Strange Days Indeed: The ATV Market Amid Endless Drama

An escape from these wacky times needed most.

We’ll come right out with it – these are very strange times no matter where you happen to live. You see it whenever you go to put gas in your car, when you stop by the store to get groceries or even just to grab a bite to eat at the drive-thru. Let’s not even get started about when you turn on the TV. Sadly, our off-road corner of the world is not immune to the strangeness. Let’s take a look at what we’re witnessing of late and try to explain why.

Pandemic(s):

Arguably the train really began to go off the rails when Covid-19 swept across the globe. We Americans certainly felt the prolonged effects but, as the virus originated on the far side of the globe, we weren’t the first. Asia is the planet’s manufacturing hub. We think about this whenever we fire up our Japanese, Korean or Chinese machines but they are but a sliver of the problems the world has been dealing with as a result of industry shut-downs abroad.

For the first time in recent memory, demand began outpacing supply in just about every sector. Everything from the food we eat to toilet paper began getting harder to come by. We were lulled into a false sense of security by imagining “Made in the USA” items would be unaffected. The truth is – even products made in the States rely upon packing and inks from Asia, are assembled on industrial machines made in Asia, shipped in creates made in Asia etc. Like it or not, we are now one world. When something like this happens, there is nowhere unaffected.

Domestic Economy:

Quick Economics 101 lesson – when more money is pumped into a closed system, the less valuable each dollar in that system becomes.

When the current administration took office, their resolution to the stumbling economic crisis caused by the pandemic was to issue stimulus money en masse. By flooding the closed system with new funds, the value of the dollars within plummeted (we call this inflation).

To make matters worse, those supply issues mentioned above still weren’t (and aren’t) resolved. Thus demand is greater than supply in a lot of sectors still – also known as inflation.

The exuberant prices we’re seeing on everything we buy is a double whammy inflation effect.

Fuel Costs

As if the inflation-crushing prices aren’t bad enough – fuel is at an all-time high as well. This hits us two ways. First we are paying more out of pocket just to get to work and run our errands and secondly, prices for everything that has to be shipped increases to compensate for pricier fuel as well.

Why is gas so expensive? It is a combination of factors, the nation’s lack of energy self-sufficiency, turmoil abroad, and mostly a market that, like everything else on this list, is severely out of balance thanks to the pandemic.

Conflict

As if the world at large hasn’t been through enough, Russia’s occupation of Ukraine is creating additional waves of turmoil rippling through the global economy. Sanctions and embargoes on Russia account for 10% of our domestic oil consumption suddenly halted (even less supply) while Ukraine exporting (grains like barley, wheat and corm as well as steel and coal) are grinding to a halt as a result of war.

Chip Shortage:

One of the strangest casualties to come as result of the production shut-downs was a global shortage of microchips thanks to demand of semiconductors outpacing supply. First instinct may be that is going to affect the electronics industry mostly (which it has), but the truth is this one managed to ripple through to nearly every facet of society.

We know our ATVs and SxSs use a myriad of chips in their onboard computers, resulting in decreased production supply, but like everything in this story, it’s the farther reaching affects that are causing real problems. Shipping companies unable to update entire vehicle fleets, automakers struggling to finish vehicle production (Ford claims they are down 9% / $3.1 billion the first quarter due to time shut down waiting on chip restocks).

Our Industry

After reviewing the facts, it becomes a lot clearer why we are witnessing the strange patterns taking place in our segment of the hierarchy of society as well. Our machines are comprised of pieces and bits from all over the globe, regardless of where they are assembled. They rely upon assembly line equipment likely manufactured and serviced by Asian industry. The vehicles (and the equipment that makes them) rely upon semiconductors. Shipping the machines from the factories to the dealership networks is slower than it has ever been and costly due to rising fuel costs. In short, we are feeling the squeeze from all sides, too.

Amazingly, though, browsing your local dealership is nothing like a scene from the apocalypse. Many dealers are still maintaining decent stock. There is less wiggle room on MSRP, of course. Going used it getting more difficult as ATV/ UTV owners who would otherwise think of upgrading for the new season are instead opting to hold onto the machines they have. The flip side to this is trade-in values are higher than they’ve been.

Conclusion

After so much doom and gloom, we can at least end this look at what’s going on in the world on a positive note. The chip shortage is showing signs of easing up. At one point annalists were predicting it would maintain until 2023 but those projections are being pulled back to the latter half of 2022.

While we’re not seeing much improvement at the pump yet, crude oil has dropped some 20% from its peak back in March. When oil goes up, we feel it almost immediately. When it drops, no one wants to be the first station to slash the price on the competition and force them to follow suit. And while it’s slowly dropping in small increments, they just go on making more profit per gallon until it levels out.

As supply lines continue to improve, inventories of all aspects of society will replenish and once we reach an equilibrium of supply and demand, prices should start returning to normal.