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Mar 10, 2023

Dealers Want A Break From OEMs' Expensive Demands

The National Powersports Dealer Association is asking the OEMs to give them a

The National Powersports Dealer Association is asking the OEMs to give them a break on expensive demands for facility upgrades, to help dealerships weather the tough months they expect are coming. Photo: ALPA PROD/Shutterstock.com

American powersports dealers are sensing upcoming financial turbulence, and they are trying to prepare by asking OEMs to give them a break on major business expenses.

Despite the turmoil of the past three years, particularly the closures during the first few weeks of the COVID-19 pandemic, we’ve seen powersports dealerships experiencing an unexpected boom due to massive demand for motorcycles, ATVs and other powered toys. However, as we enter Q2 of 2023, the economy is not chugging along as strongly as it was only a few a months ago. With rising interest rates and other turmoil in the markets, National Powersports Dealer Association members seem to expect the recent boom to be followed by a bust.

In an article in the April issue of Dealernews, the association (which represents more than 300 powersports dealers in the US), calls for "a 12-month moratorium on requirements for extensive facility upgrades and other capital expenditures." In other words: Motorcycle manufacturers want the dealers selling their products to invest money into sprucing up their buildings, along with other major expenses, and the dealers don't want to spend that money, because they figure financial troubles are coming. They’ve been there before, and they want to be prepared this time.

The concerns are featured in the April edition of Dealernews, with a position letter in the publication (viewable here) laying out the position.

It's very interesting to take a flip through the whole publication and see what industry insiders are saying. Check out Robin Hartfiel's column on Page 8, where he talks about tough sales numbers in 2023's Q1, with worse expected for Q2. On Page 82, we see the position paper from the Association that officially asks for that 12-month moratorium. The dealership group says they’re worried they’ll be hit by expensive infrastructure improvement bills just as their sales collapse, and while they may be legally required by the terms of their contracts with OEMs to perform such upgrades, they’re asking for a break. The quote below sums up their important points:

Currently, a multitude of issues cloud the future of the Powersports industry. Recent discussions with our members, along with our legal counsel, revealed that the following have the potential to negatively impact Dealers in the short term.

• Rapidly changing economic conditions• Interest rate run-ups• Global conflicts – specifically tensions with China• Declining consumer sentiment• A slow start to 2023 and double-digit reductions in year-over-year volume• A significant buildup of new inventory in the field

No one wants to repeat the 2008/2009 failures of the Powersports industry, especially the self-inflicted ones. Thus, NPDA members are requesting our OEM business partners enact a 12-month moratorium on requirements for extensive facility upgrades and other capital expenditures. It is time for OEMs and Dealers to work together to complete an in-depth cost-benefit analysis before we proceed. Failure to do so can bankrupt Dealers and disrupt our ability to best serve consumers. In these uncertain times, it's not prudent to spend millions of dollars on ill-timed and ill-planned "cap-ex" investments.

For Dealers currently impacted by such programs, the issue is existential; the costs of such programs can bankrupt even the best of operators. For the rest of the industry's Dealers, it is only a matter of time before OEMs attempt to one-up their competition. Considering the economic instability facing the nation, we are seeking dialogue to find rational, prudent, and equitable solutions to fulfill the desire of each manufacturer to build and/or expand brand awareness.

The letter ends with a plea from the National Powersports Dealer Association for dialog with the OEMs on the issue, to avoid legal wrangling (which often proves very costly on its own).

What does it mean for the consumer—you, the reader, who's buying motorcycles and parts? Hopefully, it means your local dealership remains in business, and remains strong, even if tough times are ahead for the industry.