Potential tariffs on aluminum and aluminum sheet are the most concerning policy issue facing the industry outside of workforce challenges, with the spread of E15 following closely behind, according to a new dealer survey.
Of the dealers that responded to the monthly Pulse Report conducted by Robert W. Baird in conjunction with the Marine Retailers Association of the Americas and Soundings Trade Only, 37 percent said tariffs were the biggest concern facing the industry, and 31 percent cited the spread of E15 — fuel with blended with 15 percent ethanol — as the largest challenge.
One dealer responded in the comments section that “fear of ethanol in gas for boats, tariffs and the impact on costs” were all causes for concern. Several said pontoons, which are made of aluminum, were helping drive sales.
The concerns could explain the decline in dealers’ three- to five-year outlook, which dropped to its lowest level since June 2016, to 64 out of 100, declining another six points after dipping 11 points in January.
Marine sentiment for the immediate future remains strong at 74, but dipped from 79 in February.
Long-term outlook has declined monthly since October 2017 with the exception of January, when it shot up to 81 points, possibly in response to the passage of a tax reform bill on Dec. 22. The 64 number is still above a neutral rating of 50.
Retailers indicated that the economy, new products, OEM promotions and access to credit all positively impacted demand during March. Many also said they faced headwinds from lingering cold weather as the Northeast experienced several Nor’easters in March.
Many cited government action and inaction as a drag on demand, possibly a response to looming aluminum tariffs.
“Boat shows and manufacturer incentives helped create excitement and urgency but not enough to overcome weather challenges in the Northeast,” one dealer wrote. “Stock market volatility created some concern as well.”
Baird senior research analyst Craig Kennison wrote: “Our checks suggest marine trends remained strong in March, entering the important selling season. Sentiment remains positive, but dealers appear cautious in their outlook.”
One dealer said banking trends were a concern: “As interest rates rise, it would behoove our industry to think of how we might alleviate high inventory financing costs.”
Retailers reported that new-boat inventory levels were appropriate. In March, slightly more dealers considered inventory “too low” (29 percent) compared to “too high” (28 percent). Baird said inventory remains in the normal range.
Used boat inventory remains lean, with 57 percent of retailers reporting “too low” versus 11 percent that report inventory is “too high.”
Several dealers said promotions were working, while others said lack of promotions were hurting sales. One dealer cited momentum from the tax bill as the most impactful positive influence at his business.
Many retailers said pontoons and tow boats were driving positive sales trends, aligning with sales data reflecting growth in those segments.
A few dealers said fiberglass and large center consoles were soft as more manufacturers enter that segment.
“Too many new center console brands on the large boat side,” one dealer wrote. “Too many boat models for a relatively small market.”
New sales tactics were driving growth at least one dealership.
“Guerrilla-style marketing at the lake with customers seems to be working well as opposed to waiting for the doors to swing at the dealership,” one dealer said.
Along those lines, one dealer said, “old-school sales processes” were not working, adding: “If you’re doing it like you did 10 years ago, you’re missing sales.”
This article originally appeared in the May 2018 issue.