The truth behind rising snowmobile prices

With a sour economy, record levels of unemployment and a 10-year string of marginal winters across much of the Snowbelt, there’s little doubt a cloud of concern hovers over the snowmobile industry. In a sport where some enthusiasts used to purchase a new snowmobile every one to two seasons, the repurchase cycle has doubled. Compounding matters for new sled sales, the used market is bursting with low mileage sleds at rock bottom prices, while new sled prices are soaring, many now breaking the $10,000 threshold.

From snowmobile dealerships to trailside shelters, the escalating price of new sleds has everyone concerned and talking. A closer look at the financial statements from two of the major manufacturers will tell you no one is getting fat, dumb and rich from the snowmobile business, yet retail prices are at record levels, leaving many asking what’s driving the spike?

Out-Pacing Inflation?
When comparing the average retail price of model year 2000 snowmobiles to those offered in 2009, we can definitely see prices have been on the rise at a rapid pace.

When making comparison from sleds offered in model year 2000 to those in 2009 there are several ways of going about it. If you compare feature-to-feature on somewhat equal ground, you’ll find several sleds offered today that are a better value now than they were in 2000. The Polaris IQ Shift for example, is under-pacing inflation, with only a moderate rise in MSRP of $700 in just nine years over its 2000 counterpart, the Polaris Triumph.

But when you begin to compare retail price by looking at top-of-the-heap sleds in 2000 to the top guns in the same class in 2009, the picture changes dramatically. For example, the retail price for a top-dog Polaris or Ski-Doo 600-class snowmobile was $6,599 in 2000. Last winter comparable 600cc models posted an MSRP of $9,699 and $9,499 respectively, a difference of $3,100 and $2,900.

Those differences equate to an increase nearly 20 points higher than the consumer price index inflation rate* of 29.3 percent recorded at the penning of this article. In real dollars that amounts to an average increase in costs of $1,300 more than the inflationary rise in MSRP. In short, when you want the best you pay. The numbers are big, the increases are even bigger and enthusiasts are paying the price, or are we?

Product Is King
Few powersports enthusiast are as demanding as snowmobilers when it comes to technology. And as the sport matures, the thirst of its participants grows. Twenty years ago, snowmobile enthusiasts were content with machine platforms that would change little year over year. Today, demands for all-new chassis designs, suspension technology and engines has grown to a fever pitch, with expectations of all-new occurring in as little as three-to four-year intervals.

“Product is king,” said Steve Cowing, spokesperson for Bombardier Recreational Products. “Today’s riders are very demanding thus we [the manufacturers] have to keep innovating while still keeping value in the equation.”

No question, today’s snowmobiles represent a quantum leap in technology compared to models just 10 years prior. Both suspension and engine technology have continued to make huge gains as do ongoing improvements in reliability. And time and time again, snowmobile customers have proven they are willing to pay for those improvements.

Arctic Cat Director of Marketing John Tranby agrees. “Back when we (Arctic Cat) first introduced EFI to the market, those sleds came with a hefty price premium over our carbureted models. But our customers chose EFI almost unanimously when given the choice, despite the higher price tag.”

Not only have snowmobilers continued to demand greater technological innovations from their snowmobiles, but they also expect more standard features as well. Items such as multi-functional gauges, reverse, electric start and much more are now considered must-have features instead of luxury items. Once again, snowmobilers have shown an overwhelming willingness to pay for those extras.

“When we introduced the Shift to the market, we had to be careful of what features we kept and those we didn’t,” said Mark Nevils, spokesperson for Polaris Industries. “The Shift is targeted as a value model, but buyers still expect a lot of features you couldn’t get on sleds 10 to 15 years ago.”

The Cost Of Clean
Along with growing customer demands for more features have come legal requirements for less, in regards to emissions and noise. With snowmobiles now falling under the watchful eye of the Environmental Protection Agency (EPA), manufacturers have had to literally clean up their act when it comes to exhaust emissions. From four-stroke engines to high-tech semi-direct and direct injection two stroke engines, the cost of clean has been bigger than anyone may have first calculated.

“Its more than just the raw cost of the technology,” said Cowing. “Technologies such as E-TEC takes more research and development time, added material costs for high-tech sensors, wiring harnesses and on-board computers, plus added administrative costs on the testing and verification side for the EPA.”

In fact, in a governmental report filed with the EPA a decade ago, the manufacturers, through the International Snowmobile Manufacturers Association (ISMA), said meeting new EPA standards would add $1,500 to the cost of every snowmobile for the testing, development and manufacturing of the new engines, according to ISMA’s Ed Klim. And that doesn’t include certification costs, which are also quite high, Klim said.

Being clean has resulted in more than simply developing new fuel induction technologies. For every OEM it has often meant the development of completely new engine platforms and a chassis to house these sophisticated new motors.

Yamaha, for example, has made the transition away from two-stroke engines in its snowmobile line. Most engineers will tell you the cost to develop a four-stroke engine versus a two-stroke are higher due to their more complex architecture and increased part count. But according to Yamaha, these new engines come with greater customer benefits including improved fuel economy, reduced maintenance and a level of reliability and durability that is head and shoulder above what most snowmobiles offered just 10 years ago.

The arrival of emission cap requirements from the EPA, which were feared by the OEMs and snowmobile enthusiasts just a few years ago, now has become almost an unforeseen blessing. While it has created more hurdles for the manufacturers to clear, the end result is a collective group of snowmobiles that are more fuel and oil efficient, quieter, more powerful, less smelly and more reliable, and few are begging for their carbureted snowmobiles to return. Remember rejetting regularly for temperature and altitude? Remember all of the spark plugs we used to go through each season? Those days are largely in the past.

Volume Impact
While technology and innovation continues to fuel the industry, perhaps no other component has contributed to the rise in MSRP more than the overall downturn of the industry. As snowmobile sales have fallen, commodity prices have not. Materials such as aluminum, plastic and rubber have dramatically risen in price the last three to four years by as much as 60 percent. Further hampering this raw material price increase has been the overall reduction in snowmobile production volumes. With lower volumes comes reduced buying power for these materials.

In addition, volume reduction has also thinned the many vendors who once supplied the manufacturers with key components and parts. Where there was once three to four options available to a manufacturer to have a component or part sourced, there now remains only one, thus eliminating competitive bidding. To make matters worse, the lower volumes have also increased the component costs from these suppliers.

“It’s not just the increased costs for the materials,” said Cowing. “As manufacturers we all have fixed costs regardless of how many snowmobiles we build. Things such as buildings, tooling, design, testing, marketing and administrative costs are fixed costs.”

In short, volume reduction has created a greater burden on each snowmobile produced. The fixed costs, raw materials, sourced components and manufacturing costs must now be spread out over a much smaller build quantity, thereby requiring each sled to bear a much greater cost per machine.

The 1995 XLT is an example of just how much volumes have changed over the past 15 years. During that model year, Polaris manufactured more than 40,000 XLT models alone; today most manufacturers will build fewer total sleds for their entire 2010 snowmobile offering.

“We do everything we can to control costs and limit the effects the increase in raw materials costs and the reduction in volumes have on pricing,” said Nevils. “Our customers expect the best value anywhere when they purchase one of our snowmobiles. I think if you look at the level of performance and quality today’s snowmobiles deliver, they really are a great value.”

True Cost Of Technology
If we take inflationary costs out of the picture, there is no doubt snowmobile prices have increased; to the average tune of $1,356 in a 10-year period. But when you compare it to what we have gained, the increase begins to look far less intimidating.

High-tech four-stroke and sophisticated two-stroke engines have become the norm; fuel economy numbers now average in the mid-teens, with some models exceeding 20 mpg; chassis materials have grown stronger and lighter; standard features now read like a laundry list of a fully optioned snowmobile from just 10 years ago; and durability and quality have improved dramatically.

By comparison, a similar transition has occurred in the off-road motorcycle industry, and the increase in MSRP over the same time frame is comparable to a 600cc class snowmobile. In 2000, Honda offered its top of the line CR250R motocross weapon for an MSRP of $5,799. Since that time, Honda along with all of the major off-road motorcycle manufacturers have made the transition to four-stroke, fuel injected power. In 2009, the Honda CRF450R (today’s equivalent to the 2000 model year two-stroke) retailed for $7,999; an MSRP increase of 38 percent. By comparison, a Ski-Doo 600cc snowmobile during that same time has shown an increase of 44 percent in MSRP.

For now, the manufacturers are putting forth considerable efforts to drive down costs and deliver more affordable snowmobiles that strike a balance between performance, quality, features and value based on what the customer is asking for. The OEM that can deliver that combination for the best value will ultimately hold a competitive advantage.

“The only real solution to better pricing is to bring volumes up and/or drive down costs,” said Cowing. “As a manufacturer we are looking at efficiency and price every day to assure the costs are kept at a minimum. We know regulations like the EPA will always be there, and customers will always want improvements to the vehicles. So programs like ‘Take a Friend Snowmobiling’ are really great ways we can all help this sport remain vibrant and get on the path to growth again. There are a lot of people out there who would love to join us, but have no idea how to get started, and that’s where snowmobilers can help.”

* The Consumer Price Index, also referenced as CPI, is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The US Inflation Calculator measures how the buying power of the dollar has changed over the years by using the latest Bureau of Labor Statistics (BLS) inflation information provided in the Consumer Price Index (CPI). The CPI data fluctuates daily thus affecting the net results of the US Inflation Calculator. While the percentage of change may differ from day to day, this arcticle does illustrate a fair “apples to apples” comparison using the CPI rate given for the date this article was written. For more information on the CPI and US Inflation Calculator visit www.usinflationcalculator.com.

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