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Jan. 21, 2008 – Gauging V-twin execs’ expectations for 2008

January 21, 2008
Filed under Features

By Neil Pascale
Editor
A discussion with custom V-twin executives about the possibility of a third straight year of declining sales revolved largely around the factors constraining the segment: the troubling housing market and consumers’ squeezed discretionary spending.
The V-twin executives that spoke with Powersports Business recently about the segment’s potential for 2008 don’t see those factors immediately turning around for the positive, although there is some optimism within the group.
Kevin Alsop, owner and founder of Big Bear Choppers, says some signs point to the U.S. housing market beginning to recover in the summer.
Nick Messer, president of Big Dog Motorcycles, the largest custom manufacturer, said “going into an election year, I’m cautiously optimistic. This market isn’t going to go away.”
Still all indications point to it probably shrinking, at least compared to previous years.
Although there is no official retail sales data on the V-twin industry, Messer says information he has seen indicates the segment’s 2007 U.S. retail sales approached the 10,000-unit mark. That is expected to include an approximate 25 percent-30 percent drop from the previous year, according to data Messer has seen and a dealership survey by Powersports Business taken last summer.
“We’re seeing some of our smaller competitors going to the wayside,” Messer said. “Some of these individuals have cut production dramatically or are no longer producing bikes period. We’re still building motorcycles, so we’ve managed to grab some of that market share that we didn’t have before because the loss of these other companies. But we’re still off.”
Big Dog is off approximately 20 percent from its previous year sales, which industry-wide were down in 2006 compared to what might have been the segment’s peak year for the foreseeable future in 2005.
“Clearly the market here has softened considerably from a demand perspective domestically,” said Saxon Motorcycle President David Schwam.
Schwam and others tie the softened retail environment to the lack of discretionary income that increased gas prices and interest rates, which have ballooned some mortgage payments, have produced. Plus, he cites the downturn in the U.S. housing market as vital.
“People can’t pull equity out of their homes as easily as they could,” he said. “It just doesn’t exist right now. Whether people were using home equity loans to buy motorcycles or people’s self perception of wealth based on home equity they have. Those two things are impacting us.”
David Seiders, chief economist for the National Association of Home Builders, recently told national media that he doesn’t expect sales to pick up until 2009. By the middle of 2008, Seiders predicts new home sales will be down 45 percent compared to the 2004-’05 peak, according to the Detroit Free Press.
With that in mind, do Schwam or Messer expect the V-twin market to follow the housing market, with sales continuing to decrease in 2008? For the most part, yes.
“You won’t see anywhere near the volume you will next year,” Messer said, predicting even more smaller custom manufacturers will close or go in another direction with their business.
Schwam agrees, noting the dramatic impact even just higher gas prices can have on monthly discretionary income.
“How much of the market will go away as a result of that, I don’t know,” Schwam said. “But there will be a chunk of it that does particularly given the fact that such a high percentage of our buyers, contrary to popular belief, are payment buyers.”
Alsop of Big Bear Choppers is a little more optimist of 2008 V-twin sales, noting he has seen reports from European and domestic sources of the U.S. housing market turning around.
“The good news is the sun is going to start poking through around April-May next year in the housing market,” Alsop said. “We’re in the belly of the beast right now.
“My honest opinion is we’re going to see 2008 be a little better than 2007.”
What’s not disputed is the current state of mind that most V-twin dealers are in.
“I believe dealers are being much more cautious than they were in years past,” Messer said, conveying a thought that others echoed. “They’re carrying a little less inventory on their showroom floor, they’re cautious about dollars spent, and I think that’s all a good thing.”

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