Over the last six years, the most impressive-performing U.S. market in powersports retail sales has been side-by-sides such as the Polaris Ranger series and the Yamaha Rhino.

In 2007, the market hit 265,000 units, an 11 percent increase over the previous year. However, sales appear to have flattened out in 2008.

Last year, the market was heading for another record sales year when things came to a grinding halt due to the meltdown of the financial and credit markets. Although there has been some improvement this year, most OEMs continue to have difficulty getting credit approval for customers, despite favorable terms.

As a result, UTV sales in the fourth quarter of 2008 may have dropped as much as 20 percent overall, causing sales to be virtually flat with 2007. Since then, UTV sales have been on a steady decline and aren't likely to improve until late this year, if at all.

HISTORY LESSON
Between 2000 and 2002, the UTV market struggled just to maintain its overall 100,000-unit level — whatever gains were made in the consumer segments of the market during 2001 and 2002 were offset by declines in the commercial segments such as golf, resorts and industrial applications that were severely impacted by the existing recession. In 2003, the UTV market jumped to about 121,500 units from 103,000 units the previous year after the U.S. economy bounced back from a prolonged slump. This growth pushed sales to nearly 165,500 units in 2004, 200,000 units in 2005 and 238,000 units in 2006.

Based upon our analysis, consumer sales — which include farmers, ranchers and homeowners segments — represented about 40 percent of North American UTV sales in 2000. By 2002, consumers accounted for just fewer than half of sales and by the next year, they had surpassed commercial applications with a 55 percent penetration. Over the next six years this percentage continued to climb to 72 percent of sales in 2007. They remained about the same in 2008. Over a seven-year period the consumer segment has contributed to nearly 90 percent in the overall growth in UTV sales.

This trend was largely the result of the development of the recreational utility vehicle (RUV) that began when Polaris introduced Rangers that exceeded the conventional 25 mph speed limit. The trend gained momentum with a surge in popularity of the Yamaha Rhino and more recently evolved with the introduction of the Polaris RZR.

Over the last few years, a new category of recreational riders has emerged as a growing customer niche, stimulated by older ATV riders who seem to be switching from ATVs to UTVs. We estimate that in 2005, this category accounted for as much as 15 percent of total consumer sales. This grew to 26 percent in 2008.

UTVs generally are unable to negotiate many of the same public trails ATVs are able to travel because of size restrictions. This presents somewhat of an obstacle, although there is less of a problem in more open riding areas such as the Southwest. In developing the RZR, Polaris appears to have studied the states' trail systems and discovered an opportunity for a vehicle with a 50-inch width that could be ridden on many ATV trails with these restrictions.

MAJOR OEM MARKET SHARES:
Up until 2004, five OEMs essentially dominated the UTV market: John Deere, Kawasaki, Polaris, Textron and Ingersoll Rand. In 2003, these OEMs accounted for about three-quarters of the total market. However, during 2004, two new formidable OEMs — Kubota and Yamaha — entered the market with their innovative products. The move changed the competitive landscape. By 2006, the total market share held by the five leading OEMs dropped more than 20 points to 56 percent of sales. In that same year, Kubota and Yamaha together accounted for more than a quarter of total UTV sales, and Yamaha grabbed the top market share from Deere.

In 2007 Polaris surged ahead of Yamaha with the release of the 800 EFI RZR and the continuing popularity of the 500 and 700 EFI Ranger. A year later, the Minnesota-based company introduced the RZR-S, a wider version of the standard RZR aimed at the open riding areas in the Southwest. By our estimates, Polaris' share of golf- and turf-type UTVs was nearly 25 percent in 2008, up from 2007.

Yamaha held onto second place in the market with an estimated share of nearly 15 percent. Through its golf and turf dealer network, the company marketed a completely different golf-type chassis U-MAX utility vehicle series. (We calculated this vehicle into its share estimate.)

Yamaha's share has been on a steady decline since the second half of 2008 with stiff competition from the RZR and Kawasaki's new Teryx. Yamaha recently announced a "Rhino Repair Campaign" to address certain issues it worked out with the Consumer Product Safety Commission, and has suspended all spring 2009 Rhino production. An anticipated four-seater was put on hold until the fall of 2009.

Kawasaki's Mule and Teryx helped the company hold onto third position with an estimated 14 percent market share. The Teryx was given an EFI upgrade late in the year. The introduction of the Teryx was timely, as it offset Mule sales that began to taper off during the year. We expect Kawasaki to move ahead of Yamaha in 2009 and to finish in second place.

Deere's Gator sales continued to decline in 2008, although the company maintained its fourth position in the market with an 11 percent share of golf- and turf-type UTVs. Deere once held about a quarter of the market back in 2004.

Kubota has been giving Deere and, more recently, Kawasaki fits with its aggressive marketing of its RTV-branded products. Holding onto fifth position with about a 10 percent share, Kubota appears to be running on flat sales for the second year in a row. The RTV1100 with integral cab has sold well and a new EFI gasoline RTV500 was introduced in late 2008. A five-seater is expected to be introduced this year, along with improved transmissions for the RTV900 and 1100 models. Expect to see Kubota move ahead of Deere this year and possibly even slip ahead of Yamaha, whose sales are currently in a free fall.

Ingersoll Rand (Club Car, Bobcat and Husqvarna) is considered the sixth-ranked supplier of golf- and turf-type UTVs and also produces a line of shuttle and personnel carriers.

Textron (E-Z-Go, Cushman and Jacobsen), believed to be in seventh place in the North American UTV market, also markets a line of shuttle and personnel vehicles through the E-Z-Go and Cushman labels. E-Z-Go phased out its unsuccessful attempt at a 4x4 UTV during 2008 while Club Car introduced a new low-cost 4x2 and 4x4 XRT950 three-model series near the end of 2008 with automotive styling and independent rear suspension. Both OEMs experienced double-digit sales declines in their UTVs during 2008.

Arctic Cat moved into the eighth position with its Prowler series, having introduced a new EFI version late in 2007 and a 950cc model late in 2008. Brister's is the ninth-ranked brand, having significantly slipped in sales during 2008. The company was acquired in the middle of 2006 by American SportWorks, which earlier had acquired Manco, a major manufacturer of karts.

After many years of studying the UTV market, Honda finally introduced a work-type UTV called the Big Red in the second half of 2008 with minimal sales. The vehicle is produced in El Salto, Mexico, alongside Honda's CR-V.

Late in 2008 Landpride said it was withdrawing from the UTV market, choosing instead to focus on its core farm implements and attachments and ZTR mower businesses. Early this year, Bush Hog experienced financial difficulties and briefly shut down. It appears they also could soon exit the UTV market.

There are more than 30 other minor OEMs competing in this market with a variety of vehicle types, including an increasing number of Chinese brands. Chinese OEMs accounted for more than 12,000 UTV sales in 2008, up from an estimated 3,500 in 2007. In addition, there are now nearly a half-dozen distributors targeting hunters by offering 4x4 electric UTVs sourced in China. This niche was initially carved out by Bad Boy Enterprises.