ATV Ban Could Cost $1 Billion This Year

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That’s About $3 Million Every Day the Ban Continues

Here’s a nice round number that the CPSC (Consumer Product Safety Commission) might want to think about when it considers whether or not to drop the ban on kid’s ATVs and motorcycles: $1 billion.

That’s one estimate of the impact on the powersports industry if the ban were to last throughout 2009. It was put together by the Motorcycle Industry Council (MIC), the industry trade group based in Irvine, Calif.

“The potential losses for the powersports industry are massive at a time when this country cannot afford additional economic losses,” says Paul Vitrano, general counsel for MIC and its partner organization the SVIA (Specialty Vehicle Institute of America). “With these vehicles sitting in warehouses instead of on showroom floors, the related sales of most protective gear, accessories, and parts and services are virtually non-existent. Thousands of small businesses across America are impacted by this ban.”

That number seemed huge, and I had a few questions about the process involved in developing this number, so I called Vitrano, who walked me through the calculations. Here is what the MIC included:

  • 2008 estimated value of the retail marketplace for ATVs and dirt bikes. This number was then adjusted for estimated 2009 sales.
  • Estimated revenues from services performed on youth machines.
  • Parts, garments and accessories for youth machines and riders. This includes apparel such as helmets and riding armor that may contain excessive amounts of lead or other chemicals banned under the law.
  • It also includes product advertising, vehicle financing charges, insurance premiums, dealer personnel salaries, state sales and dealer personnel income taxes, and vehicle registration fees.

In round numbers, that comes down to about $3 million per day in lost revenue for the industry. Much of this may yet reach retailers if the CPSC acts quickly to lift the ban.

By one estimate, about 10% of youth machine purchases are made by impulse buyers, ones that won’t ever return. It’s likely that the other 90% of sales are being deferred until after the ban is lifted, if it is lifted before the primary selling season this spring.

The longer the sales ban remains in place, the more likely it is that deferred purchases will not be made, for a variety of economic and personal reasons.

The other problem for retailers, of course, is that their cash flow is reduced. Dealers located in the South are looking at lost revenue today for machines, PG&A, service and F&I, until the ban is lifted.

In many cases, OEMs are helping out with floorplanning costs, the fees that dealers pay to manufacturers when they finance the purchase of machines.

As we’ve discussed here previously, the CPSC is charged with enforcing the Consumer Product Safety Improvement Act (CPSIA) that was signed by President Bush last August.

The law limits the amount of lead that can be contained in paint and the total product. It also limits the amount of certain chemicals used in plastic. The law applies to products intended for youth age 12 and under. That includes ATVs, dirt bikes, PG&A and accessories. The ban on sale of these products went into effect Feb. 10, 2009.

Those calling for the exclusions believe that the lead-content provisions of the act, which originally were aimed at toys that can be swallowed by children, were never intended to apply to youth ATVs and motorcycles, says Vitrano.

Most of the components making up youth powersports products are in compliance, says the MIC. But some parts, that youths would not normally ingest, contain small quantities of lead in excess of the CPSIA limits, such as the valve stems on the tires, aluminum in some brake components, and the terminals on batteries. The CPSC is considering industry requests for exemptions. JD

Contact me with news tips and story ideas at 952/893-6876 or joe@powersportsupdate.com.

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3 Responses to “ATV Ban Could Cost $1 Billion This Year”

  1. CPSIA: Powersports, crystals, and stranded inventories Says:

    […] if Congress does not act to restore the products’ legality. Joe Delmont at DealerNews has more information on how that figure was arrived at. Two weeks ago we cited an estimate that the frozen inventory […]

  2. Cindy Says:

    ATV’s should be banned from recreational use. There are far more bad drivers than good as evidenced by the increasing environmental damages these tools of destruction create. No one, not even dealers, will accept accountibility.

    We have lost thousands of dollars in damages to our agri land and there is no concern that your food supply is being threatened “just for fun”. Too many years of excuses have allowed the ATV world to justify thier continiued bad behaviour. They have had enough time to set things right and have done nothing. The result should be an outright ban.

  3. Dennis J. Says:

    Hi Cindy, I’m one of the authors for this blog. I’m wondering what region of the country you’re in. I’m always interested to know where these problem areas are.

    thanks,
    dennis

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