The sun is out , the sky is blue , the cricket season has started , and riding weather is upon us - all is right with the world . Except it ' s not . Can there be any doubt now that the leading Western economies are skidding into the crash barrier ? No . Our market ' s recovery from the damage inflicted by the 2007-2009 Financial Crisis has been superficial and shallow . In motorcycle unit sales terms , we are still way behind where we were in 2006 . Therefore , we are nowhere near in as good shape to face whatever is ahead of us as were back then - and ' back then ' we were slaughtered . Having ducked the bullet in the spring of 2020 , indeed having seen global demand for motorcycle and scooters increase as a result of the pandemic , we here in the motorcycle industry are faced primarily with a supply led crisis for once , not a downturn in demand . This situation is unique in my experience . The economic headwinds that drag us all into the abyss would usually be killing demand , and maybe the decline in real-world disposable incomes triggered by inflation and rising interest rates may yet make the supply chain issues irrelevant as demand evaporates . The stability of demand for our products may lose some of its lustre as this cycle plays out , as disposable incomes atrophy , but the changes taking place in consumer attitudes to the ownership and riding experience appear bakedin . Our technological direction of travel is seeing motorcycles draw ever closer to the consumer electronics market , as they become ever more convincing as a transport solution for mid- 21st century consumers . I still think this bodes well for a future which is likely to see ferocious growth in demand for PTWs ( Powered Two Wheelers ) of all kinds - regardless of what the short-term holds . This is a medium to long-term outlook that we haven ' t seen for 40-plus years . Whether it is environmental issues , commuting , economy or leisure riding - I for one would rather be in our industry right now than in any number of less well starred sectors . That ' s not to say that everything in everyone ' s garden is going to be lovely , of course it isn ' t - it never is . Even in the best of times that is never the case , but neither will these be the worst of times , for the motorcycle industry at least . Notwithstanding macroeconomics , Putin ' s ongoing madness , or the supply chain , one of the major issues that our industry does face is its ability to generate capital . Having generated surplus ( where we have ), we are failing retain the profits we make as an industry for reinvestment . The ever-growing creep of Private Equity ' s profit sucking tendrils into our market , the ongoing Mergers and Acquisitions consolidation and the churn in the powersports industry dealer network ( on both sides of the Atlantic ) all result in ever more of our profits being taken out of the industry as investor returns , rather than being returned to the industry as investment capital . Sure , Private Equity and the other mechanisms by which our OE manufacturers , aftermarket vendors and dealership groups all talk a good game when it comes to providing the acquired , consolidated , or floated business with the capital backing it needs . But first and foremost , the primary responsibility of all such managements is to return stakeholder value . Reinvestment is not a balance sheet or EBITDA
recession as one of the weapons
positive in the short to medium term and is the enemy of bonuses and dividends . Capital must come from somewhere and the only place to grow it is through profits . It is trading surplus that builds reserves and opportunities . The clue to how it is generated is in the name - capitalism . Shorting the flow of capital is to short the flow of returns , but the time cycle which drives capital markets doesn ' t care . It needs its ROI now , not in 36 months or more . It was only in the three to years prior to the pandemic that our industry finally started to show some real growth . Prior to that , from 2009 / 2010 to 2015 / 2016 , it had been a stop-start cycle of false dawns and fools ' gold . We all housekept our way to profits rather than grew our way to them . Those who thought they could build the profits their mergers and acquisitions were slated to deliver mostly found they were building on quicksand . We are staring at what , without question , has the potential to the greatest technological change to our market since Daimler and Maybach first put an internal combustion engine into a bicycle frame 137 years ago . Not having access to needed capital resources is likely to be the paradox of the next 20 years - the latent demand for our products is there but we cannot innovate to meet it . It also explains why so many of the ' legacy ' OEMs are lagging behind the start-ups and new entrants where electrification is concerned - their capital resources have not been dependant on the mainstream of the PTW market . Instead , they are deploying consumer electronics and tech industry capital resources into a market that they see as ripe for morphing in the direction of their core competencies . From Harley to Honda , BMW to Yamaha , motorcycle derived profits have not been sufficient to generate the necessary capital resources . Many of our existing manufacturers have had to get ever more creative about how they generate their capital and from where . Many are dependent on the no longer entirely reliable profits they make from their automotive activities . Many others have at one stage or another in the past decade , and in way or another , been skating on much thinner ice than most realize - Harley included . Fortunately , even those who are suggesting that we are headed for global doom , gloom , hunger , poverty , conflict and strife are not forecasting the kind of economic downturn in the developed world seen with the Financial Crisis of a decade and more ago . So far forecasters are suggesting that , if there is a widespread recession at all , it will be relatively shallow and of relatively short duration . The FED ' s 0.75 % rise in interest rates in June signals their determination to fight inflation , whatever it takes , but it also signals that they see recession as one of the weapons in the locker .
Robin Bradley
Co-owner / Editor-in-Chief robin @ dealer-world . com
4 AFTERMARKET MOTO DESIGN - JULY 2022 www . AMDchampionship . com