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Polaris motorcycle capacity to increase by five times annually soon, analyst says

By November 26, 2012General Posts


Polaris Industries’ motorcycle capacity “will soon increase five times to 60,000-70,000 units annually,” according to a research note provided to Powersports Business this week by Wells Fargo Securities analyst Tim Conder.

The Wells Fargo Securities report, filed after a recent roadshow in which Polaris management met with investors, says that Victory “will grow via domestic/international sku and distribution expansion. Polaris will relaunch Indian late summer/early fall 2013 with what we believe will be 3-5 skus addressing a broader segment of the 1400cc+ market (i.e. $15-35K price point.) Management believes Polaris’ combined (Victory/Indian) share can double to about 10 percent by the end of 2015 as the dealer base expands and additional skus are introduced.”

Conder also reported the following takeaways from the event:

  • Incremental ORV Competition. Competitive product introductions remain within management’s expectations. 2013 market share gains likely to be driven by a strong R&D pipeline in SxS (sport, utility) and the first half of 2013 entry into the commercial segment (20% of the SxS market) via new co-developed Bobcat/Polaris joint venture product.
  • North America Channel Inventory Growth. Year-over-year growth due to 1) increased fill rates/address shortages, 2) dealer growth (60 YTD in Victory), 3) new skus, 4) early (timing) snowmobile shipments. Absolute channel inventory levels will likely slightly rise, while velocity related initiatives should produce improved inventory turns over the next 12-18 months.
  • International (excluding Canada). Europe is expected to be flat in 2013 with motorcycle growth offset by declines in ORV. Latin America is expected to be the leading growth driver over the next 2-3 years as distribution sale is achieved. A new European manufacturing plant could be announced by year-end 2012 that will offer additional cost savings and Return On Invested Capital similar to that seen in Mexico.
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