
- A dearth of supply, leading to historically high margins at retail, has been replaced by a whole new surge of supply, the point where we are now;
- New supplies have come via new company entrants into the market, as well as through longer established companies;
- While the market continues to grow, the new supply/demand balance has resulted in a considerable softening of prices at the retail level.
The conditions are such now that a shake-out within the industry is very likely. Long time entrants will, no doubt, survive. It is among the more than dozen new entrants—within the past two years of so–where the toll will be taken.
Why the long time, established companies will survive
Here is what the established companies have that make them survivors:
- Have a solid network of dealers;
- Few or no supply chain issues with regard to parts;
- Warranies that can be counted on;
- Dependable and efficient servicing and technical support;
- Brand recognition;
- Capable of profitable operation at discount pricing.
New entrants—the pluses and minuses
Despite bearing the brunt of the competitive turmoil ahead, the new entrants have brought to market a new flavor of laudable products, complete with the latest upgrades and accessories. And broadly speaking have some notable strengths:
- Clear focus on the LSV/PTV market, which is the growth segment;
- Models feature the latest upgrades;
- Lower price strategy buttressed by relatively cheap partially-assembled vehicles from China.
On the other hand they have at least three critical weaknesses:
- Little brand recognition;
- Dealer network is undeveloped;
- Early buyers may find issues with servicing and parts;
To the degree that a new entrant can shore-up these weaknesses, the far better its chance of surviving the competitive fallout.
The upside to increased supplies and weakening prices at retail
The consensus of those that SVR talked with at the 2024 PGA Show was that there would be a decrease in prices in LSV/PTV vehicles at the retail level, as a result of increased supplies coming largely from new entrants. That is what is actually occurring, but there are at least two mitigating factors on the more optimistic side:
- Lower prices will attract more buyers;
- Greater product variety, featuring an array of upgrades and accessories could well work to sustain profit margins.
Economics 101 tells us that a shift rightward of the supply curve, as seen in the diagram, means that it will intersect the downward sloping demand curve at a lower price point, but the good news is that quantity demanded (i.e., purchases) increases. Thus, in what may be difficult times for some dealers, for the industry as a whole, the market could well expand.
In the longer term, say by 2026, the market will have decided the survivors and the non-survivors. At this point the supply curve reverses course, shifting leftward, bringing higher prices.
Getting beyond the short term
The big reason for surviving in the short term is to flourish in a better market and competitive environment that likely emerges beyond the next 12 to 24 months. Small Vehicle Resource has just published a forecast of the market for the period 2024 to 2030. The outlook for the industry as a whole is positive.
Underlying this positive outlook are four favorable trends that actually started before the COVID pandemic, and are very likely to continue well into the forecast period.
- Population movement out of urban centers into surrounding suburban areas and beyond;
- Home office deployment of the professional workforce continues, making the exodus from urban center offices feasible;
- Population movement on a broader scale from colder northern climates to the south with its warmer weather;
- Age distribution of the U.S. population continues to shift toward and older populace.
Best of all worlds
The best of all worlds would be a simultaneous shift rightward of the demand curve, thus supporting higher prices, while at the same time experiencing overall market growth.
The favorable systemic conditions, cited above and experienced on a national scale, all create an environment in which the use of GCT vehicles will be more readily accepted. As new communities are developed and present communities adapt, the acceptance of GCT vehicles as a viable and desirable alternative to conventional automobiles will at the same time increase. The GCT vehicle will be the go-to solution for short distance driving.
Again, the headwinds of the current market may take their toll, but the tailwinds of an improving long term market environment, innovation and upgrades, and growing public acceptance will, in all likelihood, propel market growth in the long term.
Design innovations are still needed to extend the short distance driving market
In many ways the industry is still mired in its golfing legacy. This is not to denigrate golf or the golf-related segment of the market. This segment is quite viable, and while not a growth market, it is nonetheless bread and butter for some OEMs—in particular the Big Three, Club Car, E-Z-GO and Yamaha.
The LSV/PTV segment, however, is the growth segment of the market and where the promise of higher margins lie. Many dealerships selling these vehicles brand themselves as golf “cart” dealers, encouraging the image of golf and moving about a golf course. In many cases it is the consumer who is leading the way into the short distance driving market of emobilty; that is, in terms of image change.
OEMs wishing to present a new image, and project the benefits of short distance driving with small electric vehicles, might well look to Europe for inspiration. The vehicle below is one of many small electric vehicle prototypes coming out of Europe. Picture is the Eli Zero, reportedly to be rolling out in ten European cites. The Zero is classified as a quadricycle, meaning it can be designed to reach highway speeds.
Introduction in the U.S., which limits low speed vehicles to 25 miles per hour, would not take advantage of the full range of the vehicle’s capabilities. (See the comment below.)
Nonetheless, the concept of a fully-enclosed, weatherized cabin with all the creature comforts is a direction open to U.S.-based OEMs. With minor design changes golf bags could be accommodated, if one insists on maintaining some connection to golf cart history and its legacy.
Do NHTSA LSV regulations need modernizing?
If there is a real purpose in achieving a zero-carbon footprint in transportation, some thought should be given to modifying the highly restrictive NHTSA standards for low speed vehicles. The answer might be to create another vehicle class, such as the quadricycle, as used in Europe. This would create an intermediate class of vehicles between LSVs and conventional automobiles.
A new small, electric vehicle classification, such as a U.S. version of the quadricycle, incorporating provisions for higher speed and use on public roads with speed limits greater than 35 m.p.h., would significantly enhance practical useability. It would also be a major attraction to the short distance driving market—small electric vehicles and more significant substitutes for conventional automobiles.
Getting such a change will take some lobbying and political pressure at the grass roots level. A dealers association would be just such an organization to undertake the task. And, in fact, there is one: the Low Speed Vehicle Association. If you are a dealer, and have not yet joined, it would be beneficial to consider membership. Here is the link to the LSVA website: https://lsvda.com/
SVR announces new analysis of the small, task-orient vehicle (STV) market, with outstanding growth potential, and covering:
- Impact of new industry entrants;
- Segment analysis—LSV/PTV, light duty utility vehicles, and fleet (electric & gas);
- Trends from 2016, including the COVID disruption;
- Forecasts by segment and by electric vs. gas to 2030;
- Electrification of the off-road market;
- New market opportunities and benefits of a national dealers’ association
Authored by Stephen Metzger, small vehicle industry expert and longtime contributor to GolfCar Advisor, this new analysis of industry trends is a must-read for developing market strategies and product development. Stephen will be attending the 2024 PGA Show, and if you would like to talk to him there, or find out more about the SVR market analysis, you can contact him at: smetzger@smallvehicleresource.com
(914) 293-7577
