International Dealer News IDN 155 June/July 2020 | Page 4
• COMMENT • COMMENT • COMMENT • COMMENT • COMMENT • COMMENT •
V? U? W? L?
The shape of things to come?
As European national markets enter 'unlock' at varying
speeds this summer, and no doubt with varying degrees of
success, in business terms the primary hope of the
motorcycle market will be that the delayed spend and the
appeal of two wheels as a pandemic as well as environmentallyfriendly
transport solution will prove to be a winner with consumers
- consumers who want to combine mobility with safety.
That is a sentiment no doubt shared by many markets, but having seen 2020 get
off to such a good start in January and February in most of Europe's main national
markets, and following five unbroken years of growth, the PTW industry has more
reason than many to hope that scientists and politicians have got it right.
Of course, if unemployment climbs to anywhere between 10 and 20 percent,
even if only for the short term, then a large proportion of our potential customers
are going to remain side-lined for economic reasons, but with such a high
proportion of the growth we have seen in the past five years
inevitably focussed on urban and suburban congestion
busting, it is likely that consumers are going to be leery
about piling back onto public transport for a while.
Trains, trams, busses and underground networks, and the
stations and passenger flow infrastructure that keep them
running, are going to need to be substantially reconfigured
until such time as some kind of "herd" immunity (if it
actually exists) is established - and that assumes that a
satisfactory vaccine or suite of vaccines will exist. We all hope - but at this stage
we still don't know.
Much is going to remain unknown for a long time - long enough for urban
mobility to remain a problem, and therefore be a window of opportunity for the
PTW market.
Last month I alluded to one of the characteristics that will define this recession,
compared to all those that have gone before, as being time.
Even if consumer demand does come flooding back, and even if we can somehow
find ourselves with overall unit sales growth as we end the year, then the one
thing that nobody can buy us back is time.
Time in which dealers, distributors and manufacturers still had to carry all their
fixed and many of their variable overheads while not earning revenue, not making
profit and therefore eat into capital reserves rather than adding to the capital
they need to invest in fresh inventory.
This "Thief of Time" faces us with a perfect storm - a trifecta of growth sapping,
survival challenging demands on industry capital that would likely see the market
unable to hit the bottom of this downturn for up to five years.
In 2009, the talk of a so-called 'V' shaped recovery proved to be wrong. It turned
out that we hit the bottom of a very broad 'U' curve in the European motorcycle
industry in the summer of 2014. We started to see some evidence of some very
weak growth during the final four or five months that year, and then the first
full year of growth was not until 2015.
Alphabet Soup
of recessionary
metaphor
So, is that what this is going to be? Another broad bottomed 'U' curve? Dream
on. We can hope, and my word, how I would love to be proved wrong, but even
those who are plundering the Alphabet Soup of recessionary metaphor by talking
about a 'W' shaped sequence in which weak and ultimately short lived modest
recovery is followed by another downturn, are probably living with the fairies.
If you really want to view the future through the lens of an alphabetic analogy,
then the most compelling arguments I have been reading suggest that we are
headed into an 'L' shaped new era in which, having fallen off a cliff, once the
first reaction to freedom from restrictions and fears of a "second wave" have
played out, what we will see is a so-called 'New Normal' in which the needle is
reset, economies are recalibrated at levels of GDP and arising economic activity
and consumer demand that look a lot more like 2009 in terms of consumer
incomes and spending than like 2019.
It is likely that most of Europe will have seen at least 10 percent of GDP ripped
from its business cycle by the end of this year. Even at
around 2% GDP growth a year thereafter, it will take us
through to around 2026 to be back where we were during
those extraordinarily busy and optimistic days at EICMA
2019.
Even then though there is the little matter of having to
make back the lost time, the lost profit and the lost capital
- and regenerating that and trying to catch up with where
we should have been in 2026 will likely take us through to
the end of the decade.
By which time another ten years of demographic atrophy will have eaten into
our status quo and we will be another ten years closer to the near certain and
near total bans on internal combustion engines. In effect, we could be looking
at another lost decade.
Unfortunately, the experiences of past recessions do not help us to predict the
shape of this one. We do not know what the future holds in store for us - either
in public health or economic terms. If, as appears likely, the next set-back is the
cancellation of the major shows in October and November (looking at you BMW
and KTM), then the motorcycle market's chances of seeing the damage done so
far mitigated by a return of consumer confidence in the short term will get a
whole lot more difficult.
Robin Bradley
Publisher
[email protected]