More Incentives on the Horizon for Polaris After 2016 Recalls

canstockphoto23814374-e1460735420219Polaris Industries Inc. expects to lean on financing incentives and retail promotions more heavily in 2017, following unfavorable effects spurred by the OEM’s slew of recalls in 2016, said Polaris Chief Executive Scott Wine during the company’s fourth-quarter earnings call.

Higher promotional spending and research and development investments are transitory, Wine said. “Across all of our businesses there is a cycle of investment, and we happen to be right now in a heavy investment cycle for our side-by-side business,” he added.

Last year, Polaris issued various recalls across all vehicle segments, but mostly for its side-by-side units. In September, for example, the OEM recalled its RZR Turbo ROVs, and two weeks later recalled its Ranger ROVs — both due to fire hazards.

The powersports industry is becoming “a real dog fight for marketshare,” said an analyst, who wished to remain unnamed. Polaris responded to the recalls by increasing incentives to try to maintain marketshare, he said, and that has been a driving factor of increased promotions industrywide throughout 2016.

“A lot of manufacturers, especially in early 2016, the dealer inventory levels were just way out of whack,” he added. “They have gotten better, but you know they were high, so they had to reduce inventory levels somehow, and they leaned on their promotions to do it.”

However, Polaris will remain cautious of its promotional spending efforts in order to prevent “promotional fatigue,” where consumers might become less responsive to new rebates and incentives, Wine said on the call. “Our team is quite adept at monitoring the [promotional] programs and making adjustments,” he added. “We actually did quite a bit of that in fourth quarter. We’re not just going to spend money when we don’t see a reaction coming from it.”

Separately, Polaris will focus on improving dealer relations this year, Wine said. “Overall [dealer] sentiment is not where we wanted to be,” he said. “I will say that obviously we did way more recall activities than we wanted to, but we did — I think — actually improve [dealer] sentiment somewhat with how we handled the recalls.”

However, during the recall process, Polaris saw “many other opportunities” where it could improve the dealer relationship, Wine said. “That’s going to be one of our big corporate priorities in 2017.”

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