Vehicle Innovation to Bolster Growth for BRP, Analyst Says

BRP is likely to grow faster than Polaris and Harley-Davidson, thanks to innovations and gaps the OEM has filled in its vehicle lineup, Morningstar Ratings analyst Jaime Katz told Powersports Finance.

“[BRP has] really focused on segments that they are underrepresented in, and they have over the last three or four years come out with consistent product launches in new areas,” Katz said. “Whether that’s a specific type of off-road vehicle, or if they haven’t been in utility enough, they put more good power utility products out there. To me, that business is very focused on marketshare, what they can do to increase that, and bringing some new positive innovation to the market.”

For example, BRP introduced the Can-Am Commander, its first ever side-by-side vehicle, in 2010 to enter a new vehicle segment. The side-by-side has gone on to take marketshare from Polaris for the past “handful of years,” she said. BRP also launched the 2019 Sea-Doo Fish Pro, a personal watercraft designed for fishing that the OEM claims are the first of its kind.

Polaris and Harley-Davidson are in less favorable growth positions than BRP, according to Katz. Polaris, for one, has gotten “harrier” since its 2016 acquisition of Transamerican Auto Parts Co., a manufacturer of off-road Jeep and truck aftermarket products, she said, adding that the business “hasn’t grown nearly as robustly as they had originally anticipated at acquisition.” Aftermarket sales in the first quarter declined 2% to $197 million, compared with the previous year.

For More Read: Chinese Tariff Hike Could Slash Polaris Profits, Analyst Says

Polaris motorcycle sales have been declining — namely Slingshot vehicles, which were down in the low-double digits percentage in the first quarter. “It’s slightly less easy to get as excited about that [Polaris] name,” Katz said.

Harley-Davidson’s U.S. motorcycle sales have been on the decline, too, dropping 4.2% to 28,091 in the first quarter. However, the first-quarter sales performance is the smallest year-over-year decline in the past nine quarters.

To compensate, Harley has been working on producing new models with smaller engine sizes to appeal to a different demographic of riders. However, “those [lower displacement bikes] tend to be margin dilutive to the whole enterprise,” Katz explained.

Additionally, both Polaris and Harley-Davidson are impacted by Chinese tariffs, which were raised to 25% last week. Polaris expects the tariffs could reduce earnings by as much as $200 million, Chief Executive Scott Wine said last week. But BRP is based in Valcourt, Canada, so the tariff impact would be smaller than it would be for U.S.-based Polaris and Harley.

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