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Tuesday 28 February 2023

Comment by Editor-in-Chief, Robin Bradley

Is 'Flat' the 'New Black'?

This is the first edition of AMD that we have been able to produce since finishing February the week before going to Louisville, Kentucky, for the (excellent) Drag Specialties and Parts Unlimited NVP Product Expo. I mention this just in case you think that only just now seeing our review of that show is a tad 'off'. 

It isn't because we are lazy or disorganized (well, maybe I personally am prone to being a little bit disorganized) but, with an additional subsequent trip to Las Vegas for (the fast improving) AIMExpo, and catch-ups still in play with International Dealer News (following most inconvenient final quarter 2022 scheduling and event clashes), it only needs a couple of weeks of bumps in the road and we can still be unwinding the impact some months later. 

However, if a couple of weeks is a long time in Publishing (and Politics!), then it is equally true that a couple of months can be a long time in Economics.

vendors will take that

Since I last tried to share what I see of the market's fortunes through my idiosyncratic lens, the air has cleared, the clouds have parted, and to channel the great Jimmy Cliff, "I can see clearly now."

I had the great good fortune to see Jimmy Cliff live once in a nightclub on Long Island. Awesome! Great music and lots of exotically scented aromas - just like in a Las Vegas taxicab!

First of all, retail price inflation in the United States finally peaked and has now started to ease. Not by much, but enough to encourage the Fed (for now at least) to slow down the rate at which it has been raising interest rates.

Though mixed and unpredictable on a month-by-month basis, job market statistics in USA still point to low rates of unemployment, high rates of employment (despite widespread retirements and voluntary workforce exits) and high levels of unfilled vacancies - coupled to ongoing challenges to hire the right talent. Indeed, if anything, and as is the case in the UK and some other markets (looking at you Japan), tightening the spigot of immigration is actually holding economic growth back from where it might otherwise be headed.

As the number of jobs filled and vacancies both climb, the inescapable conclusion appears to be that Fed policy is working, and while it may not be boom-time yet, the United States may well duck any kind of 'technical recession' in the next 24 months.

That isn't to say that everything in the garden is peachy, it isn't. There remain 'bigger issues' that could rain on our parade at any time, and at short notice, and the powersports market has its own specific concerns too.

Not least, as was aired at AIMExpo recently, the concern is that the thousands of 'new entrants' who embraced on-highway motorcycles or off-road vehicles (two and four-wheelers) during the pandemic may now tire of their purchases, no longer feel the need to clutter the garage or driveway with their Covid-induced panic-buy, flood the used market and take their disposable income out of the market - out of dealership service departments, and out of the P&A and G&A markets in particular.

Fortunately, the evidence for that is mixed so far. There is some of that happening, but with sales doing okay last year (in Europe) and continuing to do well overall in North America, the other issue that the pandemic wind-down throws into focus is "what now?"

Where do we find the tens of thousands of buyers we need annually to keep the prior growth moving in at least a somewhat net overall gain direction? Who will those buyers be, what will they want to buy, how will they want to buy, what will be their (much changed) attitude towards the ownership and riding experience - how do we generate the door swings we need and how do we smooth and schmooze their way to the card swipe and credit app?

More "questions than answers" at this stage (oh hello, who let Johnny Nash into the room?).

What was encouraging about AIMExpo was seeing the questions being asked and attempts being made to develop answers. What with the pandemic and everything else, it feels like it has been a long time since the market was addressing the right issues en masse. Indeed, it feels like it has been a long time since we have had a viable and sustainable platform through which we could address the issues. 

While AIMExpo still has a long way to go, and it is unlikely to ever manage to speak 'Custom' convincingly - indeed there was precious little there that addressed the mainstream of the street bike/on-highway sector at all - it was a much-needed reproof of concept in terms of the value and importance of an independent, all-players trade nexus. Congrats to the MIC's show team!

However, maybe the MIC could look at establishing an AIMExpo East to complement Las Vegas. They've been there before of course, at Columbus, Ohio, but how about resurrecting the market's spiritual show home at Cincinnati?

Whilst I am not for one moment suggesting that anyone should compete against the two Midwest LeMans shows - that is not the point here at all, we need strong distributors and their shows - I do firmly believe that there is a place for both. Company and independent shows both have their value.

If the MIC wants to get serious about including all the nation's dealers (and vendors) in the dialog, then it cannot expect to do so by being in the Southwest alone.

The contagion from the United States ducking any kind of formal recession is significant. We are already seeing ripples from that starting to raise expectations here in Europe, even in the UK. Continental Europe is now daring to believe that while the next 24 months may not be much better than 'flat' - in and of itself that is a lot brighter prognosis than the one that was feared as recently as six months ago - and better than the one that the IMF has been selling.

Equally, the big take-away from Louisville was that for 2023, as elsewhere, 'Flat' will be the 'New Black' in aftermarket terms in the United States. By-and-large, vendors were in agreement with that and, under the circumstances, would be mostly glad to take that for now.