The recreation vehicle industry has just come off its best year in more than two decades.
But the industry faces challenges on at least three fronts: capacity, quality and stock valuation, according to 'Ready to Roll: RV Industry Report.'
Lambert, Edwards & Associates, an investor relations company in Grand Rapids, Mich., prepared the report. Three major RV manufacturers pay the firm for public relations and investor relations services.
RV manufacturers delivered 321,200 units to retailers during 1999, the best year since 1978. But the expanding market for motor homes and towables has made it difficult for manufacturers and suppliers to keep pace with demand, said Jeffrey Lambert, co-author of the report and a principal at the firm.
According to the report:
Despite start-up companies entering the field, the RV industry is short of production capacity for chassis and replacement parts.
Quality surfaced as the top consumer complaint in a survey commissioned by the Recreational Vehicle Industry Association. Future sales to finicky baby boomers could hinge on just how well the RV industry solves this problem.
The 15 publicly traded RV manufacturers, suppliers and dealers remain undervalued. That has discouraged mergers, acquisitions and equity offerings to fund growth. To obtain additional capacity to meet demand, manufacturers are acquiring mom and pop operations or expanding their own factories. They are financing this growth through their own profits, rather than using public equity.
Recreation vehicle sales ought to grow 3 to 4 percent annually during the next five years, according to the report. Motor homes will lead that growth, driven by sales of Class A motor homes.
MORE SERVICE SHOPS NEEDED
John DeWolf of DeWolf Associates of Sterling, Va., a forecaster for the RVIA, predicts Class A motor home sales will rise by 2.5 percent this year and 9 percent in 2001. Class A sales of 49,400 were up 15.2 percent during 1999.
'We have a good market through about 2005-2006, and I think that the motor home market is going to grow faster than the low-end trailer market, which still accounts for the bulk of RV sales,' said Tom Walworth, president of Statistical Surveys Inc. of Grand Rapids, Mich., a company that tracks the RV industry.
'I think you have a buyer who's coming in who is more affluent and who is going to buy the things he wants - and those are higher-end motor homes and higher-end trailers,' he added.
The report also states that service remains a critical problem for the industry, which could be addressed by a national chain of service centers.
RV owners who experience problems while traveling often find it difficult to locate a dealership to service their motor homes. When they are successful in locating a repair facility, it usually is a shop that also handles truck repairs. The RV owners become the lowest priority on the repair schedule.