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Despite down year, there are reasons for optimism for U.S. snow market – June 5, 2006

June 5, 2006
Filed under Features

While official sales reports from the International Snowmobile Manufacturers Association (ISMA) were not released yet, we have an early view of the state of the industry from a survey of more than 180 North American dealers.
The survey conducted for Powersports Business indicates sales in North America during the 2005-06 season declined 8.7 percent. Sales in Canada were down 7.5 percent and U.S. sales were down 9.2 percent.
Compared to recent years, only the 2002-03 season was worse for sales: an 11 percent decline, with flat sales in Canada and a 15 percent drop in the U.S. There have been steady declines in annual snowmobile unit sales in North America since 1997. Snowfall is still widely viewed as the most important factor in snowmobile sales. Two consecutive winters in the eastern region with poor snowfall has left many of those dealers swimming in inventory.
If robust winters with good snowfall hit the Midwest and East, the snowmobile industry is poised for a rebound. There are three reasons for that optimism, providing the ground turns white.
The first is that registrations have grown in recent years, and remain high. Total North American snowmobile registrations were 1.75 million during the winter of 2004-05, 1.77 million in 2003-04, 1.72 million in 2002-03, and 1.65 million in 2001-02.
ISMA’s Ed Klim hasn’t crunched the final numbers, but he told Powersports Business May 24 that he expects the current year registrations to hold steady. He also noted there might be an upward tick in some states and a reduction in others, following where the snow fell the hardest. While overall unit sales are slowing, registrations in recent years have increased or held steady, meaning people aren’t walking out on snowmobiling.
Klim was critical of the industry, saying that snowmobilers assign a worse public image to themselves than exists. He said public perception of snowmobiling is quite high. “In general, non-snowmobilers think we’re OK,” Klim said. “They think that [snowmobiling is] cool. They’d love to try it, but they don’t know where to go. That’s where things have to change.
“As an industry, we spend most of our time talking to ourselves,” Klim said. ISMA is working with the snowmobile manufacturers to build the Go Snowmobiling campaign for new customers. It might be just the tool dealers need to get snowmobile buyers through the door ready to spend.
Another cause for optimism is sales in Russia and Scandinavia increased a combined 14 percent this past year. Developing infrastructure in Finland is one reason for the increase. Klim said trail systems are growing, establishing a stronger trail riding market. Russia’s booming oil business also has a lot to do with that country’s increase. Most of the oil fields are located in wintry climates, and workers in the oil industry have money to spend, Klim said. They are turning to snowmobiling for recreation.
While much of that sales growth is attributed to developing infrastructure and new wealth, the cause for optimism for the U.S. market comes from fuel costs. The fuel costs in Europe are significantly more than fuel costs in North America. Currently, gasoline in most of Scandinavia equates to about $7 per gallon. Could that mean that despite the concerns of rising domestic fuel costs and how it will impact the U.S. snowmobile industry, people will keep riding? According to Klim, sales numbers and empirical evidence, that answer is yes.
“In Europe, about 60 percent of the new vehicles sold were what we call new technology engines — SDI and four-strokes,” Klim said. People are concerned about miles per gallon and want the cleaner, more efficient technology, but the sales are growing despite high costs of fuel. psb

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