Can You Make Money Selling Electrics?

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This story originally appeared in the Dealernews December 2009 issue. 

When Polaris Industries introduced its electric golf cart a few months ago, the move took many in the powersports industry by surprise. Electric power in a combustion engine business? Not likely, many said.

Even Polaris managers say that its electric Breeze vehicle won’t be sold initially through powersports dealers. The company is looking at a different market, one made up largely of nonpowersports riders living in southern retirement communities.

“We’re going aggressively at new markets,” Polaris CEO Scott Wine told a reporter, “but we’re also using this as a test-and-learn type of trial.” Analysts and others in the powersports industry haven’t been too excited about Polaris’ plans in this segment, Wine continued.

That’s understandable, because the appeal and the customer are very different from what powersports dealers are used to working with. But the margins — close to 25 percent on many machines — can be a lot more attractive than what dealers normally get on combustion-powered machines.

Mike Tomberlin, head of the Augusta, Ga.-based Tomberlin Automotive Group, is one of the most aggressive of many small companies developing electric on-road vehicles. A powersports dealer himself, Tomberlin also produces and distributes a line of combustion-powered ATVs, motorcycles and scooters through his diversified dealer network. He knows the difference between marketing gas and electricmachines. “A company that has historically sold combustion [machines] and transfers to electric can do well,” he says. “But it’s a big leap from combustion off-road to electric on-road. There will absolutely be dealers who can navigate that [change] very, very well.”

But Tomberlin adds a warning: “We have found that it is not a product that you just buy and toss onto the showroom; you really have to get out and drive it and really get active at putting butts in seats for a test drive, and that takes some money. You’re selling more than just a brand.”

Tomberlin has been selling his golf-car-like e-Merge for several years, and expects to sell more than 5,000 units to his 300 or so dealers this year. “The customers are different,” warns Tomberlin, “and powersports dealers will have to work [to sell electrics]. It’s a totally different product and, in some cases, a different consumer. The buying stimulants are different, and there’s a learning curve for technicians.”

And you have to maintain the product differently, too, he says. You can’t just put a battery-powered electric unit on the floor and let it sit for six months; you have to have a system for maintaining it or the batteries will degrade, for example.

There is at least one advantage to selling some electrics through sizeable rebates from state and federal governments. Take both rebates, as buyers in states like Oklahoma have done, and consumers can buy a new unit for almost nothing. Literally. It’s a deal many are not passing up.

Electric Vehicles 101
Time out. If you’re thinking about electrics, you should be familiar with the jargon here. The term NEV (Neighborhood Electric Vehicles) is a generic term that applies to low-speed, on-road machines that run at 20 to 25 mph, weigh less than 3,000 lbs., and meet federal motor vehicle standards. NEVs have to include things like turn signals, brakes, headlights, taillights, windshields, VIN numbers and seat belts. Unfortunately, many vehicles that run at slow speeds are often inaccurately called NEVs.

Golf cars, those little buggies that golfers ride in and that show up in golf communities, run at speeds less than 15 mph and usually are not street-legal. Neither is a PTV (personal transportation vehicle), which is a little bit faster — up to 19.9 mph. The most common electric vehicle is the LSV, a low-speed vehicle that has a speed up to 25 mph. Today, we’re starting to see MSVs, medium-speed vehicles that run at speeds of 25 to 35 mph. LSVs and MSVs generally are street-legal.

Power Products Marketing (PPM), a Minneapolis research firm that tracks retail sales of power equipment in North America and other parts of the world, recently completed a major research project aimed at identifying leading makers of low-speed vehicles and at quantifying and forecasting the market. The results are presented in the report “An Analysis of the NEV and Related Vehicles Market.” The 34-page report is the first one prepared for our industry that sheds light on the electric vehicle market.

PPM analyst Dave Crocker sees the market for PTVs and LSVs at about 15,000 units this year and perhaps as many as 18,000, assuming some aggressive LSV shipments are retailed by Dec. 31. He expects LSV sales to climb to 25,000 units next year and 50,000 units in 2012. PTV sales will decline and remain flat through 2012 at about 3,000 units, he says. A key assumption in these forecasts is that the feds will extend rebate programs out to 2010.

Another uncertainty factor is the reconditioned-golf-car market, which could cut into LSV sales if large numbers are dumped into the market. “This could cause problems for the Big Three — Yamaha, EZ-Go and Club Car — in disposing of any excess used golf car inventory,” says Crocker. The report and database of leading NEV OEMs is available through PPM.


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One Response to “Can You Make Money Selling Electrics?”

  1. mcesare Says:

    One potential crossover segment for powersports dealers is electric utility vehicles that are street legal. For example a customer may use the vehicle on the farm or estate but also occasionally have a need to drive the vehicle into town. At International Market Solutions we have been covering the LSV, golf car and utility market for about ten years. The use of LSVs/NEVs as a utility vehicle has always been the larger market even though the original target market for the vehicles was the gated community. While the federal tax credit for 2009 has skewed the market numbers, the market is gaining momentum with energy efficiency, cost reduction and environmental concerns driving demand. Federal, state and municipal agencies and universities are an important market. The US Army is in the middle of a 4,000 LSV purchase and the Air Force will likely become a major purchaser as well. The Army estimated that they could purchase up to 10,000 of the vehicles eventually with the Air Force and Navy following their lead. – Marc Cesare http://smallvehicles.wordpress.com

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