State of the nation

If recent trends continue, Canada should make progress toward economic recovery this year, but 2009 was a year of recession, and as you’d expect, it was a tough one for the motorcycle industry.

If recent trends continue, Canada should make progress toward economic recovery this year, but 2009 was a year of recession, and as you’d expect, it was a tough one for the motorcycle industry.

As with any downturn, there are consequences, and the predictable reaction from most importers has been to cut costs. These cuts have manifested themselves in the form of drastically reduced racing programs, fewer new model introductions, lowered advertising budgets, and even staff layoffs.

Not every manufacturer complains of hard times, however, and while some have concentrated on cutting expenses and inventory, some others tackled the faltering economy by charging ahead to gain market share.

CMG talked with a selection of Canadian importers (BMW, Ducati, Harley-Davidson, Kawasaki, Kymco, Suzuki, Triumph, Yamaha, and very briefly, Honda) to get a picture of the industry’s health in these times.

HOW BAD IS BAD?

Predictably, most manufacturers said 2009 was difficult – “it’s been tough” was a common response to our calls, and figures from the MMIC illustrate how serious the decline was.

The member companies — that is, all the major manufacturers and most of the minor players — after years of steady increases, sold 52,383 street bikes in 2008, but only 39,007 in 2009, a decline of just over 25 per cent. Scooters represent an even more drastic example: sales went from 10,773 in 2008 to just 6,161, a drop of nearly 43 per cent.

Why such a large drop in scooter sales? Dennis Heilman, director of Parts, Service & Warranty at Kymco Canada, suggests that it has nothing to do with any particular brand, but is a result of the poor economy: on one hand, scooters generally do well in a recession because they’re small and inexpensive, but on the other hand, most scooters are sold to first-time buyers, who may be less committed to the notion of owning a two-wheeled vehicle and so can be more easily put off by a recession.

Other scooter importers have suggested that fuel prices, which rose in 2008 but fell back in 2009, played a significant role in scooter sales numbers as people rushed to cheaper forms of transport, then went back to their SUVs when gas became more affordable.

Many of the OEMs reminded us that the motorcycle industry was not as seriously affected by the recession as the automotive industry — no billion-dollar handouts were needed in order to stay in business, after all — and two companies claim they even had a good year: BMW and Triumph.

BMW sales were up this year – only about four per cent, but any increase is a huge victory in times like these. According to Rob Dexter, communications specialist for BMW Motorrad Canada, these improving sales numbers follow several years of effort at changing the brand’s image from reserved and expensive to sporty and affordable.

He went on to say that in 2008, the company lowered prices “across the board” on their motorcycles, offered lower-seat options on some models, and began promoting their motorcycles to new buyers.

The introduction of the F800 line of parallel-twin motorcycles in 2007 rendered BMW with a somewhat playful stance, and the recent introduction of the S1000RR superbike puts teeth in the proposition that they are determined to excel at racing and making sport bikes. The cumulative effect of all that was increasing acceptance among buyers.

Triumph Canada boss Chris Ellis was even more enthusiastic about 2009, stating simply in an email message to CMG that it was “a great year.” With a 19 per cent sales increase over 2008 figures, it’s easy to understand his comment.

Ellis added that Triumph has been “somewhat recession proof,” in part because of the public’s enthusiastic response to retro models, such as the Bonneville and Thruxton, parallel-twin motorcycles that superficially resemble 1960s Triumphs.

Others, such as Suzuki and Ducati, admitted that sales were down, but not so much, while still others simply said that 2009 was a time for circling the wagons. “We had a fairly good year,” said Dave Howson, general manager for Sales & Marketing at Suzuki Canada. “We weren’t down as bad as everybody else, so it was a good year for us – it wasn’t great, obviously, but there were manufacturers that were worse-off than us.”

Ducati North America’s media relations specialist John Paolo Canton said, “Things are going as well as they can for us. Yes, we are down a little bit, but things are pretty good otherwise.” Although he was not able to separate the Canadian from North American sales figures, he did say that even though overall sales were down, their market share had almost tripled – perhaps a testament to how badly others are doing, especially in the States.

Meanwhile, Kawasaki experienced what Canadian Kawasaki’s Jeff Comello, head of the marketing department, called “a challenging year.” He was not specific about sales numbers, but agreed that sales were down, thanks in part to stingy creditors.

“One of the major things that’s affecting everybody … is the ability to obtain financing at a reasonable rate.” Difficulty in setting up financing for purchases especially affected younger buyers, who were often after entry-level motorcycles, he said.

Yamaha Canada’s Bryan Hudgin, a PR specialist, agreed that 2009 was “a tough year” for all the Japanese manufacturers as well as Harley-Davidson. “We were down pretty much across the board.” He said the weak economy and the exchange rate hurt sales.

“Definitely, the yen exchange rate was hard on us,” he said. A general reluctance to let go of money when it seems to be in short supply also hurt, he said. “If the general conception of the population is that things are bad and they’re not going to get better anytime soon, then they start holding onto their money, and it just became a lot harder to sell motorcycles.”

Alex Carroni, public relations specialist at Deeley Harley-Davidson, said 2009 “was tough, like for many other manufacturers,” and the head-office decision to drop the Buell brand also affected them. “But this means that we simply went back to our roots, in strengthening the Harley-Davidson brand here in Canada.”

BREAKING BAD

There were common methods for dealing with the recession, but surprises as well.

1) Spend less

Kawasaki and others are looking hard at budgets. “It’s not rocket science,” says Kawasaki’s Comello. “Everybody is trying to bring their expenses in line with sales, and Kawasaki’s no different.” Hudgin says expenses were closely examined at Yamaha, too. “We started out with a lot of budget cutting,” he said, noting that spending on advertising and other “soft” expenses was curtailed.

Ducati also cut back on advertising, said Canton. And at Kymco, “not so necessary expenses” were cut back, according to Heilman: “You definitely start looking at your nickels and dimes.”

2) Keep inventory in check

It’s a time to be cautious with inventory levels, too. “Basically, what we’re trying to do is minimize the dealers’ inventories,” says Howson at Suzuki. “If a dealer has too much inventory, they can’t sell it, and in turn we have to rebate it, which costs us money, so we’d rather help the dealers with their inventory control so that you don’t have to spend the money later. It’s just being better at business.” He says educating dealers about inventory control “is the biggest thing we can do right now.”

BMW also expressed some desire to limit dealer inventory levels: “We don’t force inventory on retailers,” Dexter said. “We try to work with them individually to establish a realistic sales target.” For a small company, BMW is not hesitating to bring in new models, however: with the new S1000RR superbike, the RR naked iteration of their F800 series, and the reintroduction of the G650GS, BMW is bringing in more new models than some vastly larger competitors.

Yamaha, for instance, is being very cautious, bringing in only the touring-cruiser Stratoliner Deluxe, while Suzuki and Kawaski will import a few new, or at least upgraded, models each: two 1250 Bandits and an M50 cruiser for Suzuki; the Z1000, Concours 14, and 650 cc Versys for Kawasaki.

Interestingly, Honda Canada races against the current trend of fewer new models, bringing the all-new sport-touring VFR1200F, two CBF standards, three new VT1300 cruisers, two new VT750 cruisers, and a scooter, the SH150i.

Kim Moore at Honda was unable to provide us with a full interview — she was busy preparing to launch all those motorcycles in Savannah — but did say that “getting people excited” about new models might help to stimulate sales.

3) Reduce racing costs

Understandably, several companies slashed the expense of racing programs, with Japanese factory teams all but disappearing for 2010. Yamaha, for instance, was heavily involved in road racing in 2009, but won’t be this year: “We’ve had to do a complete withdrawal from it,” said Hudgin.

Suzuki won’t compete either, although Howson insists that the company will support racing with contingency money. Canadian Kawasaki will show up in the national superbike series, but indirectly – through a one-rider, one-bike farm team.

On the flip side, some companies are expanding into racing, and with the competition cutting back, it would seem a good time to get on the podium. Honda, for example, will support 16-year-old Jodi Christie on a CBR600RR and the 2009 Canadian Superbike champion, Jordan Szoke, on a superbike.

But of all the manufacturers, BMW seems most thrilled about Canadian road racing. The marque will launch a serious effort to take the superbike title this year with two S1000RR-based race teams.

Perhaps the biggest surprise is Deeley Harley Davidson, which is still supporting racing – with its discontinued Buell 1125R, despite the brand’s demise, though on a smaller scale than in previous years. Deeley will support road racer Darren James and “on occasion” Olivier Spilborghs on the Buells. Carroni said this year’s race season “is also an opportunity for us to scope out the potential of racing, for example, an XR1200 class similar to what is being done in the U.K.”

Ducati is serious about its racing programs, but there is no Canadian factory team and support for AMA road racing in the States has been withdrawn. Canton says the company got more exposure through its World Superbike and MotoGP race programs than from AMA racing anyway – even in the States.

Triumph Canada does not sponsor a racing effort in Canada, though some dealers do, and the British company runs a World Supersport program.

LOOKING FORWARD

There seems to be little agreement about what models will sell in 2010, though there is some agreement on the notion that less expensive motorcycles should do well. Yamaha figures entry-level sport-touring and dual sport motorcycles will sell. Kymco’s 200 cc Frost scooter did well in ’09, and they’re hoping for a repeat performance, along with good sales of the new Quannon 150 cc motorcycle.

A number of manufacturers, in fact, are going after the first-time buyer, or at least relatively new buyers, with motorcycles plugged just under the $10,000 line.

Carroni at Deeley Harley-Davidson said the buying public “has finally come to realize that there are nice, entry-level bikes that allow you to be part of the brand at around the $10,000-mark,” and their Iron 883 Sportster will retail for $9,459.

Likewise, Ducati’s 696 Monster will sell for $9,995, BMW’s new F800R is priced at $9,990 and Triumph’s Bonneville line, as well as their 675 Street Triple, are all around the $10,00 mark.

The Japanese brands, of course, all sell motorcycles for under $10,000,
as does Korea’s Hyosung.

Price is not the only defining quality for motorcycles that could do well in 2010, however. Ducati’s new Multistrada 1200 “will be a huge hit in Canada,” predicts Canton. Harley-Davidson expects to see large touring models sell to the brand-faithful. BMW’s new superbike should sell, and Kawasaki’s 1700 cc Voyager, along with other expensive models from Honda, Yamaha, Suzuki, and Triumph.

As John Paolo Canton at Ducati says, people who want a Porsche 911 Turbo won’t settle for a Nissan GTR. “You want the 911, you know what I mean? Sales of both I’m sure are down, but I think you’ll see, percentagewise, the Turbo suffered less.”

If 2009 was a tough year for most manufacturers, 2010 could be a year that breaks backs – or a time of recovery.

Not surprisingly, everyone we spoke to is betting that buyers will come back, and Triumph has said it will bring in more new models over the next year or two, while Ducati, BMW, and Honda have gambled on new high-performance motorcycles and other companies continue to engage the market with their own new models.

In our all-too-brief conversation with Kim Moore at Honda Canada, she pointed out that there were fewer people attending some of the MMIC motorcycles shows – or maybe all of them. But among those who did attend, there were more people who were serious about buying motorcycles.

Maybe that says more about the near-term future of the motorcycle industry in Canada than anything else. And that’s good news.