Wake up call for the Big 4 ATV Manufacturers
#1
11-30-2006, 11:24 AM
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Wake up call for the Big 4 ATV Manufacturers
This post is purely just for venting, and making a strategic business observation that I have as an ATV consumer.
I think the Big 4 have their heads stuck very deep in the proverbial sand with regards to Chinese competition. The Big 4 all have very good products, very good brands, and profitable businesses. Therein lies the problem--very profitable businesses. That means major sticker shock for all us consumers--like paying $2500-$3000 for an entry level kids ATV. That's just ludicrous. Talk about major sticker shock!! When a kids ATV costs as much as an ok used car, something is wrong. So what happens? The Chinese invade the market with cheap products that have little to no reliability. The Big 4 don't care, because the products suck, and they're not worried. So they keep prices high, margins fat, and stick their heads in the sand.
So what? The Big 4 are stupid, and they're ignoring decades of business history that says that they are going to get killed in just a few years. They might as well kiss their profitable businesses goodbye right now. Just like with the US car makers and the Japanese in the 70's, just like the Xerox and the Japanese copier makers in the 80's and 90's, the Big 4 are going to get killed. Why? Because they price their products so high, it gives the Chinese tons of room to come in at the low price range, and gain experience, build sales channels, build brands, make money, and then plow that money back into R&D to make a better ATV. Then the cycle starts all over again. There are many, many examples of this business model over the past 2-3 decades. I'm not making any of this up! This is already starting to happen with Eton, for example.
So, Big 4, surely many of you with your top-tier MBA's took the same classes and read the same case studies that I did. Wake up! Why would I EVER buy a low-reliability Chinese ATV if I could buy a reasonably priced ATV from you?? I wouldn't! No one would! You guys need to lose money on your lower-end models in order to keep the low priced competition out of the market or not making any money, at least. And then lower your margins overall, in order to keep your business alive long term. And start making your ATV's in China! I don't care if Polaris makes its great quality machine in China, especially if its 25%-50% cheaper. A Polaris is a Polaris, and Polaris will maintain its quality to maintain its brand. I don't care where its built (some may disagree, but that's how I feel). Its basic economics, guys: high economic profits mean increased competition and lost market share and lower profits in the medium to long run. Once the Chinese have built their brands and businesses here, AND they have a huge cost advantage, its over for you.
So start selling great ATV's at lower prices!!!!!
I think the Big 4 have their heads stuck very deep in the proverbial sand with regards to Chinese competition. The Big 4 all have very good products, very good brands, and profitable businesses. Therein lies the problem--very profitable businesses. That means major sticker shock for all us consumers--like paying $2500-$3000 for an entry level kids ATV. That's just ludicrous. Talk about major sticker shock!! When a kids ATV costs as much as an ok used car, something is wrong. So what happens? The Chinese invade the market with cheap products that have little to no reliability. The Big 4 don't care, because the products suck, and they're not worried. So they keep prices high, margins fat, and stick their heads in the sand.
So what? The Big 4 are stupid, and they're ignoring decades of business history that says that they are going to get killed in just a few years. They might as well kiss their profitable businesses goodbye right now. Just like with the US car makers and the Japanese in the 70's, just like the Xerox and the Japanese copier makers in the 80's and 90's, the Big 4 are going to get killed. Why? Because they price their products so high, it gives the Chinese tons of room to come in at the low price range, and gain experience, build sales channels, build brands, make money, and then plow that money back into R&D to make a better ATV. Then the cycle starts all over again. There are many, many examples of this business model over the past 2-3 decades. I'm not making any of this up! This is already starting to happen with Eton, for example.
So, Big 4, surely many of you with your top-tier MBA's took the same classes and read the same case studies that I did. Wake up! Why would I EVER buy a low-reliability Chinese ATV if I could buy a reasonably priced ATV from you?? I wouldn't! No one would! You guys need to lose money on your lower-end models in order to keep the low priced competition out of the market or not making any money, at least. And then lower your margins overall, in order to keep your business alive long term. And start making your ATV's in China! I don't care if Polaris makes its great quality machine in China, especially if its 25%-50% cheaper. A Polaris is a Polaris, and Polaris will maintain its quality to maintain its brand. I don't care where its built (some may disagree, but that's how I feel). Its basic economics, guys: high economic profits mean increased competition and lost market share and lower profits in the medium to long run. Once the Chinese have built their brands and businesses here, AND they have a huge cost advantage, its over for you.
So start selling great ATV's at lower prices!!!!!
#2
11-30-2006, 11:28 AM
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#3
11-30-2006, 12:33 PM
Wake up call for the Big 4 ATV Manufacturers
While I do think the prices are getting ridiculous (over 7k will buy you a nice vehicle[img]i/expressions/face-icon-small-shocked.gif[/img]), I don't see the big 4 going bye-bye anytime soon.
One thing you have to consider, is now a days you buy machines that don't need mods to be competitive, you're buying machines that have a lot of technology in them. For example, my CRF450 could be won by a very good rider in any class Amature wise, and to be honost, it wouldln't take all that much (suspension for the most part) for a PRO to run up front on it. Paying a little over 6k for my CRF is nice when you think about the fact of what the machine is capable of. [img]i/expressions/face-icon-small-smile.gif[/img] Now to work on the rider.[img]i/expressions/face-icon-small-blush.gif[/img]
Same thing for quads too, they are getting very competitive stock, widen them up a bit, uncork them, and maybe some new suspenders, and then all you need is a better rider.[img]i/expressions/face-icon-small-wink.gif[/img] I'm not as familiar with Utilities, but there is a LOT of features on today's Utes. You don't get all the technology and quality in the Chinese bikes. (I'm not saying you ever will, but not even close yet)
You can't take a Chinese quad out of the box and compete with the big 4's high end machines. And if you just want to putt on the trails with the family, the cheaper low end Jap bikes will do the job and last 4-ever.
My 252 cents.[img]i/expressions/face-icon-small-wink.gif[/img]
One thing you have to consider, is now a days you buy machines that don't need mods to be competitive, you're buying machines that have a lot of technology in them. For example, my CRF450 could be won by a very good rider in any class Amature wise, and to be honost, it wouldln't take all that much (suspension for the most part) for a PRO to run up front on it. Paying a little over 6k for my CRF is nice when you think about the fact of what the machine is capable of. [img]i/expressions/face-icon-small-smile.gif[/img] Now to work on the rider.[img]i/expressions/face-icon-small-blush.gif[/img]
Same thing for quads too, they are getting very competitive stock, widen them up a bit, uncork them, and maybe some new suspenders, and then all you need is a better rider.[img]i/expressions/face-icon-small-wink.gif[/img] I'm not as familiar with Utilities, but there is a LOT of features on today's Utes. You don't get all the technology and quality in the Chinese bikes. (I'm not saying you ever will, but not even close yet)
You can't take a Chinese quad out of the box and compete with the big 4's high end machines. And if you just want to putt on the trails with the family, the cheaper low end Jap bikes will do the job and last 4-ever.
My 252 cents.[img]i/expressions/face-icon-small-wink.gif[/img]
#4
11-30-2006, 04:37 PM
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Wake up call for the Big 4 ATV Manufacturers
Dumb question, but who are the big 4?
Arctic Cat
Can-am
Honda
Kawi
Polairs
Suzuki
Yamaha
I assume Arctic Cat and Can-Am wouldn't be because they don't sell that many, but I can't seem to eliminate the last one???? [img]i/expressions/face-icon-small-shocked.gif[/img]
Arctic Cat
Can-am
Honda
Kawi
Polairs
Suzuki
Yamaha
I assume Arctic Cat and Can-Am wouldn't be because they don't sell that many, but I can't seem to eliminate the last one???? [img]i/expressions/face-icon-small-shocked.gif[/img]
#5
11-30-2006, 05:04 PM
#6
11-30-2006, 05:29 PM
Wake up call for the Big 4 ATV Manufacturers
IceBurg
Great post. You are right on, this could be a classic case study in any Business School text book.
There are many examples of this in the last 30 years, the Japanese car manufactures that you mentioned and another is Dell computer in the late 80s. A college kid making computers in his dorm when IBM and Compaq dominated the market and now Dell is the largest manufacturer of desktop computers.
What is even more interesting is that Honda was one of the "Japanese car manufactures" in the 70s and now it could happen to them in the ATV market.
This is a long term business strategy so the Chineese ATVs will probably be low quality for another 5-10 years ( unless they dramatically accelerate the process) but they will continue to gain market share and the "Big Guys" are giving them plenty of space to grow.
Great post. You are right on, this could be a classic case study in any Business School text book.
There are many examples of this in the last 30 years, the Japanese car manufactures that you mentioned and another is Dell computer in the late 80s. A college kid making computers in his dorm when IBM and Compaq dominated the market and now Dell is the largest manufacturer of desktop computers.
What is even more interesting is that Honda was one of the "Japanese car manufactures" in the 70s and now it could happen to them in the ATV market.
This is a long term business strategy so the Chineese ATVs will probably be low quality for another 5-10 years ( unless they dramatically accelerate the process) but they will continue to gain market share and the "Big Guys" are giving them plenty of space to grow.
#7
11-30-2006, 09:56 PM
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#8
11-30-2006, 10:05 PM
Wake up call for the Big 4 ATV Manufacturers
Just a couple of points to ponder that fall into this mix.
Much of the price you pay for a new ATV is not the mere hardware and build cost, it's paying for the R&D that went into all those parts. You don't just build a 450 4 stroke engine on a whim that takes the kind of abuse and makes the power today's class of engines produce.
The Chinese are pretty good at buying someone else's machine then reverse engineering it. Mucho money saved. Also, their people work for about 50 cents a day with a gun to their head.
JMO
Much of the price you pay for a new ATV is not the mere hardware and build cost, it's paying for the R&D that went into all those parts. You don't just build a 450 4 stroke engine on a whim that takes the kind of abuse and makes the power today's class of engines produce.
The Chinese are pretty good at buying someone else's machine then reverse engineering it. Mucho money saved. Also, their people work for about 50 cents a day with a gun to their head.
JMO
#9
11-30-2006, 10:18 PM
Wake up call for the Big 4 ATV Manufacturers
Originally posted by: ShadyRascal
Just a couple of points to ponder that fall into this mix.
Much of the price you pay for a new ATV is not the mere hardware and build cost, it's paying for the R&D that went into all those parts. You don't just build a 450 4 stroke engine on a whim that takes the kind of abuse and makes the power today's class of engines produce.
The Chinese are pretty good at buying someone else's machine then reverse engineering it. Mucho money saved. Also, their people work for about 50 cents a day with a gun to their head.
JMO
Just a couple of points to ponder that fall into this mix.
Much of the price you pay for a new ATV is not the mere hardware and build cost, it's paying for the R&D that went into all those parts. You don't just build a 450 4 stroke engine on a whim that takes the kind of abuse and makes the power today's class of engines produce.
The Chinese are pretty good at buying someone else's machine then reverse engineering it. Mucho money saved. Also, their people work for about 50 cents a day with a gun to their head.
JMO
#10
11-30-2006, 11:10 PM
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Wake up call for the Big 4 ATV Manufacturers
IceBurg, I agree with you 10000000000000000000000000000000000000%.
When I was young the big 3 laughed at a little company that first started out by bolting little engines on bicycles. Then they made a funny little junky car they called the 600. Then they made a car called the Civic. Then they made a car called the..................and then the.............and then the................ and now the big three arn't laughing anymore.
"This is a long term business strategy so the Chineese ATVs will probably be low quality for another 5-10 years ( unless they dramatically accelerate the process) but they will continue to gain market share and the "Big Guys" are giving them plenty of space to grow. "
Although I don't agree with your timeline I think you are correct. Lasers and robots and computers can make a Smo a pro in no time. They don't have the metallurgy down yet but they will; and in short order. Look at the difference in just 2 short years!!!!!!!!
I don't think the Chinese want to build a 450. They want the Model "T" of quads. And then they want to turn them out like potato chips. Just like every Vett looses GM money. The Chinese want a money maker like the Taurus; not a Vett.
When I was young the big 3 laughed at a little company that first started out by bolting little engines on bicycles. Then they made a funny little junky car they called the 600. Then they made a car called the Civic. Then they made a car called the..................and then the.............and then the................ and now the big three arn't laughing anymore.
"This is a long term business strategy so the Chineese ATVs will probably be low quality for another 5-10 years ( unless they dramatically accelerate the process) but they will continue to gain market share and the "Big Guys" are giving them plenty of space to grow. "
Although I don't agree with your timeline I think you are correct. Lasers and robots and computers can make a Smo a pro in no time. They don't have the metallurgy down yet but they will; and in short order. Look at the difference in just 2 short years!!!!!!!!
I don't think the Chinese want to build a 450. They want the Model "T" of quads. And then they want to turn them out like potato chips. Just like every Vett looses GM money. The Chinese want a money maker like the Taurus; not a Vett.