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ATV – John Deere is Satisfied with First Year

October 19, 2004
Filed under Features

Last year about this time John Deere plowed into the powersports industry with the high profile launch of several new Gators and a group of ATVs created in its joint venture with Bombardier Recreational Products (BRP).
At that time, Deere said about 300 of its 3,000 North American dealers already were selling competing lines of ATVs, a situation it expected to be able to capitalize on.
Jon Chase, Deere’s group product manager for ATVs, provided an update on Big Green’s first year in the powersports industry during an interview with Powersports Business.
Chase wouldn’t disclose ATV unit sales this year, but he did say that Deere had “good success” with its ATV sales, at the same noting that there is plenty of room to grow.
Industry estimates are that Deere’s ATV retail sales through August were about 2,000 units, which would give it less than 1% market share in the U.S. Deere didn’t begin shipping units until April.
“We never thought we would blow the doors off this thing,” says Chase. “We’re looking five years down the road.”
Chase said that Deere’s actual sales “were not where we wanted to be, but several things affected that.” For instance, dealer regulatory issues limited Deere’s selection of dealers. For another, Deere’s agricultural business was very strong this year. “Eighty percent of our dealers are ag dealers,” points out Chase, “and Deere had an amazing year on the ag side. We have to put our resources against that (market segment).”
Overall, Deere corporate has done very well so far this year. For the nine-month period ended July 31, the company reported net income of $1.05 billion, or $4.14 per share, up significantly from the $572.4 million, or $2.37 per share, reported last year. Worldwide sales for the first nine months increased 27% to $14.8 billion.
The Commercial & Consumer Equipment Division, where the Gators and ATVs are handled, posted a 17% sales gain for the nine months.
Chase is looking for a big year-end boost for ATV sales. “Now, we’re at a time where ag sales slow down,” he says. “So, we’re looking for a big fall season.”
Deere is hoping to push those sales with a promotion package that includes 1.9% financing, $500 cash back, and $250 in attachments and accessories. It’s also holding a drawing for a great fishing package that includes a tour of the “finest fishing spots in the Northern Hemisphere,” $2,500 in fishing gear and a new Deere Trail Buck ATV.
Additionally, while unit sales are important, Deere is looking hard at the accessories and attachment business. “We’re really looking at integrating them into our product profile,” he says.
Speaking of product, don’t be looking for anything new from Deere until next year. Last fall’s introduction covered the 2005 models, and there won’t be much of anything new until late next spring, although a new Buck 500 automatic was introduced in September. It features a 498cc Rotax engine, a continuous variable transmission (CVT), and it carries an MSRP of $6,499.
Look for some big changes in the 2006 lineup next spring, though. “You’ll see a lot of changes happen in model year 2006,” says Chase, “and a lot more for 2007.” This model year cycle will put Deere more in step with the rest of the powersports industry’s ATV segment, agrees Chase.
Deere’s best selling ATV has been the Buck EX, its accessorized machine. And its Gator HP “has been a tremendous success,” says Chase. “It’s gone beyond what we thought; it hit the sweet spot of that growth in the utility market.”
DEALER CHALLENGES
On the dealer side, Deere has made progress but, at the same time, faces some large training challenges. The way Chase sees it, Deere had two options in rolling out ATVs to its dealers: Either go very slowly, picking about 200 dealers, and then get the program up to speed. Or, as Chase says, go for broke and “swallow the elephant whole. We took the latter. There definitely are challenges in doing it that way. It revolves around understanding the industry and (understanding) how it’s different and how products are different.”
Now, with some 1,100 North American dealers carrying ATVs, dealer development is a huge issue. “Powersports is different than our core business,” he acknowledges. “We’re investing in dealers to train them and get them up to speed; we’re investing in advertising to get the word out, and we’re investing in our (product) portfolio.”
Deere tried to select dealers who were committed to ATVs, who were in strong ATV areas, such as West Virginia, and where the dealer population made it appropriate. “Obviously, we didn’t want Deere dealers competing against Deere dealers,” he says.
Chase sees continued “tremendous” growth for side by side machines; last year, Deere estimated the segment at $2.5 billion, and it expects it to continue to post strong gains. “It just continues to grow,” he says, adding that increased competition from additional OEMs also will continue.
Chase sees the segment growing as new buyers enter the market and as UTVs replace light duty trucks in certain applications. “Those things provide a tremendous opportunity,” he says.
The joint venture with BRP is working well, too, he says. “BRP is a great company that has tremendous excitement for product; they want to have the best product as quickly as possible.”

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